Social Media Influencers and the FTC

The proliferation of social platforms has created many new marketing opportunities for brands. But in these formats, it is often impossible to distinguish between products that influencers happen to like and those that they are paid to endorse. Today, brand owners struggle with how to harness their authenticity without deceiving customers or falling afoul of federal disclosure requirements.

The Federal Trade Commission is watching carefully. Guided by Section 5 of the FTC Act (http://1.usa.gov/sHVpsp), which prohibits “unfair or deceptive acts or practices in or affecting commerce,” the FTC has increasingly focused on influencer marketing. Last December, it updated its guidance with a policy statement on deceptively formatted advertisements. See , “Enforcement Policy Statement on Deceptively Formatted Advertisements,” FTC (December 2015) (http://bit.ly/2acwYtX). In its long-held view, messages not identifiable as advertising are deceptive if they mislead consumers into believing that they are independent, impartial or not from the sponsoring advertiser. It explores this principle in the context of influencer marketing.

Increasingly, its enforcement focuses on influencers too. In July, the FTC settled charges against Warner Bros. that it used influencers deceptively to generate buzz for the video game “Middle Earth: Shadow of Mordor.” The complaint alleged that Warner paid Internet influencers, including PewDiePie, tens of thousands of dollars to post positive videos about the game without disclosing that they were being compensated. PewDiePie's video was viewed over 3.8 million times. See , http://bit.ly/2aouyZr.

What can brand owners do to ensure that they do not fall afoul of these disclosure rules?

Be Transparent

At bottom, the FTC's guidance boils down to a common-sense principle: Be honest about the advertising relationship. Ensure that the influencer is, too. Ask yourself: If consumers learned about it, would it affect their view of the endorsement? In most cases, the answer is yes. Practically speaking, being evasive also doesn't help a brand longterm. Consumers value influencers precisely because their voice is authentic and trustworthy. If consumers later feel betrayed, both the endorser and the product lose their appeal.

Consider the Context

There is no bright line rule to ensure that a disclosure is adequate. Rather, the FTC considers the ad's “net impression.” This depends upon context. Sometimes, it is immediately apparent that content is an advertisement, and disclosure is unnecessary. But where the marketing connection is not reasonably clear, disclosure is needed. In making this assessment, consider not only the nature of the message and its distribution channel but also the expectations of the target audience.

Work with the Format

A disclosure must be “sufficiently prominent and unambiguous to change the apparent meaning of the claims and to leave an accurate impression.” Recognize the format's unique characteristics to ensure that the disclosure satisfies this test. For example, Facebook and blog posts lend themselves to natural language disclosures. On Twitter, where space is limited, a succinct hashtag like #ad may suffice.

Clarity and placement matter. Vague hashtags, like #spon, or #sp, are insufficient. But even clearer designations, like #paid_ad or “[sponsored]“, will not make the grade if they are insufficiently prominent. For example, they might lurk at the bottom of a blog post or the end of an Instagram caption. Consider how the message will reach consumers.

Be Specific

While the disclosure rules apply to everyone, the onus of compliance ultimately falls on brands. Be specific: indicate to your influencers what you expect in terms of a disclosure. Don't assume they will disclose appropriately.

Thomas Harvey is a partner at San Francisco's Coblentz Patch Duffy & Bass. His practice focuses on intellectual property litigation and counseling.