The kettle’s on at the Federal Trade Commission (“FTC”), where quite the storm has been brewing lately for social media influencers and their sponsoring brands. The FTC is continuing a streak of increased scrutiny for social media advertising in general, but with a stronger emphasis on the responsibility of influencers themselves, building on last fall’s Disclosures 101 for Social Media Influencers. Big changes are ahead with the agency looking to comprehensively revise its Endorsement Guides, as well as issuing a $15.2 million judgment against a detox tea manufacturer who advertised through a fleet of well-known influencers like Cardi B and Jordin Sparks (these influencers also received individual FTC warning letters as a result of the settlement).

How should the FTC regulate influencers? Let your voice be heard!

The advertising world looks nothing like it did forty years ago when, in 1980, the FTC first published its “Guides Concerning the Use of Endorsements and Testimonials in Advertising,” more commonly known now as the Endorsement Guides. With the advent of the internet and proliferation of social media platforms, it comes as no surprise that the FTC voted 5-0 to publish a Federal Register notice requesting public comment on the Endorsement Guides as part of a comprehensive regulatory review. The Guides were last amended in 2009.

The FTC seeks public comment and supporting data on at least twenty-two issues, including, but not limited to:

• whether the practices addressed by the Guides are prevalent in the market and whether the Guides are effective at addressing those practices;

• whether consumers have benefitted from the Guides and what impact, if any, they have had on the flow of truthful information to consumers;

• whether consumer perceptions regarding endorsements have changed since the Guides were last revised;

• whether changes in technology, the economy, or the environment require changes to the Guides;

• whether aspects of the FTC’s guidance document “The FTC’s Enforcement Guides: What People Are Asking” should be incorporated into the Guides;

• how well advertisers and endorsers disclose unexpected material connections on social media platforms, including which disclosures of material connections are sufficiently clear an understandable to consumers when used on social media and whether the sufficiency or insufficiency varies by platform, type of material connection (e.g., a paid post versus a free product), or other factor;

• to the extent connections are not being adequately disclosed, whether the problems tend to be in the substance of the disclosures or in their conspicuousness (e.g., placement, visibility, or audibility) and whether the Guides should provide more detail on what disclosures of material connections are sufficiently clear or unclear in different social media formats;

• whether children are capable of understanding disclosures of material connections and how those disclosures might affect children;

• whether incentives like free or discounted products bias consumer reviews even when a favorable review is not required to receive the incentive, and whether or how those incentives should be disclosed.

Commissioner Rohit Chopra issued a separate statement critical of online digital marketing, advocating for the FTC to “take bold steps to safeguard our digital economy from lies, distortions, and disinformation.”

The deadline to submit comments through Regulations.gov is April 21, 2020.

Cardi B in some hot tea – Takeaways from FTC v. Teami, LLC

The FTC recently announced a proposed settlement with Teami, LLC to the tune of a $15.2 million dollar judgment and 10 warning letters to well-known influencers including Cardi B and Jordin Sparks.

Teami, who markets teas and skincare products, claimed that its detox tea pack would help consumers lose weight and that its other tea products treated other conditions such as cancer, clogged arteries, migraines, influenza, and the common cold. The FTC’s complaint alleged that these claims were deceptive because Teami did not possess reliable scientific substantiation for these assertions.

Although this fact pattern may be run-of-the-mill, this is the FTC’s first complaint involving health and wellness efficacy claims conveyed mainly through social media influencers. The FTC noted that these influencers not only promoted the deceptive claims, but also failed to adequately disclose that they were being paid to promote Teami’s products by burying the disclosure below the “more” button on Instagram.

The FTC previously sent Teami a warning letter in April 2018, putting Teami on notice of the FTC’s concerns regarding its influencers’ inadequate disclosures. The FTC reminded Teami that, per the Endorsement Guides, any material connection between an influencer and his/her sponsor must be clearly and conspicuously disclosed using unambiguous language that consumers can easily notice and comprehend. These disclosures should appear above the “more” button on social media platforms like Instagram. To address the FTC’s concerns, Teami enacted a social media policy for their paid influencers to be included in its contracts, but the FTC’s complaint alleges that many Instagram posts by Teami’s influencers failed to comply with Teami’s own social media policy and resulted in inadequate disclosure in violation of FTC requirements.

The FTC’s proposed settlement with Teami (i) prohibits deceptive health and weight loss claims made by the company or its influencers, (ii) requires adequate scientific substantiation for any health or weight-loss claim, (iii) requires clear and conspicuous disclosure of any unexpected material connection between Teami and its influencers, (iv) requires Teami to monitor and review its influencers’ disclosures for compliance, and (v) includes a $15.2 million dollar judgment that could be partially suspended upon paying $1 million to the FTC.

The FTC also sent ten warning letters to the celebrities and influencers cited for inadequate disclosure in the complaint, including Cardi B and Jordin Sparks.

Lessons learned and next steps

Any health or wellness claim in your company’s marketing must be supported by adequate (pre-advertising) substantiation. Additionally, as FTC Commissioner Noah J. Phillips tweeted on March 6, 2020, “Influencers should be on notice: If you have a brand affiliation, you must clearly and conspicuously disclose material connections to the brand.”

It’s not enough to merely have a social media policy in place unless you can also demonstrate that you are monitoring compliance with it, as Teami learned the hard way. Brands are responsible for reviewing their influencers’ online activity and taking corrective action when they find non-compliance with their policies or inadequate disclosures. A mere contract provision covering the nature of your relationship with an influencer may no longer be enough.

As a result, set some expectations when engaging with an influencer, especially influencers who are relatively new or inexperienced with the FTC’s requirements. Educate them, monitor their social media activity, and provide feedback. Brands are responsible for ensuring that influencers understand their own personal legal obligations and then connect those personal legal obligations back to the legal obligations of the brand. If an influencer doesn’t act responsibly (and legally!) on social media, reevaluate whether those influencers are the right ambassador for your brand – regardless of how many followers they have.

One thing is clear: increasing scrutiny of influencer marketing by the FTC is here to stay. If influencer marketing is critical to your brand’s marketing strategy, consider submitting a comment to the FTC for consideration during the revisions to the Endorsement Guides.

If you have questions about the FTC’s recent enforcement activity – or would like to submit comments to the FTC regarding revisions to the Endorsement Guides – please contact Meryl Bernstein, Julia Anne Matheson, and Brendan C. Quinn.

Authored by Meryl Bernstein, Julia Anne Matheson, Brendan C. Quinn