Social Medial Law: FTC’s First Social Media Influencer Enforcement

September 7, 2017. Washington, D.C.

CISCO LOTTO co-owner, influencer Trevor Martin, jumps for joy — as he wins at his own game.

Although the writer of this post, Glen Gilmore, is an attorney, nothing in this post should be considered legal advice as facts, circumstances and new rules may impact the regulatory obligations discussed. For legal questions, consult with an attorney from your jurisdiction.

Ratcheting up its focus on Influencer Marketing, the FTC announced three new actions in a single day.

  1. Law enforcement. The FTC issued its first enforcement complaint against individual social media influencers for failing to comply with its Endorsement Guides, guidelines requiring online endorsers to “clearly and conspicuously” disclosure any “material connection” (i.e., “business or family relationship, monetary payment, or the gift of a free product”) they have to a brand they endorse. It is a hybrid case as the influencers are also the owners of the brand they endorsed.
  2. Warning letters. From a group of 90+ influencers and marketers who received an “educational letter” from the FTC in April of 2017 cautioning compliance with the FTC’s social media disclosure requirements, the FTC has issued 21 follow-up “warning letters”. The warning letters require the recipients to respond by informing the FTC whether they have a material connection with brands identified in their subsequent social media posts. ”If they do,” said the FTC, “we’ve asked them to spell out the steps they will be taking to make sure they clearly disclose their material connections to brands and businesses.”
  3. Updated guidance for influencers and marketers. The FTC also just updated its Endorsement Guides: What People Are Asking, a question and answer guide about endorsements focused on social media. Its update answers more than twenty new questions concerning influencer marketing and how legally-required disclosures of “material connections” should be made on social platforms.

Academy-Award-Worthy Example of Why Disclosures Are Needed

Online influencers come in many stripes. Gamers are one.

The touchstone of influencers is that they have significant online communities that trust them and are inspired to follow them and the lifestyle choices they share in their posts. Their endorsement of a product or service often inspires action.

A 2016 Influencer study by Twitter found that “Nearly 40% of Twitter users say they’ve made a purchase as a direct result of a Tweet from an influencer.”

In the case of two influential online gamers, Trevor Martin and Thomas Cassell, who are the subject of the FTC’s first-ever enforcement action against individual influencers, their passionate endorsement of a betting site came with much excitement, many tweets, videos, and Facebook posts — but no disclosure of their modest “material connection” to the gambling site. (They were president and vice president, respectively, of the company that owned the gaming site.)

In all the excitement and shouting that takes place in one of Trevor’s online betting episodes, would one ever have imagined from the experience that Trevor owned the betting site he was gambling and winning on? Likely not.

Would you be likely to guess from Thomas’ tweet that he was one of the owners of CSGOLotto? I’m betting not.

The dynamic duo of Trevor and Thomas also paid other influencers to promote their gaming site. Not surprisingly, they failed to inform the influencers they had hired of their duty to disclose their material connection to the company when promoting the brand.

The FTC separately announced a settlement of the complaint. If you’d like to comment on the case or settlement, you’re certainly welcome to do so here, but know that the FTC is also inviting public comment through October 10, 2017.

21 New Warnings (with Demand for Explanation) Follow “Educational” Letters

21 of 90+ Instagrammers and marketers who received “educational” letters from the FTC earlier this year informing them of their responsibility to “clearly and conspicuously” disclose “material connects” when they are endorsing brands seem to have failed the FTC’s effort at education. They have now received “warning letters” from the FTC reminding them of the earlier correspondence and demanding more information about recent social media brand endorsements they have made.

A Photo Tag of a Brand IS an Endorsement Triggering Disclosure Duties

In its new warning letter to influencers and marketers, the FTC noted that is staff believes that “tagging a brand is an endorsement of the brand”, triggering disclosure requirements. Celebrities, influencers, and marketers beware!

FTC Issues Expanded Guidelines

What Does NOT Work as a Lawful Disclosure?

Sorry influencers, the FTC just threw out several hashtags commonly used as a subtle way of attempting to disclose sponsored content: #thanks, #collab, #sp, #spon, or #ambassador. And burying a disclosure so it doesn’t appear on a mobile display, as in below the first three lines of an Instagram post, doesn’t work either.

How Do You “Snap” a Disclosure?

According to the FTC’s latest enforcement guidelines, where a platform only provides for image sharing and a user is sharing sponsored content, the endorser should: “superimpose your disclosure over the picture in a clear font that contrasts sharply with the background.”

FTC Tightens Its Policing of Influencer Marketing

The overarching lesson from the FTC’s latest volley of influencer marketing announcements? The duty to disclose material connections in social media endorsements, regardless of the platform, is a duty shared by brands, marketers, and influencers — and the FTC is proactively scanning social media for compliance.

TAKEAWAYS

  • Influencers will now be held personally responsible for their duty to clearly and conspicuously disclose material connections when making endorsements in social media.
  • The FTC is shifting its traditional endorsement disclosure compliance focus from brands and marketers, to include influencers.
  • If you hire influencers (i.e., give them anything of value), you must educate them on their duty disclose, monitor them for compliance — and take action if they fail in their duty to disclose.
  • Tagging a brand in a photo is now considered an endorsement, creating a presumption of the duty to disclose any material connections between the endorser and brand.
  • “Ambiguous” disclosures, such as #Thanks or #Ambassador or #Collab are ineffective disclosures.
  • If you Snap branded content and have a material connection with the brand, you must superimpose a disclosure on the image you have shared.
  • Just because a social network has created a “disclosure” mechanism does not mean that it will satisfy the FTC’s disclosure requirements — you cannot abdicate your duty to disclose by simply relying on a social network’s latest disclosure tool.

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