Under the FTC Act, the Federal Trade Commission is responsible for investigating and bringing cases involving deceptive advertising. Many of these cases relate to endorsements made on behalf of advertisers. To help advertisers stay within the boundaries of the law, the FTC published and periodically updates a lengthy document it calls the “Guides Concerning the Use of Endorsements and Testimonials in Advertising,” or the “Endorsement Guides” for short.
In September 2017, the FTC added an FAQ about the Endorsement Guides to its website. The FAQ focuses a bit more on social media and influencer marketing than “traditional” media, and it is easier to digest than the Guides, but it is still a relatively dense document.
“Disclosures 101” Update
On November 5, 2019, the FTC posted an update about the Endorsement Guides to its website. The update is titled “Disclosures 101 for Social Media Influencers,” and it includes a short video overview of disclosure requirements, a few bullet points about disclosure rules for influencers, and a PDF brochure. The update emphasizes that “[a]s an influencer, it’s your responsibility to make these disclosures ….”
It’s worth noting that disclosures are not just the responsibility of the influencer—in the context of “native” advertising, the FTC says that compliance is the responsibility of “everyone who participates directly or indirectly in creating or presenting” advertisements. That means the brand, the ad agency, the marketing team, and anyone else who touches the ad are all ultimately responsible for “mak[ing] sure that ads don’t mislead consumers about their commercial nature.”
In terms of substantive content, the Disclosures 101 update offers nothing new. Instead, it states in much more concise, easy-to-understand language, the basics of how to comply with disclosures if you are an influencer. In general terms, influencers have to disclose any “material connection” (i.e., a family, employment, financial, or personal relationship) that they have with a brand when they post about that brand or its products. And the disclosures need to be “clear and conspicuous.”
To make sure disclosure is clear and conspicuous, consider the “Four Ps”:
Presentation: Is the wording and format easy to understand?
Placement: Is the disclosure information easy to find?
Proximity: Is the disclosure nearby the claim that it qualifies?
Why did the FTC post this update?
This update likely reflects the FTC’s recognition that noncompliance is a growing problem. According to research reported by Forbes in 2018, only 1 in 4 influencers made disclosures in a way that complies with FTC rules, and almost half reported that they make disclosures only when asked. As brands increase their focus on influencer marketing, and more people try to become influencers themselves, the risk of consumer deception associated with nondisclosure increases. The FTC probably realizes that most influencers are not going to make the effort to sit down and read the Endorsement Guides. This update at least provides the basics in a short, accessible format.
The update also may signal that the FTC intends to pursue even more enforcement actions against influencers who fail to comply. After focusing exclusively on enforcement against brands, the FTC settled its first-ever case against individual influencers in September 2017 and sent more than 90 warning letters to individuals that year. We can expect to see that trend continue as influencer marketing grows.
Why should influencers care about disclosure compliance?
Complying with the law should be incentive enough, but it’s easy for influencers to think that the odds of an FTC action against them are low, so what’s the big deal? At the moment, if you are an influencer, you may have a good chance of avoiding FTC attention, but there are other reasons to comply. Among other things, your contract with your agency or brand probably requires you to comply with FTC rules (and if it doesn’t, it should). So, if you don’t comply, you are breaching your contract, which means you might not get paid, or the brand or agency may stop working with you.
By complying, you are protecting your business interests and your reputation. You are also signaling to other brands and agencies who see your content that you are someone who understands the rules and that you take your obligations seriously. That’s good marketing.
Why should brands care about disclosure compliance?
Again, the risk of FTC enforcement should be good enough reason to comply. You want your brand to become famous, but not because the government is accusing you of deceiving the public.
Aside from government action, your competitors may also have grounds to sue you for failure to make appropriate disclosures through your influencers. Although there is no private right to sue for violations of the FTC Act directly (only the FTC can do that), the Guidelines may inform what constitutes false advertising under the Lanham Act—a federal law that allows business competitors to sue for “us[ing] in commerce any … false or misleading description of fact, or false or misleading representation of fact, which … is likely to … deceive as to the … sponsorship, or approval of … goods, services, or commercial activities by another person.” So if you are taking market share from a competing brand or agency that is playing by the rules and complying, they may have grounds to sue you for it.
Similarly, violations of the FTC Act (as described in FTC Guides) may form the basis of private claims under state consumer protection statutes, including California’s Unfair Competition Law.
Compliance is a smart business decision, not just a legal one.