The Federal Trade Commission (FTC) is responsible for keeping brands and influencers under check and preventing deceptive marketing on social media. With influencer marketing at its peak, brands are pouring in money and asking influencers to promote without disclosing the monetary connection. Many influencer posts can be seen on Instagram that mention the brand in their caption but do not highlight if it’s a paid partnership or not.
How FTC has stepped up their legal actions against inadequate disclosures?
In 2016, FTC first charged Lord & Taylor when they paid 50 fashion influencers to promote on Instagram without disclosing any paid partnership or monetary exchange. However, the influencer marketing disclosure guidelines were not clearly stated then by the FTC, hence the company was left without any admission of liability.
In 2017, FTC released influencer disclosure records for Instagram influencers which resulted in Instagram introducing branded content tags. The tag allowed influencers to add “in paid partnership” at the top of every sponsored post so the endorsement is easily understood.
The feature however has not been adopted by all influencers even today. Many celebrities are seen using the paid partnership tag but micro/nano influencers still get away without adequate tagging.
It has come to notice that many brands ask their influencers to hide the monetary relationship to keep away from traditional advertising forms. They want the influencer posts to look like genuine reviews and hence, they ask influencers to avoid tagging.
After several violations and warnings, FTC finally decided to act upon it. In 2020, FTC announced a settlement of $15.2 million with Teami due to inadequate disclosure in their influencer campaigns.
What are influencer disclosure rules as per the FTC for influencers, brands, and platforms?
As per the latest influencer guide released by the FTC on November 2019, Instagram influencers and other social media influencers need to:
- Disclose any financial, personal, family, or employment relationship with the brand.
- Know that U.S. laws apply to influencers worldwide if the post seems to be reaching or affecting U.S. consumers.
- Make sure that disclosure is easily understood. In case of a video, disclosure needs to be stated in the video. In case of live streaming, disclosure needs to be repeated periodically. In case of a post, disclosure needs to be added right next to the endorsement.
The guidelines clearly state the necessary steps influencers need to take. But, in 2020, Officer of Commissioner, Rohit Chopra from FTC issued a statement suggesting a revised approach to influencer marketing. The statement focuses primarily on misuse of disclosures on Instagram, YouTube, and Tik Tok. It states that:
- FTC needs to make existing endorsement guides as formal rules so violators can be liable for civil penalties.
- Requirements need to be declared for technology platforms like Instagram that benefit directly/indirectly from influencer marketing.
The report clearly states that not just brands and influencers, even platforms should be held liable in case of influencer marketing frauds and scams.
Recent Case Study of FTC enforcing against brands and influencers:
Recently, the FTC has settled a case with a brand, Teami for improper disclosure and false influencer advertising.
According to FTC, the influencers that promoted for Teami made the following mistakes:
- Influencers failed to disclose any material connection regarding the advertisement.
- The influencers did add a #teamipartner to their posts but the disclosure was only visible after clicking on “more” which violated FTC’s disclosure guidelines
To make sure that Teami doesn’t repeat their influencer marketing mistakes, they were:
- Made to pay $15.2 million in settlement.
- Required to hire influencers only after they acknowledge proper disclosure and agree to comply.
- Required to establish a system to track disclosures of each influencer with which it has material connections.
Even the influencers were sent warning letters to make sure that a future legal action will be enforced if they continue sharing improper disclosures.
A new disclosure manual was published to guide creators, brands and agencies in their work, thus all the professionals involved in influencer marketing campaigns definitely need to carefully follow these guidelines.
The Key Takeaway:
As FTC is stepping up their game, it becomes mandatory for brands and influencers to match their passion. Failing to keep up with the FTC would mean incurring loss financially and socially. Even the influencers would not be spared as enough warnings have been given to the influencers by the FTC already. It becomes apparent that platforms cannot shy away from their responsibility now. Banning brands and influencers from advertising incase of a breach would protect them from any trouble in the future.
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