USE OF INFLUENCERS AND DECEPTIVE ADVERTISING: The FTC takes notice of Instagram

Last week the Federal Trade Commission (FTC) sent more than 90 letters to advertisers and influencers using Instagram reminding them of their obligations to disclose brand relationships in social media posts, in particular on Instagram. These letters were sent in response to petitions from particular interest groups that objected to the lack of disclosure of these relationships. Influencers can include athletes, celebrities, media personalities, bloggers and artists.

In the past, the FTC focused its enforcement actions against companies. However, these letters for the first time target individual influencers which could indicate a change in the FTC’s approach to enforcement in this area.

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Background

The FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising  (the Guides) outline circumstances when someone endorsing a product must disclose that there is a material connection between the endorser and the brand. A material connection is usually that the endorser is receiving compensation for the endorsement in the form of money or free items. However, a material connection may also be a business relationship (e.g., when an employee endorses his/her employer’s brand) or a family relationship. When there is a material connection, that connection needs to be “clearly and conspicuously” disclosed.

When an influencer is seen using or discussing a product, it will usually influence sales of that product. So, if it is not obvious from the circumstances that that the influencer is being compensated for this subtle endorsement, there must be a conspicuous disclosure so that the consumer can then determine how much weight to give such endorsement.

The Guides were first issued in 2009. While the Guides are not law, they do represent the FTC’s view on what would constitute an unfair and deceptive advertising practice in violation of Section 5 of the FTC Act. According to the FTC, the Guides, “at their core, reflect the basic truth-in-advertising principle that endorsements must be honest and not misleading.” 

Instagram

On a site like Instagram, the endorsement would usually take the form of a photograph or selfie of the influencer wearing the brand clothing or jewelry, drinking the beverage or otherwise using the product. The photograph need say no more to act as an endorsement and influence sales of the product. Viewers of the photo will not necessarily understand that the influencer is actually getting compensated for endorsing the particular brand. Therefore, if there is indeed a material connection, that connection needs to be conspicuously disclosed.

The primary concern of the FTC regarding Instagram is how to make sure that the relationship disclosures are conspicuous. For instance, if a disclosure appears at the end of the post, then when a user views the post on a mobile device, the disclosure would only appear if the user chooses to view the entire post. Therefore, the disclosure would need to appear at the beginning of the post to be conspicuous. Also, the FTC pointed out that disclosures using hashtags such as #sp, #partner, or wording such as “Thanks [brand]” might not clearing indicate that this is a paid endorsement.

Bottom Line:

The FTC might have limited resources to examine endorsements on social media. However, as this recent activity makes clear, public interest groups are watching and are able to get the FTC’s attention. Also, the conspicuous disclosure requirements of the Guides will equally apply to mobile devices even though compliance is more difficult to accomplish. Additionally, individual influencers are as subject to the Guides as are advertisers, and can be directly targeted by an FTC action. Lastly, advertisers are obligated to monitor how influencers promote their brands to make sure the promotions comply with the Guides.

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William Galkin manages GalkinLaw. Mr. Galkin has dedicated his legal practice to representing Internet, e-commerce, computer technology and new media businesses across the U.S. and around the world. He serves as a trusted adviser to both startup and multinational corporations on their core commercial transactions.