The following is a guest piece by Lauren Carey, an associate at Lewis Rice LLC. The opinions expressed are those of the creator and don’t necessarily reflect the views of Lewis Rice LLC. This piece is for general information purposes and just isn’t intended to be and should not be taken as legal advice.
On June 29, 2023, the Federal Trade Commission (FTC) released an updated version of its Guides Concerning the Use of Endorsements and Testimonials in Advertising (Endorsement Guides), together with updated Endorsement Guides FAQs, to deal with, amongst other things, social media influencer marketing.
Influencers have a capability to attach brands with their goal audiences in a way that’s more impactful, intentional and authentic than another promoting medium. Think about it: In which of the following scenarios are you more prone to make a purchase order?
- You are flipping through a catalog for a clothing brand and a cute swimsuit catches your eye.
- You are scrolling Instagram when your favorite influencer/virtual BFF pops on stories to try on the same swimsuit. The influencer shows you all the angles, colours and styles, gives you a direct link to purchase and a singular discount code.
If you’re a millennial (hi, it’s me) or Gen Z, it’s a protected bet you picked the second scenario.
That said, many influencers gain the trust and loyalty of their followers through organic – think non-sponsored – content akin to ask me anything (AMA) query boxes, monthly engagement giveaways, prepare with me (GRWM) videos, to be read lists (TBR) and more. As you may imagine, the line between organic and sponsored content can easily grow to be blurred, like when a GRWM video includes a combination of products that were purchased and gifted. This is where the Endorsement Guides are available.
The Endorsement Guides provide guidance on what practices could also be unfair, deceptive or in violation of the FTC Act. With respect to influencer campaigns, the Endorsement Guides include a set of guardrails for brands, influencers and other intermediaries akin to ad agencies and public relations firms involved in the dissemination of sponsored content. Below are several key updates that influencers and brands should pay attention to.
When is a disclosure required?
When there’s a fabric connection between an influencer and a brand and that connection just isn’t reasonably expected by the viewers of a sponsored post, the connection have to be disclosed. In other words, if a major minority of viewers wouldn’t understand or anticipate the connection, then disclosure is required. This standard just isn’t a transparent one, so when unsure, err on the side of creating a fabric connection disclosure. These forms of connections may impact the weight or credibility that a viewer gives the influencer’s opinion of the product.
Tip: The material connection disclosure requirement applies to all influencers, from side-hustle nano influencers with 500 followers to mega influencers with greater than 1 million followers. Do not wait until you go viral to learn the rules.
A cloth connection disclosure doesn’t need to incorporate every detail of the relationship but must clearly communicate the nature of the connection so viewers can evaluate its significance. While the FTC didn’t prescribe magic language for this purpose, the following disclosures, if presented clearly and conspicuously (more on this below) are generally acceptable:
- Ad:
- Paid ad
- #ad
- Advertising:
- Advertisement
- Sponsored by XYZ
- Promotion by XYZ
Tip: An influencer’s unique discount code for a brand’s products just isn’t a sufficient material connection disclosure. While it could convey that there’s a connection between the influencer and the brand, it doesn’t necessarily show that a financial relationship exists.
Where should the disclosure be?
In general, a fabric connection disclosure have to be “clear and conspicuous.” In other words, per the Endorsement Guides, the disclosure have to be “difficult to miss (i.e., easily noticeable) and simply comprehensible by bizarre consumers.” This will look different for various posting formats. For example, if the endorsement is made through visual means (e.g., a picture), the disclosure should be made no less than visually (e.g., superimposed over the picture or in the caption). If the endorsement is made audibly (e.g., talking about a product on stories), the disclosure should be made no less than audibly (e.g., state the disclosure verbally), although each visual and audible disclosure are preferable.
A platform’s built-in disclosure tools is probably not sufficient for purposes of exposing a fabric connection in a transparent and conspicuous manner. In determining whether a built-in disclosure is obvious and conspicuous, the FTC will consider several key aspects: placement (should be difficult to miss), readability (should be easy to read in contrasting font) and clarity (should be straightforward wording). Exercise caution before relying solely on built-in disclosure tools. If insufficient, the influencer or brand could also be on the hook, not the platform.
Tip: If a brand is sponsoring a series of posts, an appropriate material connection disclosure should be included with each post. An influencer cannot assume that viewers will read greater than certainly one of their posts and associate them with one another.
How can brands monitor compliance?
According to the Endorsement Guides, advertisers are subject to liability for misleading or unsubstantiated statements made through endorsements or for failing to reveal unexpected material connections with influencers. A brand could also be answerable for a deceptive endorsement even when the influencer just isn’t.
To ensure compliance with the Endorsement Guides, brands should have reasonable programs in place to coach and monitor their influencers. The FTC notes that, “[w]hile not a protected harbor, good faith and effective guidance, monitoring, and remedial motion should reduce the incidence of deceptive claims and reduce an advertiser’s odds of facing [an FTC] enforcement motion.”
Tip: Sponsored posts which are short-lived (e.g., stories) are difficult for brands to watch in real time. Consider adding a pre-approval process to your brand’s monitoring program, particularly for most of these posts.
Read the full article here
