#Hashtag: FTC Puts Social Media Marketing on Notice

The Federal Trade Commission (FTC) recently announced it settled an enforcement action against two social media influencers for failing to disclose the material relationship between themselves and the business they were promoting.

Social media influencers are individuals who have a following on social media and can use their status to influence the popularity or perception of brands or products. In this case, the two influencers, Trevor Martin and Thomas Cassell, are popular figures in the online gaming community. The FTC alleged that the pair violated the FTC Act by using their social media profiles on YouTube, Twitch, Twitter, and Facebook to promote an online lottery company they jointly own, while failing to disclose their ownership interest in their promotions.

The FTC has long stated in its Guides Concerning Use of Endorsements and Testimonials in Advertising that advertisements must disclose any financial or other relationship between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement. For example, you’ll frequently see disclosures in commercials such as “real people paid for real opinions” or “sponsored.” But while many companies know that they need to disclose these relationships in television, print, or radio advertising, they don’t realize that the same rules apply to social media.

In an effort to share this information with businesses, the FTC sent educational letters in April 2017 to social media influencers and brands. The letters informed companies about FTC guides and cautioned that they should review their practices to make sure they were in compliance. On the same day the FTC settled with Martin and Cassell, it also sent 21 warning letters to influencers previously contacted. Make no mistake: as social media continues to grow as an advertising medium, FTC and state regulators will only become more aggressive in their enforcement within this arena.

When marketing on social media or using influencers to drive the popularity of a product, sellers need to keep in mind that any material connections must be clearly and conspicuously disclosed. This means if you are an owner of the brand being promoted, you should disclose that fact. If you have provided free samples to the influencer, that should be disclosed in the influencer’s content. Lastly, as with traditional forms of media, before engaging in a social media campaign or utilizing influencers, always consult with skilled legal counsel to identify ways to ensure compliance and minimize the risk of an enforcement action.