July 12, 2018
Originally posted 2018-11-19 11:21:14
By Shandice Sluch | www.amdlawgroup.com
With the rising popularity of social media, brands find themselves taking advantage of platforms like Instagram and YouTube to advertise. In fact, companies have invested millions of advertising and marketing dollars in the use of social media influencers. These influencers, also known as brand ambassadors, partner with companies to advertise their products on social media in exchange for money. Some well-known brands that utilize this strategy include FashionNova.com and Sephora.com, a skincare and makeup company.
Unfortunately, this marketing strategy exposes influencers to the legal issue of disclosure. How do consumers know if the promotion is genuine or just the result of a compensation or merchandise for the influencer? There is no full-proof way to know but there is a duty to disclose the association between the brand and the influencer.
The Federal Trade Commission (“FTC”), a government agency, has become increasingly more active in the regulation of influencers. As a consumer protection agency, it’s their task to maintain fair competition in the marketplace. Unfortunately, many influencers have violated FTC rules regarding the need to disclose.
After reviewing Instagram posts by various influencers, the FTC discovered that influencers rarely disclose that they are being paid to advertise. This realization was followed by a mass mailing of letters to 90 influencers who were in violation of the FTC’s rules and regulations.
These “reminder letters” put influencers on alert. It stated that they needed to clearly and conspicuously disclose their relationship to brands when promoting products through social media. In order to make it easier for influencers to comply with these regulations, the FTC released an endorsement guide.
This FTC endorsement guide states that if there is a “material connection” between the influencer and the brand it must be communicated. A material connection is any connection that might affect the weight or credibility that consumers give the endorsement. For example, suppose you find a fashion influencer that gives a great review about a brand of clothing. If you later find out that the influencer receives free clothes and a paycheck from the brand, it could affect the weight or credibility that you give the influencer’s review.
Additionally, if a material connection exists, it must be clearly and conspicuously disclosed. For example, on Instagram, influencers often caption their post and then use multiple hashtags, followed lastly by the hashtag “#ad”. Because the hashtag is at the end of a grocery list of other hashtags, the followers usually have to press the “more” button to view it. The FTC does not view this practice as conspicuous because hashtags at the end of a long post may not be viewable upon first glance to the follower. Also, when using multiple hashtags, the FTC warned influencers that viewers are likely to just skip over them. To remedy this, the material disclosure should be placed above the “more” button when making an endorsement on social media platforms.
There are four key points that an influencer should keep in mind:
If influencers do not abide by the FTC’s rules and regulations, there could be monetary consequences. The federal agency has already initiated its first law enforcement action against individual online influencers and the companies that employ them. Also, multiple influencers have received multiple warning letters. If the investigations reveal proof of disclosure violations, they could be fined upwards of $40,000.
As a brand influencer it takes is the strategic placement of three characters to lessen the possibility of an FTC investigation: #ad.