FTC Works to Expose Undisclosed Endorsement Relationships on Social Media
Social media has complicated the common form of commercial advertising. For instance, when celebrities—or what have been coined ‘social media influencers’—post on social media, it can be an inconspicuous advertisement. Such an informal method of advertising blurs the line between advertising and unsponsored content. The difference can potentially affect a consumer’s opinions and decisions about whether to purchase the product or service if customers are unaware of the relationship between the advertiser and the owner of the product or service. The Federal Trade Commission (FTC) is tasked with setting the industry rules and regulations surrounding advertisement disclosures in print, and as of late, on the internet.
The FTC Act prohibits, “unfair or deceptive acts or practices in or affecting commerce.”[1]. The broad provision covers unfair or deceptive advertising through any medium including internet, radio, and mobile. As the FTC Endorsement Guide states, advertisers’ use of third-party endorsements is deceptive if there is an “undisclosed material connection between the advertiser and the endorser—one that might materially affect the weight or credibility of the endorsement.”[2] The relationship must be clearly and conspicuously indicated on the sponsored content.[3] To determine whether an advertiser’s disclosure is insufficient, the FTC focuses on the entirety of the advertisement, not elements in isolation such as words, phrases, or images.[4] The FTC uses the reasonable person standard to determine whether the advertisement, taken as a whole, is unfair or deceptive.[5]
In September 2017, the FTC settled its first case on this subject matter.[6] The government agency instituted its first formal action against individual social media influencers, Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell, for failing to disclose that they were co-owners of a company they frequently featured in their online content.[7] The number of viewers who watched the video featuring the company’s services without disclosure reached 5.7 million.[8] In addition, the influencers paid other celebrities to promote their company without requiring disclosure of the relationship.[9] The parties settled for a non-monetary amount.[10] The settlement instead requires TmarTn and Syndicate to clearly and conspicuously reveal their relationship to the products and services on social media and requires the same of their endorsers.[11]
The FTC used this opportunity to put other social media influencers on notice that it would be going after others who similarly do not follow the advertising rules. In spring 2017, the FTC sent approximately 100 letters to a number of big names in media, including Jennifer Lopez, Zendaya, and the president of Adidas, Mark King, reminding the recipients of the disclosure rules.[12] The letters addressed issues arising out of Instagram posts on mobile devices, where viewers typically see only the first three lines of a longer post unless they click to see more. The FTC told the recipients that the proper solution is to disclose any material connection above the “more” button.[13] Thus, the long string of hashtags that are ordinarily at the end of a post, and are easily skipped over by consumers, is insufficient.[14] In a recent blog post on the FTC’s website, the agency explained that disclosures, such as “Ad,” “Promotion,” or “Sponsored,” or with a hashtag like “#Ad,” are acceptable forms of disclosure, as opposed to the common “#sp,” “Thanks [Brand],” or “#partner.”[15] Following the settlement with TmarTn and Syndicate, the FTC sent out another round of letters—this time, more strongly worded.
The FTC is warning the media world that it is serious about transparency of endorsement deals. To avoid any adverse consequences, companies must work with influencers on the use of their social media accounts for advertising purposes. The simplest solution is to ensure that captions on social media posts explicitly state that the post is sponsored content. Companies owe it to their customers to be transparent and ethical by sharpening the line between genuine posting and advertising.
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