Social media has taken over, with social media users nearly doubling from 2.3 billion in 2016, to 4.2 billion in 2021.1 Social media platforms provide direct access to consumers, with the ability to focus on niche consumer groups. Beyond traditional advertisements, companies leverage "influencers" - from the micro-influencer to the Kardashians to showcase their products.

In response to this growing space, the FTC issued guidelines for influencers in 2019.2 These guidelines create boundaries and pathways for FTC enforcement. Key takeaways include:

  • Endorsements should make obvious the existence of material connection with brand.
  • A material connection means not just paying the influencer to promote a product but anytime an influencer is given a free or discounted product or service.
  • Acceptable disclosure includes tags, likes, pins, etc. to show that the product or brand is an endorsement and should be placed so it would difficulty for a viewer to miss.
  • An influencer cannot speak to an experience with a product they have not tried, and cannot make claims about a product that would require proof the brand or company does not have (i.e. claims related to health conditions).

But who is responsible for ensuring that influencers follow FTC guidelines, and what happens if an influencer fails to follow FTC guidelines?

Ultimately, companies need to have programs in place that will train and monitor the influencers they utilize. The scope and reasonableness of the program depends largely on the potential risks for consumer harm, based on the product or service being advertised. For example, when there is a risk of physical injury or financial loss.

The rise of financial advice influencers on social media are a prime example of potential risk for companies. Personal finance influencers, and finance influencers target an exciting market for financial services companies, but without proper disclosures there is a risk that influencers may run afoul of the FTC.

The FTC proposes the following approach3 - companies should:

  • Explain to influencers what they can (and cannot) say about the product or service;
  • Instruct influencers to disclose the material relationship with the brand;
  • Monitor and confirm that influencers are following FTC guidelines; and
  • Address potentially questionable practices.

A single FTC violation can result in penalties exceeding $40,000 per violation so an influencer's noncompliant Instagram story, tik tok video, blog, or post shared across multiple platforms can result in hefty fines for a company. [4]

Since the FTC first began issuing notices in relation to a social media campaigns in 2014 it has gradually increased its enforcement in the social media space, issuing notices to brands and influencers alike. Companies should take head of the increasing enforcement in the social media space and be sure to have formal influencer policies in place that adhere to the FTC guidelines.

Footnotes

1. Social media poses 'existential threat' to traditional, trustworthy news: UNESCO | | UN News; https://news.un.org/en/story/2022/03/1113702, published March 10, 2022 (last visited April 5, 2022.)

2. Disclosures 101 for Social Media Influencers (ftc.gov)

3. The FTC's Endorsement Guides: What People Are Asking | Federal Trade Commission

4. Social Media Endorsements Can't Escape FTC's Watch (bloomberglaw.com)

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