In November, we posted that four consumer groups had sent letters to FTC, encouraging the agency to investigate and bring enforcement actions regarding the use of influencers on secretsInstagram. In what may be a response to that encouragement, the FTC just announced that it had sent more than 90 letters to companies and influencers, reminding the recipients of their legal obligations.

The letters state that consumers need to know if there is a material connection between a company and an influencer who promotes the company’s products or services. Unless the connection is otherwise evident from the context, the influencer is required “clearly and conspicuously” disclose the connection.

There are at least four noteworthy aspects to these letters:

  • Thus far, the FTC’s enforcement efforts have been focused primarily on companies. Some of these letters, though, were sent to celebrities, athletes, and other influencers. This could signal broader enforcement in the future.
  • The letters address some issues that are unique to Instagram. Consumers who view Instagram posts on mobile devices typically see only the first three lines of a longer post, unless they click “more.” When making endorsements on Instagram, influencers should generally disclose any material connection above the “more” button, so that the disclosure is less likely to be missed.
  • The letters also noted that when posts include multiple tags, hashtags, or links, readers may just skip over them, especially when they appear at the end of a long post. It’s important to ensure that important disclosures don’t get lost in the mix. This might require leading with the important disclosures or making sure that they otherwise stand out.
  • Some of the letters addressed particular disclosures that the staff believes are not sufficiently clear. For example, some letters pointed out that consumers may not understand a disclosure like “#sp,” “Thanks [Brand],” or “#partner” in an Instagram post to mean that the post is sponsored. Although there’s no one-size-fits-all way to make that disclosure, a term that is subject to multiple interpretations may not be sufficient.

These types of letters are often a precursor to more formal action, so this might be a good time to revisit your influencer agreements and campaigns.

In September, we noted that four groups – Public Citizen, Commercial Alert, the Campaign for a Commercial Free Childhood, and the Center for Digital Democracy – had sent a joint letter to FTC encouraging the agency to investigate and bring enforcement actions related to the use of influencers on Instagram. The letter included examples of over 100 allegedly problematic Instagram secretsposts. This week, the same groups sent another letter to the FTC with 50 new examples, and once again urged the Commission to take action to stop this “dangerous trend.”

Although some of the examples provided in the letter could – if the allegations are true – violate the FTC’s Endorsement Guides, others are arguably fine. The problem is that groups misstate some key provisions in the Guides and exaggerate advertisers’ responsibilities. For example, the groups suggest that all paid endorsements must be labelled as ads. Although a label is often necessary, the FTC has acknowledged that a label may not be required if something is obviously an ad. Some of the examples in the letter are obviously ads.

The groups also suggest that the only appropriate labels are #advertisement or #ad, and they argue that a #GotItFree hashtag is not sufficient. However, the FTC has stated that there is “no special wording” for the disclosures and has discussed other labels, in addition to the ones the groups suggest are required. Moreover, the Commission has opined that a simple disclosure explaining that a person received a free product to try “will usually be effective.” Some of the examples in the letter arguably comply with this requirement, as well.

Undoubtedly, many influencer campaigns don’t comply with the law. But as anyone who has worked extensively with influencers knows, there is a lot of gray in this area, and there often aren’t one-size-fits-all answers. A letter that suggests otherwise and lumps compliant campaigns together with non-complaint ones is not helpful. Although it’s too early to see if the FTC will take any action in response to these letters, we can hope that the Commission will see that the letters mischaracterize the Guides and evaluate campaigns with a more reasonable eye.

Regardless of what happens, this letter serves as another reminder of the potential risks associated with influencer campaigns. For more details, see this Law360 article.

This week, four groups – Public Citizen, Commercial Alert, the Campaign for a Commercial Free Childhood, and the Center for Digital Democracy – sent a joint letter to FTC encouraging the agency to “investigate and bring enforcement actions related to the practice of non-disclosed advertising through influencer user profiles on Instagram.”

As we reported last month, paid endorsements are a big issue for the FTC, and press reports had suggested that the agency might soon “crack down on paid celebrity posts.” But the crackdown is coming fast enough for some. The letter asks the FTC to move “promptly and aggressively” in order to stop a problem that “has reached epidemic proportions” and is putting children at risk. Dramatic claims.

The groups attempt to support these claims by reporting the results of an internal “investigation of the disclosure practices among movie stars, reality TV personalities, famous athletes, fitness gurus, fashion icons, and pop musicians.” According to the letter, the investigation revealed 113 influencers who endorsed a product without disclosure. Is a disclosure necessary? Public Citizen doesn’t seem to know for certain whether the celebrities were compensated, but presumes so, “based on industry norms.”

Despite not being certain, the groups present examples of over 100 Instagram posts that could be problematic. And they ask the FTC to “take aggressive enforcement action against companies and agencies that engage in the practice of non-disclosed ‘influencer’ endorsements.” (They even suggest two companies that should be at the top of the FTC’s list.) Although the groups believe that the FTC should continue to focus on the companies, they also urge the agency to take action against prominent influencers.

KK Instagram Post

Regardless of whether the allegations in the letter are accurate, this development highlights the potential risks in this area. Not only do companies have to worry about the FTC itself – they also have to worry about being called out by “watchdog” groups.

Last week, Bloomberg ran an article suggesting that the FTC is about to “crack down on paid celebrity posts” that aren’t labeled as ads. If you read this blog, you already know this is a big priority for the FTC. In fact, the agency has launched investigations against a number companies who used influencers to promote their brands without requiring the influencers to disclose their relationship to the companies. That’s not new. But what may be new are the suggestions from the FTC that some of the methods influencers commonly use to disclose those relationships may not be adequate.

There is no one-size-fits-all strategy for making the necessary disclosures. In a medium where space isn’t an issue, making Hashtagthe disclosure in a full sentence is usually ideal. And the sentence doesn’t have to include “legal” language – something as simple as “I’m working with” the company will usually do. But where space is limited, such on as Twitter, influencers will often turn to hashtags. The FTC has previously suggested that hashtags such as #ad or #sponsored can be used to disclose that something is an ad or sponsored content. But they’ve frowned on other abbreviations, such as #spon, worrying that many consumers won’t understand them.

According to the article, simply using the right hashtag in a tweet may not be enough, though. Michael Ostheimer from the FTC’s Ad Practices Division said: “If you have seven other hashtags at the end of a tweet and it’s mixed up with all these other things, it’s easy for consumers to skip over that. The real test is, did consumers read it and comprehend it?” Accordingly, he suggests that the disclosures at the beginning of a tweet would better satisfy the FTC’s “clear and conspicuous” standard. Apparently, the FTC is worried that a typical consumer’s attention span will run out before the end of 140 characters.

Although the suggestion that legal disclosures should appear at the beginning of a tweet is troubling, it’s too early to read too much into this. Ostheimer may be expressing a preference for a best practice, but that doesn’t necessarily mean that a company will get in trouble for having a disclosure at the end of a sponsored tweet. Again, the goal is to ensure that consumers are likely to understand that something is sponsored, and there’s certainly more than one way to for an advertiser to achieve that goal.

What is clear is that this continues to be a priority for the FTC. Ostheimer states that the FTC will continue to go after advertisers whose influencers fail to made adequate disclosures. Although the FTC has yet to charge an influencer with deceptive advertising, it hasn’t ruled that out. If your company uses influencers, now may be a good time to take a look at your practices. There’s still a lot of gray in this area, but there are easy things you can do to avoid becoming an easy target.

#notanad

Last year, we posted about a settlement between the FTC and Machinima over an influencer campaign. This week, the NY Attorney General announced a settlement with Machinima over the same campaign, along with settlements with three other companies that allegedly solicited false endorsements.

In 2013, Machinima paid gaming “influencers” to post videos endorsing Microsoft’s Xbox One system and several games. The influencers spoke favorably about the products and, according to the AG, gave the impression that their videos were independently produced and reflected their personal views. Nowhere in the videos did the influencers disclose that Machinima had offered them compensation in exchange for creating and uploading the videos. If you read our blog, you already know that’s a problem. As part of the new settlement, the company must pay $50,000 and take steps to ensure that influencers make the proper disclosures.

Positive FeedbackThe AG accused the other three companies of soliciting fake reviews from people who had never tried the services they reviewed. For example, the AG alleged that Premier Retail Group solicited reviewers on Craigslist to write reviews in exchange for free samples or other compensation, ESIOH solicited freelance writers on Craigslist and Fiverr to write over 200 fake reviews for money, and Rani Spa worked with a third party to solicit others to write reviews for money. The companies all agree to change their practices and to pay penalties of up to $50,000 (parts of which were suspended, based on the companies’ financial conditions.)

This isn’t the first time the AG has taken action against fake reviews. As we noted a few years ago, the AG’s office conducted a year-long undercover investigation into the reputation management industry and the practice of posting fake reviews online. This is a hot topic for both federal and state regulators. We assume that readers of our blog would never solicit fake reviews, but remember that if you incentive reviews, you need to take steps to ensure that the reviewers disclose those incentives.

In January 2014, AdAge interviewed me about news reports that Machinima had hired influencers to create videos promoting Microsoft’s Xbox One gaming console and games. In a native advertising campaign, the influencers posted positive reviews, but didn’t disclose that they had been paid to do so. During the interview, we speculated about whether the FTC might take action against the campaign and what the result might be. Now, almost 20 months later, we have the answer. This week, the FTC announced a settlement with Machinima.

According the to the FTC, Machinima, the operator of a popular YouTube network, paid two influential gaming bloggers to create videos promoting the new Xbox One console and three new games, but didn’t require the bloggers to disclose that they were paid for the reviews. The bloggers posted four videos that had more than 1.6 million views. To capitalize on this success, Machinima later recruited and paid more people to upload positive reviews, again without requiring a disclosure. This generated another 300 videos and 30 million views in a five-week period.MachinimaXB1

If you follow our blog, you can already guess the problem. As Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, said: “When people see a product touted online, they have a right to know whether they’re looking at an authentic opinion or a paid marketing pitch. That’s true whether the endorsement appears in a video or any other media.” Under the proposed settlement, Machinima is required to ensure its influencers clearly disclose when they have been compensated in exchange for their endorsements.

Whether you refer to this as an “influencer” campaign or “native advertising,” the answer is always the same. If your company pays people to review or promote your products in a way that could confuse viewers into thinking the reviews come from independent consumers, you need to take steps to ensure that the reviewers clearly disclose that they have some connection to your company. Make sure you educate reviewers about their responsibilities and take steps to monitor their compliance. If you don’t, you could end up as one of future blog posts.

As we’ve posted before, if a company provides incentives to a consumer in order to encourage the consumer to promote the company’s products, the consumer is required to disclose those incentives. It’s not just the consumer’s problem, though. The FTC has stated that a company can be held liable for a consumer’s failure to make the disclosure. Fortunately, though, there are easy steps a company can take to protect itself in case consumers don’t comply.

The FTC recently investigated a promotion conducted by Nordstrom to promote the opening of a new store. Nordstrom provided social influencers with gifts and failed to tell the influencers that when they wrote about the event, they should disclose they had received gifts. After reviewing the promotion, however, the FTC decided not to pursue the case for a few reasons. First, the FTC noted that several influencers who posted content did disclose that they had received the gifts. And, second, Nordstrom revised its social media policy to address the FTC’s concerns.

This case serves as a reminder that companies who engage in social media should have a policy that provides endorsers with guidelines about what they can, can’t, and must do. It’s not just enough to have the policy in place, however. Companies must also monitor to ensure endorsers comply with the policy, and take action against those who don’t.  

As we’ve noted in previous posts, if a company provides incentives to a consumer in order to encourage the consumer to promote the company’s products, the consumer is required to disclose those incentives. It’s not just the consumer’s problem, though. The FTC has stated that a company can be held liable for a consumer’s failure to make the disclosure. Fortunately, though, there are easy steps that a company can take to protect itself in case consumers don’t comply.

The FTC recently investigated a promotion conducted by Nordstrom to promote the opening of a new store. Nordstrom provided social influencers with gifts and failed to tell the influencers that when they wrote about the event, they should disclose they had received gifts. After reviewing the promotion, however, the FTC decided not to pursue the case for a few reasons. First, the FTC noted that several influencers who posted content did disclose that they had received the gifts. And, second, Nordstrom revised its social media policy to address the FTC’s concerns.

This case serves as a reminder that companies who engage in social media should have a policy that provides endorsers with guidelines about what they can, can’t, and must do. It’s not just enough to have the policy in place, however. Companies must also monitor to ensure endorsers comply with the policy, and take action against those who don’t.