Why the Shifting Landscape of FTC Influencer Compliance is Something You Should Be Afraid of

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Compliance Background

Privacy has been the headline when it comes to social media, however, an issue that’s been lurking in the background has been compliance to “truth in advertising.” The United States Federal Trade Commission (FTC) is responsible for investigating and reporting issues around deceptive advertising. In the influencer marketing world, while there have been some cases around unsubstantiated claims (i.e. the product does not work the way that the advertisement claims), most of the cases relate to the need to disclose the “material connection” between the advertiser and the influencer. 

The FTC categorizes influencer endorsements as advertisements, and thus, they must follow the advertising and social media guidelines. Any “material connection” between the influencer and the advertiser needs to be disclosed in a way that is “clear and conspicuous.” Any case that the FTC brings up extends liability for non-disclosure to the brand, the ad agency, the marketing team, the individual influencer, and anyone else who touches the endorsement. Every party is ultimately responsible for “making sure that ads don’t mislead consumers about their commercial nature.”  

Ways to Comply

To ensure compliance the FTC has authored a brief “Disclosures 101 for Social Media Influencers.” The document is a quick and simple read, but in case, we’ll lay out the key things you need to know.

  • You should disclose when you have a financial, employment, personal, or family relationship with a brand. (Financial relationships are not limited to money.) When in doubt, disclose whatever relationship there may be, even if you receive a product from a company that you are not currently mentioning. If there’s no relationship and you simply like a product, then there is nothing to disclose.
  • Make it hard to miss the disclosure. Place the disclosure in the message itself, NOT in your About Me section, a header / footer, below the fold, in a soup of hashtags, or within a “more” link.  For pictures, superimpose the disclosure on the image, for videos, superimpose the disclosure in video as well as audio, and for live streaming, continually let your audience know the relationship with your advertisers.
  • Use clear language to let your audience know the relationship. Cryptic hashtags like “sp”, “spon”, “collab”, or “thanks” are not clear. Also use the same language for your disclosure as your message is (i.e. your tweet in Russian should have a disclosure in Russian).
  • Tell the truth. You can’t make up scientific test results or say that a product you think is mediocre is the best product ever.

The Consequences of Non-Compliance

In 2015, the FTC acted against Machinima, a multi channel network that paid influencers to promote the Xbox One release. While the case was eventually settled with Machinima, Microsoft was no culpable, due to, as the FTC mentions, the “robust compliance program in place when the Xbox One campaign was launched, including specific legal and marketing guidelines concerning the FTC’s Endorsement Guides… and relevant training made available to employees.”

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Contrast that with the latest settlement dealing with ambiguous disclosures that the FTC has most recently announced with Teami Tea.  It mentions that the brand utilized deceptive claims as well as inadequate disclosures by popular social media influencers, who were paid to post about their products. While the #teamipartner hashtag (within hashtag soup) was used, the actual disclosure was only visible after followers clicked on the “more” button on the post. Video posts also did not include an audio disclosure. Teami was warned for employing this roundabout disclosure method back in 2018. The FTC settlement with Teami included a $15 million judgment (that was eventually reduced to $1 million) and a warning letter to the 10 influencers including Kylie Jenner and Cardi B. 

The latest FTC updates and actions highlight the changing sentiment toward holding all parties accountable and responsible for compliance. It is no longer a valid excuse for influencers to say that they didn’t know or for companies to receive training yet fail to execute. All parties involved must take responsibility in clarifying relationships. However, unfortunately, it looks like the FTC will have much more ahead for them as according to research reported by Forbes in 2018, only one in four influencers made disclosures in a way that complies with FTC rules, 41% reported that they make disclosures only when asked, and 90% of YouTube videos and 93% of Pinterest pins fail to disclose “material connections.” 

 

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