One of the challenges we marketers face is legal compliance, and the influencer marketing industry is no different. While it used to be that “snake oil” salesmen once roamed the free for all of unregulated advertising, this is no longer allowed. Nowadays, we have to worry about various consumer protection laws and agencies. In the US, this is mainly the Federal Trade Commission. Break the rules, and there could be some pretty serious fines involved. As technology has expanded, so has the purview of federal regulators. Here is some discussion of the FTC influencer guidelines and how they are relevant to brands.
The History and Role of the FTC in Advertising
Back in the day, it was acceptable to sell all kinds of dangerous products and services. We also could say whatever it took to sell something. Luckily for the modern consumer, plenty of safeguards exist. At the turn of the 20th century, this started with regulations on electrical power and the advent of the FDA. Finally, at the dawn of WWI, the Federal Trade Commission was formed to regularize consumer protections.
Back in 1914, media and advertising were much simpler. While radio was relatively common, motion pictures were limited to mass gatherings such as cinema. Printed matter, therefore, was one of the biggest advertising media available. Newspapers, then magazines, were responsible for a large majority of marketing activity.
It was also the age of Robber Barons, who built vast monopolies that set prices and took advantage of consumers. The Clayton Act was passed to help address these issues. If you’ve heard of the term “anti-trust,” that’s what they’re talking about. At its heart, the FTC is intended to foster competition and fair dealing in business. When businesses play fair, consumers win.
Pre-social media policing
As we all know, before the advent of social media advertising was mainly paid for in traditional ways. Sure, there was always word of mouth and reviews in publication. But the role of these was much more limited, because their role was limited in geographic area or by affinity group. However, with the beginning of the Internet the power of the press, and media generally, has been democratized.
Early in the Internet age, the FTC started regulating commercial speech online. It didn’t take long for the internet to morph from a place where ideas were exchanged into a major marketplace. Amazon and other early retail giants started staking their claim. Unfortunately, ethical actors like Amazon have also needed to contend with unethical scammers and other unsavory characters.
To combat deceptive advertising online, the FTC published guidelines on endorsements. As originally published, these guidelines assumed something relatively similar to the celebrity endorsements of print media. That is, someone who was already important in media otherwise who was paid to promote something. Bloggers were the original target of this, and it soon grew to online reviews. In a nutshell, the FTC influencer guidelines said that you cannot make claims that you are unable to back up with facts. This includes misrepresenting the benefits of a product. It also means you can’t make up things to make something look better than it is.
Specific guidance for online businesses
Now that online advertising has become more common, the FTC has made more specific rulings. For instance, anyone providing reviews of a product must declare any business affiliations between them and the company producing that product. You’ll see this in several different ways. For instance, go to websites that discuss securities, and you will see disclosures at the bottom. These might include “I own stock” or “my company is a subsidiary of a different company,” for example.
Here’s a different situation where these guidelines apply. If you go onto an ecommerce website, you’ll sometimes see that the reviews have disclosures attached to them. Particularly, some companies will send out product samples to everyday consumers and ask them to review the product. If they post, the website asks them to reveal if they’ve gotten some sort of promotion. This is truthful advertising in action.
However, up until a few short years ago there weren’t many formal FTC influencer guidelines. After all, this is a relatively recent phenomenon that grew out of the social media revolution. Over time, as ad blockers and other means of bypassing online adverts proliferated, brands looked for other means of reaching customers. Influencer marketing wouldn’t be a new “Wild West” for long.
The Publication of Disclosures 101 for Social Media Influencers (November, 2019)
Now that influencer marketing has become a more mature method of advertising, the FTC has decided it is time to clarify there are requirements for disclosures. For example, the recent release of its publication “Disclosures 101 for Social Media Influencers,” the FTC tells us that it is necessary to include business relationship disclosures in any influencer content. One way that we can do that his with the various hashtags set up on each platform to show that something has been sponsored, or that a business relationship exists between the influencer and the brand.
In fact, The FTC dictates that even free products received in exchange for an endorsement trigger this reporting requirement. Just because something is posted online doesn’t mean that they are exempt from the old print advertising-based rules. Furthermore, The FTC requires influencers to place this disclosure in such a way that someone viewing the content or hearing the content will not be able to miss it. In this way The FTC is ensuring that the average consumer can tell the difference between sponsored content and non-sponsored content. In so doing, the FTC is clarifying the lines between normal social media posting and advertisements.
A Summary of Disclosures 101 for Social Media Influencers: What Influencers Should and Shouldn’t Do
With the basics of FTC rules out of the way, let us break them down into more easily digestible pieces. Briefly, what the FTC is trying to avoid is situations where companies have their employees manipulating the marketplace through fake reviews. The guidelines also prohibit using paid endorsers to deceive consumers into thinking that something is better or more popular than it actually is. You can see examples of this sort of deceptive behavior on the FTC website. For instance, there was a skin care company that was recently busted having employees post fake reviews in an effort to get more sales. In addition, recent news stories about mysterious seed packages from China have generated speculation that Chinese seed sellers were trying to generate fake reviews and get more orders in a very competitive environment. With that in mind how can influencers and brands ensure that they do not run afoul of FTC rules? Let’s take a look at a few do’s and don’ts.
What not to do
- 1st don’t forget to mention business relationships. This is this is something that the FTC takes very seriously. In fact, failure to disclose business relationships is one of the best ways to get yourself fined. Not only that, but the brands themselves are liable for penalties anytime an influencer fails to properly disclose his or her business relationships. What this means is that anyone who benefits from a business relationship is liable when that relationship is not disclosed.
- 2nd but don’t obscure that disclosure. The FTC has made it very clear that disclosures of sponsorships and other business relationships must be done in a manner that it cannot be missed on see contact. For example, in case of a sponsored video that is longer than a few minutes it is wise for the influencer to mention the sponsorship at various points throughout the video. This way anyone who watches the only part of the video is more likely to see that the video has been sponsored.
- 3rd, don’t assume that people know about your relationships. Many influencers have multiple lines of business. They may also have friends and family who work for specific brands and this is not generally something that would be known by everyone who consumes their content. For that reason, it is critical that influencers disclose any relevant business relationships anytime that they produce content on behalf of someone with whom they have those relationships. This includes employers, family employers, friendships, and so on.
Instead, do this:
- Make sure that you disclose everything. This way you cannot be accused of hiding important information from consumers, and the FTC is unlikely to fine you or the influencer. Besides which, who really wants a reputation for being underhanded in their business practices?
- Make any disclosures prominently within each post or video that you make.
- Understand that you are the person in charge of making sure that anything you post is in conformity with FTC influence or guidelines.
- Ensure that your disclosure is clear. Using confusing or ambiguous language is playing with fire FTC-wise.
- Only endorse things that you have worked with yourself. That means for example that if you endorse a beauty product you must have used the product at some point. This is one reason why I recommend that brands provide free or reduced priced products and services to potential influencers. Not only does this create goodwill with the influencers but it also helps and sure compliance with FTC influencer guidelines.
- Engage exclusively with products and services that you can honestly recommend. Otherwise you may be liable to either break your contract or the FTC influencer guidelines by saying that something is excellent when you hate it.
- For brands, engaging with influencers who already use your products and services is a great way to promote compliance with truth in advertising guidelines.
Where We are Today: FTC Further Reviewing and Its Potential Impact
With the value and prevalence of influencer marketing on the rise in this Age of Influence, the FTC is becoming more strict about what influencers can and can’t do. Especially since the FTC influencer guidelines were published, the agency has been cracking down on those who don’t play by the rules. While the guidelines don’t necessarily have the force of law yet, the FTC is still enforcing many of the rules as codified in existing regulations. How is this important to us as marketers?
Brands may be held liable
As recently as February 2020, it has become clear that the FTC influencer guidelines are becoming more mandatory than advisory. In particular, the agency is considering civil penalties against brands that encourage influencers to not disclose the relationship. That would be true even if the brand simply looks the other way as FTC rules are violated. Especially if a brand does a lot of influencer marketing, this can become expensive fast.
Guidelines are subject to review
Although the 2019 guidelines are useful, it must be pointed out that they are advisory. Strictly speaking, the binding rules are focused on more traditional endorsements, and they are much older. However, the FTC is planning further review of binding rules to determine how clear an influencer has to be about sponsorships. There’s also debate on the extent to which non-business relationships need to be disclosed. From these points, we can see that the landscape is subject to change at any moment.
The FTC may target social media outlets
While it might not be immediately obvious to the average consumer, social media networks indirectly profit from influencer marketing. While the brand isn’t usually paying for typical advertisements, they do encourage people to consume content. This in turn lets the network make money through advertisements. In addition, brands DO pay for extras like boosted posts as part of influencer marketing campaigns.
Because of this potential targeting, we marketers need to consider the possibility that networks will do some of the policing themselves. It only takes a couple of large fines levied against them by the FTC. Combine those fines with bad press, and suddenly the FTC influencer guidelines will be enforced rigorously. If we don’t start policing ourselves better, others will do it for us.
The Teami FTC Settlement and What it Means
Back in March of this year, the FTC obtained a settlement from Teami for improper influencer marketing practices. Teami sells herbal teas that are supposed to promote weight loss and other health benefits. However, the company has never had studies done to verify these claims, potentially violating truth in advertising rules.
Besides the false claims issues, Teami and its team of influencers was violating the FTC influencer guidelines right and left. Some prominent influencers like Cardi B and Kylie Jenner were failing to give prominent disclosures of these business relationships. Worse, there were many influencers who didn’t give any disclosures at all. This meant that many consumers were deceived into thinking that such people were giving unbiased reviews of Teami products.
The result of the FTC settlement was devastating: Teami was originally fined over 15 million dollars, though that’s since been reduced. This company also had to agree on more supervision for influencers. Specifically, new contracts have to pledge compliance with FTC influencer guidelines, and Teami must approve all posts before they go live. An exception exists for small dollar influencers. While it was Teami that paid the fines, the FTC also warned influencers that they can be held liable for violating the rules. In other words, everyone is responsible for following the FTC influencer guidelines.
From a marketer standpoint, this is a groundbreaking decision. At the end of the day, it means that brands can and will be held responsible for what their influencers do. When rules are violated and the FTC comes calling, the buck stops at the brand. Furthermore, it is clear that the FTC is looking even more carefully at products that claim to have health benefits. Products of this sort tend to be very popular and highly profitable. However, they are somewhat controversial in that everyone wants to lose weight, and some will go to extreme lengths to do so. Brands of this type must be especially careful.
Summary of Advice for Influencers
At the end of the day, the FTC has made it clear that both brands and influencers are responsible for following advertising laws. This is true whether the influencer got free product or cash and can even apply when engaging in employee advocacy. Even though influencers are usually independent contractors, this doesn’t excuse brands from liability. Make sure that you are aware of the legal requirements for influencers and follow them carefully.
Although we focused on the brands here, if the FTC decides to fine influencers there’s a good chance it will be punishing. With a few exceptions, influencers don’t make a ton of money for their services, and fines could easily outstrip profits. Fortunately, by following the guidelines most influencers should be able to keep themselves out of trouble. In particular, sponsorships should always be disclosed. Those disclosures should always be prominently displayed, so that the FTC can’t say you failed. Companies should ensure compliance as well, to avoid civil fines. By working together, we can increase the chance that influencer marketing remains a growing industry where everybody wins.
Disclaimer: I am not a lawyer nor pretend to be, so before following any advice written or implied in this post, please consult with a legal professional.