On April 19, 2017, the Federal Trade Commission (FTC) sent letters to over 90 marketers and so-called “influencers,” reminding them that social media posts that promote or endorse products must clearly and conspicuously disclose any material relationship to the brand. The 45 celebrity influencers who received these letters included singer Jennifer Lopez, reality star Kourtney Kardashian, actress Lindsay Lohan, model Heidi Klum, and former NBA star Allen Iverson, and the brands included Chanel, Adidas, Dunkin’ Donuts, Johnson & Johnson and Hello Fresh. This is the first time that the FTC has reached out directly to social media influencers to educate them on the FTC’s Endorsement Guides (May 2015), which require that “material connections” between an endorser and an advertiser be clearly and conspicuously disclosed.
The recent wave of letters from the FTC focused on Instagram posts where celebrities posted photos of themselves with products without adequately disclosing the fact that they were paid by the brands to endorse the products. In the context of social media like Instagram, unlike a TV or print advertisement, consumers might believe, in the absence of a clear and conspicuous disclosure like “#sponsored” or “#ad,” that the posts are the celebrity’s personal preferences rather than a paid promotion.
Public Citizen, along with other partner organizations, sent letters to the FTC in 2016 requesting that the Commission take action against undisclosed paid ads on platforms such as Instagram. In a recent Public Citizen Commercial Alert, Kristen Strader of Public Citizen commented:
We live in an era where celebrities and average citizens are sharing every detail of their lives on social media, from what they ate for breakfast to selfies featuring their ‘favorite’ products. It is often unclear whether an Instagram user is paid to post a product endorsement or if they genuinely use it. That’s exactly why brands are using influencer marketing as a primary way to reach young consumers. But without clear disclosure, brands are deceiving consumers and reaping the monetary benefits.
The FTC provides the following advice on making effective disclosures on Instagram:
Although this is the FTC’s first time reaching out directly to influencers, paid endorsements have been subject to scrutiny in the past. For example, earlier this year, as part of its ongoing monitoring program, the National Advertising Division (NAD) of the Better Business Bureau reviewed endorsements by Kourtney and Khloe Kardashian and Kylie Jenner (the Kardashians), the quintessential social media influencers, of FitTea. The NAD opened an inquiry into the Kardashian endorsements of FitTea without appropriate disclosure. In response, the Kardashians voluntarily modified their social media posts to disclose their material connections.
Last year, Warner Bros. Home Entertainment settled FTC charges that it failed to adequately disclose that it paid online influencers, including the well-known YouTuber “PewDiePie,” thousands of dollars to post positive gameplay videos for the video game Middle Earth: Shadow of Mordor on YouTube and social media. The FTC found that disclosures placed in a description box appearing below the video visible only when choosing the “Show More” option, were insufficient. Earlier in 2016, Lord & Taylor settled FTC charges that it paid 50 online fashion influencers to post Instagram pictures of themselves wearing the same paisley dress, but failed to disclose they had given each influencer the dress as well as thousands of dollars in exchange for their endorsement. And back in 2014, the FTC sent a letter to Cole Haan with respect to a contest which premised eligibility on contestants creating a Pinterest board with five photos of the contestant’s favorite Cole Haan shoes and using the hashtag “#WanderingSole” in each pin. In its letter, which was merely advisory, the FTC concluded that Cole Haan should have instructed consumers that each post must disclose that they pinned the Cole Haan products as part of a contest.
Finally, in the most recent example of paid influencers gone amok, involving – wait for it – a Kardashian, multiple class actions have been filed against the ill-fated Fyre Festival, a music festival billed as a “once-in-a-lifetime musical experience,” that was scheduled to take place in the Bahamas in late April of this year. Rather than the VIP experience that was promised, guests were stranded in disaster relief tents with portable toilets and cheese sandwiches. The event was promoted on Instagram by Kendell Jenner (who was paid $25,000) and other celebrities, such as Bella Hadid and Emily Ratajkowski. One count in the lawsuits is a failure to disclose the fact that they were paid influencers.
The FTC’s recent letters to Instagram influencers and marketers are a public warning that the Commission is closely scrutinizing influencer activity on social media. Brands should take this opportunity to establish social media policies that must be followed by both the company and its paid endorsers, whether they are compensated in cash or free product, to ensure that clear and conspicuous disclosures are included in all social media endorsements.