The FTC is responsible for investigating and bringing cases involving deceptive advertising. Many of these cases relate to endorsements made on behalf of advertisers. To help advertisers stay within the boundaries of the law, the FTC published and periodically updates the lengthy Endorsement Guides document.
The FTC views influencer endorsements as advertisements, and as such, they must follow advertising guidelines. This includes a requirement to disclose any “material connection” (i.e., a family, employment, financial, or personal relationship) between the influencer and the brand and that the disclosures must be “clear and conspicuous.”
Liability for non-disclosure extends to the brand, the ad agency, the marketing team, the individual influencer, and anyone else who touches the endorsement are ultimately responsible for “making sure that ads don’t mislead consumers about their commercial nature.”
FTC ramps up focus on influencer marketing
In November last year, the FTC updated the PDF Disclosures 101 for Social Media Influencers document, which includes a short video overview of disclosure requirements and some disclosure rules for influencers. The update further emphasises that as an influencer, it’s your responsibility to make these disclosures. While this information is nothing new, the emphasis on influencers’ responsibility indicates a shifting tide in accountability.
Earlier this year, the FTC posted a list of “topics likely to be top of mind in months to come” on its website, which included endorsements and influencers. Then in February, the FTC commissioner Rohit Chopra said that he hopes the FTC will consider “codifying elements of the existing endorsement guides into formal rules so that violators can be held liable for civil penalties and damages” that extend beyond measures currently available to the FTC.
Legal experts saw the writing on the wall. The question was no longer if, but when, the other shoe would drop. In March, we got our answer. The FTC announced a settlement with Teami that included a $15.2 million judgment related to inadequate disclosures in Teami’s influencer campaigns.
Although the #teamipartner hashtag was used, the disclosure was not visible unless a user tapped “more,” and video posts did not include an audio disclosure. This case highlights how specific the FTC requirements are, and how strictly they will be enforced.
In addition to the judgment against the brand, the FTC sent warning letters to 10 influencers involved in the campaign who failed to make adequate disclosures. If this didn’t change, the FTC threatened legal “enforcement action.” I believe that the FTC isn’t done — the Teami case is likely just the first of several influencer-related actions we will see this year.
Now is the time for brands, agencies, and influencers to focus on training and compliance
The Teami case shows that brands and agencies should not just rely on having solid influencer contracts and policies in place. Those agreements are certainly important, and they should include provisions requiring the influencer to read and comply with the FTC’s guides.
But without a training certification, how many influencers will actually take the time to read the guides and learn the rules? Probably not that many. Many influencers don’t know about the risk they are assuming when endorsing a product, so do not take the necessary precautions to protect themselves and their brand partners. According to research reported by Forbes in 2018, only one in four influencers made disclosures in a way that complies with FTC rules, and almost half reported that they make disclosures only when asked.
The FTC wants to see brands and agencies taking a more proactive role in establishing compliance procedures and monitoring their campaigns. We know this from the FTC’s closing letters, which it sends after deciding not to turn an investigation into a full-blown enforcement action. For example, in 2015, the FTC took action against Machinima, a multi-channel network that paid influencers to promote the release of the Xbox One, but not Microsoft.
Why did Microsoft get off relatively easy? The FTC said that Microsoft had training and compliance procedures in place. The FTC’s closing letter said, “Microsoft had a 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.”
Brands and agencies who invest in compliance training and certification, including a verifiable, date-stamped and blockchain-recorded completion certificate, can limit their risk of seeing their name in the next FTC headline.