Under the Influence: Disclosure Rules For Celebrity Social Media Endorsements
Recent FTC Enforcement
For the past two years, the FTC has taken enforcement action against disguised social media ads. In May of 2015, the FTC approved a final consent order against Lord & Taylor, who paid 50 models to post a photo of themselves wearing a Lord & Taylor dress on Instagram without disclosure of payment. In the consent order, the FTC stated that paid endorsers must disclose when they have been paid to endorse. It is important to note that the final consent order did not penalize the individual models.
Similarly, in September of 2015, the FTC settled with Machinima, Inc. for failing to disclose that they had paid endorsers to promote the Xbox One system and games. In that case, Machinima, an entertainment network, agreed to settle FTC charges that it engaged in deceptive advertising by paying influencers to post YouTube videos endorsing Xbox products. The influencers failed to adequately disclose that they were being paid for their seemingly objective opinions.
In 2016, the FTC reached a settlement with Warner Bros. Home Entertainment, Inc. with respect to charges that the company deceived consumers during a marketing campaign for a video game. The complaint alleges that Warner Bros. failed to adequately disclose that it paid online influencers to post positive gameplay videos on YouTube and social media. Warner Bros. paid influencers from hundreds to tens of thousands of dollars, gave them a free advance-release game and told them how to promote it. On a couple of occasions, the YouTube influencers disclosed only that they had been given early access to the game, not that they had also been paid. The FTC contends that Warner Bros. required the influencers to positively promote the game, post the video with a strong call-to-action to purchase the game, not disclose any bugs or glitches, and not communicate negative sentiment about Warner Bros.
The Time to Comply Is Now
The FTC’s clear position on this issue (underscored by recent high-profile settlements) and the strongly-worded letter from consumer groups both serve as reminders that influencers must disclose material connections clearly and conspicuously. Presently, the level of non-compliance with the FTC Guides on this issue is staggering, and there is every indication that this high-profile flouting of advertising rules will soon be reined in.
Adam Z. Solomon is a partner at Michelman & Robinson, LLP (M&R), a national law firm with offices in California, Chicago and New York. Mr. Solomon represents clients in all aspects of advertising, digital marketing, promotions and compliance. He can be reached at (212) 730-7700 or firstname.lastname@example.org.