As the influencer marketing industry grows to 16.4 billion dollars in 2022, the Federal Trade Commission (FTC) faces a host of regulatory issues resulting from the rise of brands and influencers exploiting social media apps like Facebook, YouTube, Instagram, Snapchat, Twitter, and most recently Tik Tok. Increasing monetization on social media platforms has led brands and influencers to leverage their social media following while violating FTC influencer guidelines by posting fake reviews and deceptive endorsements which do not clearly disclose the influencer’s material relationship with the brand.
The FTC released its "Guides Concerning the Use of Endorsements and Testimonials in Advertising" in 1980 to assist advertisers across all media platforms (namely, television, radio, and print) in making the necessary disclosures for those who are paid to promote or review products and services. As part of its disclosure guidelines, the FTC protects consumers from being misled by popular figures claiming that a product works while receiving pay to promote the product. In 2009, as online advertising and bloggers gained traction, the FTC revised its Endorsement Guides to adapt to the evolving media landscape. In 2019, the FTC released a disclosure summary guide to combat deceptive advertising and help advertisers, influencers, and endorsers remain compliant with the law.
Despite the FTC's clear disclosure guidelines, companies have consistently viewed the agency’s endorsement guides as advisory rather than mandatory. By failing to clearly and conspicuously disclose a material connection with a brand, influencers and companies risk facing significant civil penalties. For example, the FTC sent more than 700 letters to companies in October 2021, notifying them of the potential penalties for deceptive endorsements. Even though the FTC has issued Notices of Penalty Offenses, and put a freeze on, and/or "made an example of" several high-profile businesses such as AmeriFresh, Machinima, Lord & Taylor, Sunday Riley, Devumi, and Teami, it has been only partially successful in combating deceptive online advertising so far.
As big brands continue to disregard endorsement guidelines, the FTC's lawsuits are just a band-aid that holds a company liable for its deceptive and misleading marketing actions. In light of the history of repeated violations of FTC guidelines by large corporations, lawsuits offer no real protection for consumers. Consequently, a series of stricter amendments to the FTC's guidelines were proposed on May 19, 2022, which will hopefully protect consumers more from misleading and deceptive endorsements.
The significant proposed changes to the guidelines include: (1) clarifying definitions of endorsements and endorsers on social media; (2) explicit guidelines for clear and conspicuous disclosure of material connections on social media; (3) defining what constitutes a "material connection" and "clear and conspicuous disclosures"; (4) establishing additional rules for online consumer reviews, testimonials, and feedback; and (5) clarifying who is liable for misleading and deceptive endorsements.
Here's what is important to know:
(1) Tagging a brand = an endorsement
Social media users who tag brands in their posts are considered endorsers. Until the new proposed guidelines, marketing and promotion messages were not included in the definition of "endorser," allowing influencers with large followings to endorse or disapprove brands with no oversight. Now, tagging a brand constitutes as an endorsement.
(2) Endorsers = individuals, groups, institutions, fictional, artificial, or computer-generated technologies
In the past, endorsers were defined as individuals, groups, or institutions. FTC expanded the definition of endorsers to include fictional, artificial, computer-generated endorsers, such as AIs or bots.
(3) Material connection = substantial impact on credibility + weight
A material connection is one that has a substantial impact on the credibility and weight of an endorsement. In some cases, material connections may not be immediately apparent.
(4) Valid disclosures = clear & easy to identify
Clear and conspicuous disclosures are easy to understand and identify. In addition, visual and auditory identification help clarify disclosures and if neither can be accomplished, then the disclosure is unclear.
(5) Manipulation/Falsification of consumer reviews = unacceptable
Manipulating consumer review content or presentation, directly or indirectly, is unacceptable. Manipulating consumer reviews includes review gating, which is when a business offers incentives for only positive review submissions, hides or removes negative reviews, purchases of "fake" reviews, and includes outlier positive reviews to boost an average review score.
(6) More potential parties can now be held accountable!
Influencers, brands, social media platforms, and anyone materially involved in a misleading endorsement can potentially face liability. Whether a party is liable depends on two factors: whether they knew or should have known that the endorsement was deceptive, as well as their level of expertise.
In summary, influencers who endorse products or services must clearly disclose any material relationship with brands, in a straightforward and obvious manner that is hard to miss. Whenever in doubt, influencers or brands should refer to these examples of acceptable and unacceptable disclosures provided by the FTC.
Grace Mickle is a second-year law student at Wake Forest School of Law. She holds a Bachelor of Arts in Communication Studies from the University of Georgia’s Honors Program.