Introduction:
The Federal Trade Commission (FTC) recently updated its Guides Concerning Use of Endorsements and Testimonials in Advertising (Guidelines). There has not been an update to the Guidelines since 2009, before TikTok even existed and Facebook was still the hip new kid on the block.
Clearly, a lot has changed since then, and being aware of and understanding the updates to these Guidelines is crucial for companies, influencers, brand ambassadors, and marketing professionals who engage in influencer marketing campaigns. The Guidelines take into account the evolving nature of influencer marketing and provide more specific guidance on how influencers can make clear and conspicuous disclosures to their followers. This summary provides a basic overview of the key changes and important points to consider in the wake of the updated Guidelines.
Background:
Anyone who has access to the internet is aware that social media influencer marketing has been a rapidly growing industry over the past decade, and the FTC recognizes the need for adequate transparency concerning this area of marketing to protect consumers from deceptive advertising practices.
The general aim of the updated Guidelines is to ensure consumers can clearly identify when a social media post, blog post, video, or other similar media is sponsored or contains affiliate links. The updated Guidelines seek to develop or make clear guidance concerning specifically: (1) who is considered an endorser; (2) what is considered an “endorsement”; (3) who can be liable for a deceptive endorsement; (4) what is considered “clear and conspicuous” for purposes of disclosure; (5) practices of consumer reviews; and (6) when and how paid or material connections need to be disclosed.
Key Changes and Considerations:
- Clear and Conspicuous Disclosure: Influencers must make disclosures clear and conspicuous. This means disclosures should be easily noticed, not buried within a long caption or hidden among a sea of hashtags. The Guidelines require that disclosure be “unavoidable” when posts are made through electronic mediums. The FTC suggests placing disclosures at the beginning of a post, especially on platforms where the full content can be cut off (i.e., Instagram). In broad terms, a disclosure will be deemed “clear and conspicuous” when “it is difficult to miss (i.e. easily noticeable) and easily understandable by ordinary consumers.”
- Updated Definition of “endorsements”: The FTC has broadened its definition of “endorsements” and what it deems to be deceptive endorsement practices to include fake positive or negative reviews, tags on social media platforms, and virtual (AI) influencers.
- Use of Hashtags: The Guidelines still hold that commonly used disclosure hashtags such as #ad, #sponsored, and #paidpartnership are acceptable, but those must be displayed in a manner that is easily perceptible by consumers. Influencers should avoid using vague or ambiguous hashtags that may not clearly indicate a paid relationship. Keep in mind, however, whether a specific social media tag counts as an endorsement disclosure is subject to fact-specific review.
- In-Platform Tools: Social media platforms increasingly provide built-in tools for influencers to mark their posts as sponsored. However, be aware, the Guidelines emphasize that these tools can be helpful in disclosing partnerships, but they are not always sufficient to ensure that disclosures are clear and conspicuous. Parties using these tools should carefully evaluate whether they are clearly and conspicuously disclosing material connections.
- Affiliate Marketing: If an influencer includes affiliate links in their content, they must disclose this relationship. Simply using affiliate links is considered a material connection and requires disclosure. Phrases such as “affiliate link” or “commission earned” can be used to disclose affiliate relationships.
- Endorsements and Testimonials: The FTC guidelines apply not only to sponsored content, but also to endorsements and testimonials. Influencers must disclose material connections with endorsing products, whether they received compensation or discounted/free products. Beyond financial relationships as described above, influencers will need to disclose non-financial relationships, such as being friends with a brand’s owners or employees.
- Ongoing Relationships: Disclosures should be made in every post or video if a material connection for benefit exists, even in cases of ongoing or long-term partnerships.
- Endorsements Directed at Children: The updated Guidelines added a new section specifically addressing advertising which is focused on reaching children. The FTC states that such advertising “may be of special concern because of the character of audience”. While the Guidelines do not offer specific guidance on how to address advertisements intended for children, those who intend to engage in targeting children as the intended audience should pay special attention to the “clear and conspicuous” requirements espoused by the FTC.
Enforcement and Penalties:
The FTC takes non-compliance with these guidelines seriously and can impose significant fines and penalties on brands, marketers, and influencers who fail to make proper disclosures. Significantly, the updated Guidelines make it clear that influencers who fail to make proper disclosures may be personally liable to consumers who are misled by their endorsements. Furthermore, brands and marketers may also be held responsible for ensuring that influencers with whom they have paid relationships adhere to these guidelines.
Conclusion:
Bear in mind, the Guidelines themselves are not the law, but they serve as a vital guide to avoid breaking it. Overall, the updated Guidelines on influencer disclosures emphasize transparency and consumer protection. To stay compliant and maintain consumer trust, it is imperative that all parties involved in influencer marketing familiarize themselves with these Guidelines and ensure that disclosures are clear, conspicuous, and consistently made in every relevant post or video. Furthermore, as this marketing industry continues to develop and evolve, it will be increasingly important to monitor ongoing developments and changes in the FTC guidelines to stay current with best practices.
If you would like assistance re-examining your advertising materials and practices or to discuss best practices in implementing a complete compliance program and/or policies for endorsements, reviews, or influencers, do not hesitate to get in touch with a Varnum attorney.