As we previously reported, the Federal Trade Commission (FTC) recently released proposed updates to its Endorsement Guides. If implemented, the proposed updates will impact everyone involved in the dissemination and monetization of sponsored content (e.g., social media influencers, brands, social media platforms, ad agencies, public relation firms). This blog post summarizes some of the key proposed updates relevant to influencers.

What are the Endorsement Guides

By way of background, the Endorsement Guides were first enacted in 1980 and are intended to help ensure that endorsements (think sponsored content) and testimonial advertising (think customer reviews) conform with Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices in or affecting commerce. The Endorsement Guides do not carry the force of law, and are thus advisory in nature, but they set the tone for FTC interpretations and potential enforcement actions.

The newly proposed updates aim to modernize the Endorsement Guides (which have not been updated since 2009) to reflect brands’ growing reliance on social media to market products. The FTC is soliciting public comments on its proposed updates through September 26, 2022 (see here for instructions on how to submit a comment).

Influencer Liability

The proposed updates would clarify that an influencer may be liable for statements in a post that he/she knows, or should know, are deceptive. The level of due diligence required by the influencer will depend on the influencer’s level of expertise and knowledge, among other factors. An influencer may also be liable if he/she makes misleading or unsupported statements about performance or effectiveness that are inconsistent with the influencer’s personal experience or that were not made or approved by the brand and go beyond the scope of the influencer’s personal experience. Furthermore, under the proposed updates, influencers who rely on insufficient built-in platform disclosures could be liable for any shortcomings in such disclosures.

Disclosure of Material Connections

Where there is a connection between an influencer and a brand that might materially affect the weight or credibility of the influencer’s endorsement, the Endorsement Guides currently require influencers to fully disclose that connection. The proposed updates would clarify that such disclosure must be “clear and conspicuous” (see definition immediately below) and would add an exception to this requirement where the connection is “understood or expected by all but an insignificant portion of the audience.” A material connection in this context includes a business, family or personal relationship, monetary payment, free or discounted products or services or early access to a product.

Under the proposed updates, this disclosure must clearly communicate the nature of the connection sufficiently for consumers to evaluate its significance, but does not need to include the complete details of the connection. The FTC has not prescribed magic language for purposes of this material connection disclosure as part of its proposed updates.

Clear and Conspicuous

In the proposed updates, “clear and conspicuous” would be defined as a disclosure that “is difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers.” The proposed updates would include specific guidance with respect to visual and audible disclosures, stress the importance of “unavoidability” and say that the disclosure should not be contradicted or mitigated by, or inconsistent with, anything in the post.

Endorsements

The Endorsement Guides currently define an “endorsement” as any advertising message that consumers are likely to believe reflects the opinions, beliefs, findings or experience of a party other than the sponsoring advertiser (again, think sponsored content). The proposed updates would expand the scope of this definition to include merely tagging a brand in a post. As a practical matter, this means that an influencer’s post could fall under the purview of these rules if he/she tagged a brand without otherwise explicitly mentioning the brand.

Influencer’s Current Opinion of a Product  

While an influencer cannot endorse products they no longer use, the proposed updates would clarify that the FTC does not require influencers to modify or delete prior posts, so long as those posts are clearly dated and not reposted.

Endorsements Directed to Children

As part of the proposed updates, the FTC is contemplating adding a new section to the Endorsement Guides dedicated to endorsements directed to children. The FTC plans to hold a public event this Fall to gather more information on this issue. More to come.

Influencers (and brands that utilize influencers) should review the proposed updates against their own policies and practices to ensure they align. If you have any questions, or need assistance updating your policies and practices, please reach out to Lauren Carey.

In March 2020, Teami, LLC (Teami), a marketer of teas and skincare products, agreed to settle Federal Trade Commission (FTC) charges that, among other things, social media influencers hired by Teami failed to adequately disclose that they were being paid to endorse Teami products on social media. The FTC filed a federal court complaint against Teami and sent warning letters to several well-known influencers who endorsed Teami products on social media (including Jordin Sparks, Adrienne Bailon, Jenicka Lopez, Leyla Milani-Khoshbin and Cardi B). The letters emphasized each influencer’s obligation to disclose their material connection with a brand when endorsing products on social media. Below are a few of the social media posts that were at issue in the Teami case.

If an influencer has a connection with a brand or company that might affect the weight or credibility that consumers give the endorsement, that connection should be clearly and conspicuously disclosed. This means the influencer should use clear language and make their disclosures stand out.

In the Teami case, the FTC emphasized that the disclosure should (1) be above the “more” button, (2) not be hidden among multiple tags, hashtags, or Instagram handles and (3) be included in all related posts.

If an influencer fails to make adequate disclosures about their material connections to a brand, the individual influencer and the brand may be subject to legal enforcement action by the FTC.

Curious about the three Ws (when, where and what) of social media disclosures? Check out this blog post. If you have any questions, please reach out to me.

Have you received free (or discounted) products and/or money from a brand to mention their product(s) in a video or post? If so, certain disclosures may be required by law. As an influencer, it is your responsibility to make these disclosures.

When to Disclose

A disclosure is required when you have a relationship with a brand. You have a financial relationship with a brand if the brand gives you anything of value to mention their product (e.g. free product, discounted product, money). Telling your social media followers about this kind of relationship is important because it allows them to weigh the value of your endorsement. Note, however, if you mention a product that you paid for yourself, there is no need to disclose the absence of a relationship.

What to Disclose

A simple explanation is generally sufficient (e.g. “Thanks to [name of brand] for the free product”). If using a hashtag to identify a material connection, make it clear, such as:

>> #ad

>> #advertisement

>> #sponsored

>> #[name of brand]ambassador

>> #[name of brand]partner

Avoid ambiguous hashtags to identify material connections, such as:

>> #sp

>> #spon

>> #thanks

>> #ambassador

>> #partner

>> #collab

Where to Disclose

Make sure people will see and understand the disclosure. You should avoid burying the disclosure in a bio or among a series of hashtags or other disclosures. For an in-feed Instagram post, disclose a material connection before the “More” button. On Instagram stories, superimpose the disclosure over the picture. In a live stream, repeat the disclosure as needed to ensure that viewers see it. In a video, place the disclosure within the video itself, not just in the description of the video. In other words, place the disclosure so it is hard to miss.

Other Tips

>> Do not assume that a platform’s disclosure tool is good enough, but do consider using it in addition to your own disclosure.

>> Do not assume your followers already know about your brand relationships.

If you have any questions on disclosures (why we use them, where to put them, how to write them), please reach out to Lauren Carey.

Behind every sponsored post is an influencer agreement. Influencer agreements can range in sophistication, but are generally drafted with an objective of being relatively brief and signed by the influencer with little or no need for negotiation. That being said, these documents contain serious legal implications and should be read carefully and tailored as needed.

Understanding the terms of your influencer agreement can (1) maximize your negotiating power and (2) ensure your own compliance.

Influencer agreements should address key business terms, such as the length of the agreement (typically tied to a campaign), compensation or other incentives, frequency of posts, platforms on which the posts should be made and whether the company requires review of any content before posting. When reviewing these terms, the influencer should make sure that they accurately reflect the deal.

Agreements with influencers will also contain a number of legal terms, some of which are briefly summarized below:

Exclusivity: An exclusivity provision may limit the brands that an influencer can work with during the length of the campaign and optionally for a time period afterward. An influencer will want to limit the time and scope of this provision, or strike it altogether, in order to maximize their ability to work with other brands.

Ownership: Companies typically prefer outright ownership of the intellectual property rights in the content influencers create for them. That being said, influencers may push back and seek to keep ownership of their posts.

Use of Influencer’s Name, Likeness and Information: The agreement may include permission to use the influencer’s name, likeness and identifying information if the company wants the right to promote its connection with the influencer. Companies try to ensure they can use this information without needing to seek further consent or approval from the influencer. An influencer will want to review the scope of this provision to understand what it covers and narrow the language if needed.

Confidentiality: This provision generally requires the influencer to keep confidential certain information he or she learns in connection with the campaign. If the company is particularly sensitive about disclosing confidential information, it may require the influencer to sign a stand-alone confidentiality agreement.

Indemnification: This provision may obligate the influencer to compensate the company for losses or damages that may occur in connection with the arrangement. An influencer may try to strike this obligation or at least limit their indemnification obligations.

Other tips:

>> Read and understand the company’s social media endorsement policy, which is often incorporated into its form influencer agreement.

>> Industry-specific laws, rules or regulations may be layered into an influencer agreement.

If you have any questions on influencer agreements (how to read them, why we draft them, when to negotiate them), reach out to Lauren Carey.