Last week, the FTC sent shock waves through the marketing community when it announced its first ever complaint against two individual social media influencers. The targets, Trevor “TmarTN” Martin and Thomas “Syndicate” Casssel, allegedly operated csglotto.com, an online gambling site that allowed players to gamble using skins from the multi-player game “Counter Strike” as virtual currency. Both Martin and Cassell posted YouTube videos of themselves gambling on the website and touting the amount of money, they won without disclosing that they were the company’s President and Vice President, respectively. The FTC also alleged that Martin and the Company maintained an influencer network through which they paid other gaming influencers between $2,500 and $55,000 to promote the gambling website without requiring them to disclose that they were being paid, while at the same time prohibiting the influencers from saying anything negative about the site.
The proposed settlement order which has been published for public comment, requires Martin and Cassel to clearly and conspicuously disclose their connections with the Company and the connections that their paid influencers have.
Obviously, this case is a stark warning to all social influencers that they can be held personally liable for the failure to disclose material connections to the brands, products or services they are promoting. The FTC’s current focus on individual influencers, however, should by no means be viewed by industry as a sign that brands and/or the agencies that hire influencers on their behalf are off the hook. To the contrary, what this case means is that going forward, the FTC is likely to hold everyone in the ecosystem liable—the brand, the agency and the individual influencer if the proper disclosures are not made. In addition, influencers can no longer rely on the brand or their agencies for compliance. It is incumbent upon all social media influencers, large and small to educate themselves about their disclosure obligations and take personal responsibility for compliance.
Simultaneously with this enforcement action, the FTC announced two other initiatives which are equally if not more significant. As readers may recall, in April 2017, the FTC sent 90 warning letters to social media influencers and their brands or agents notifying them that their Instagram posts did not contain adequate disclosures of material connections. Now, the FTC has sent follow-up letters to 21 of the 90 recipients of the original letter warning them that their posts were still not compliant and giving them until September 30 to come into compliance. The FTC has also issued revised FAQ’s to its Testimonial Endorsement Guides which are designed to provide more practical guidance to the industry about how to comply with the disclosure guidelines by presenting various factual scenarios. The content of the warning letters coupled with the revised FAQ’s provide some specific and much needed guidance about when, how and where disclosure of material connections must be made. The following are some of the key lessons to be learned from these documents:
- You don’t necessarily have to use words to convey an endorsement. Pinning an image of the product and other common social media actions such as sharing, retweeting and reposting can all be deemed to constitute an endorsement. In the most recent FAQ’s, the FTC notes that even tagging a brand you are wearing is an endorsement of the brand that would trigger the need to make a disclosure if you have a relationship with the brand.
- It doesn’t take much to give rise to a material connection. Family relationships and ownership interests in a business are material connections that must be disclosed. Similarly, receipt of free product, gifts, sweepstakes entries and even free travel and accommodations may all be considered material connections. Even non-material incentives such as the opportunity to appear in the brand’s advertising can be deemed to be a material connection. The test is not how much the incentive is worth to the influencer, but whether it would be meaningful to the consumer to know that the influencer received the incentive. For example, the FTC goes so far as to note that a restaurant reviewer should disclose receipt of a free meal. Further, the FTC cautions that even if the recipient of a free gift or other incentive is not required to provide an endorsement or positive review in exchange for the incentive, the fact that the incentive was offered could be material information to the consumer and must therefore be disclosed. Given the current regulatory climate, the FTC is likely to consider most incentives, no matter how nominal to be material. If in doubt—disclose.
- The disclosure must clearly indicate the nature of the connection between the endorser and the brand. While influencers do not need to disclose the amount of money they have been paid, they do need to indicate whether they have been paid, received free products or gifts or have some other relationship with the brand. For example, if the influencer received a free product and was paid it would not be sufficient to simply disclose that the influencer received free product. In space constrained ads, an umbrella term such as # ad or # sponsored might be sufficient, however for longer blogs or posts that are not subject to space constraints, the FTC would expect to see a more detailed disclosure of the compensation or other incentive provided.
- The disclosures must be placed in a prominent location that is hard for the consumer to miss. Both in letters to the influencers and in the FAQ’s, the FTC has adopted the three-line rule. Disclosures on Instagram posts must appear within the first three lines of the post and must be visible without the consumer having to click on a “more” button. On image only platforms like Snapchat, the disclosure should be superimposed on the image.
- The language of the disclosure must be unambiguous. The FTC has specifically called out terms such as “Thanks,” #ambassador, # collab, # spon and # sp as being ambiguous and therefore inadequate. In the FTC’s view, saying “thank you” to a brand for a product might denote that you are a satisfied customer, not necessarily that you received free product. And, while terms such as ambassador, collaborator, partner, etc. may be insufficient standing alone, combining those terms with the name of the brand, may be acceptable. The FTC’s guidance, however, reflects its long standing dislike for abbreviations and in ads without space constraints, more direct disclosures such as “I’m a paid consultant to XYZ company” or “I work with XYZ brand.” are clearly more desirable.
- Disclosures must be made in the same language as the endorsement. The FTC specifically notes that where the endorsement is made in a language other than English, the disclosures must be made in the same language as the endorsement.
- The FTC also cautioned that marketers should not assume that disclosures built into social media platforms are sufficient. This warning by the FTC coming on the heels of an announcement by Instagram that it was providing such a tool is telling. YouTube also provides a disclosure tool. However, the FTC’s message is clear that use of such tools is no defense. Marketers must independently valuate the prominence of the disclosures in the context of the ad as a whole.
It is clear from the recent actions that the FTC intends to remain vigilant in its scrutiny of influencer campaigns and that individual influencers are not within the FTC’s sights. Now would be a good time for all players in the ecosystem to ensure that they are familiar with the FTC’s guides and understand their respective disclosure and monitoring obligations. WOMMAS (NAME) available at (URL) would be a good place to start.