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Social Media Influencer Marketing And FTC Enforcement – Media, Telecoms, IT, Entertainment – United States – Mondaq News Alerts

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The endorsement of a celebrity or social media “influencer” can be a valuable tool for companies seeking
to instantaneously advertise to the millions of individuals who
follow a popular influencer. Companies pay very handsomely for
these endorsements, with some celebrities earning over $1 Million per post.
However, this explosion in paid endorsements and influencer
marketing has led to the Federal Trade Commission (“FTC”)
cracking down on misleading ads where
influencers fail to disclose their relationship with the promoted
companies. Given the potential for large fines and negative press,
companies must be aware of their obligations to ensure that their
influencer marketing campaigns comply with applicable
law. 

How Should Companies Protect Themselves?

Best Practices for Influencer Marketing

There are several simple steps that companies can take to ensure
that they do not run afoul of regulations enforced by the FTC,
attorneys general, and other regulators. First and foremost,
advertisers should consult published FTC guidance on this subject as they develop
their influencer marketing policy. 

To be protected, companies should enter into Influencer
Marketing Agreements with each of their subject
influencers/celebrity endorsers. By agreeing on the duties and
responsibilities of both the company and the influencer well before
the first post is published, errors are far less likely to occur.
These agreements should cover everything from compensation to the
content and placement of disclosures in social media posts.
Entering into these agreements, alone, is not sufficient. Companies
must also monitor influencers’ social media posts and take
action when these agreements are not complied with. 

Disclosure is a critical part of any social media influencer
advertisement. The FTC requires the disclosure of any
financial, employment, personal, or family relationship between a
brand and its influencers. Because these relationships are not
limited to those where the influencer was paid, it is wise to
always err on the side of transparency. In any post, the necessary
disclosures must be clearly and conspicuously displayed. For
Instagram posts, which are generally viewed on mobile phones, it is
always best to feature the disclosure early in the post. This
ensures that the disclosure is not truncated or hidden under the “more” button. 

Recent FTC Action Serves as a Cautionary Tale

On March 5, 2020, the FTC commenced an enforcement action
against Teami, LLC (“Teami”), a Florida-based company
that markets, advertises, and distributes detox teas and skincare
products. In addition to alleging that Teami’s marketing
materials contained materially misleading claims as to the supposed
health benefits of Teami products, the FTC also alleged that Teami
improperly employed social media influencers to market its
products. 

Prior to bringing suit, the FTC advised Teami that some of its
influencer endorsements on social media did not properly disclose
the influencer relationship with Teami. After it was contacted by
the FTC, Teami implemented a social media policy, which instructed
influencers to “ensure that all posts for which you receive
free products or any type of compensation as an inducement to make
the post . . . [u]se hashtags or words that clearly let the public
know of the connection between you and Teami.” The policy
further required that all disclosures made on Instagram appear in
the first part of an influencer’s post so that they could be
seen without a user needing to click the “more”
button.

Although Teami claimed that it had disseminated its new policy
to its social media influencers, the FTC alleged that its
influencers continued to promote Teami products in posts that
failed to comply with FTC requirements. Instagram posts published
by well-known influencers paid by Teami to endorse its products
included endorsements within the photos themselves (by clearly
showing a Teami-branded product) or within the first two or three
lines of the post’s caption. However, many of the endorsement
disclosures were hidden in text behind the “more” button.
Teami’s well-known endorsers included Cardi B, Jordan Sparks,
Kylie Jenner, and Demi Lovato. 

On the same day that the complaint was filed, Teami and the FTC
filed a joint stipulated order for a permanent injunction and
monetary judgment. The order (which must be approved by the court):
1) requires clear and conspicuous disclosures of any unexpected
material connection in all future Teami influencer marketing; 2)
mandates endorser monitoring requirements that Teami must follow in
future social media marketing; and 3) imposes a $15.2 million
judgment—constituting the total sales of the products at
issue. However, that judgment will be suspended upon payment of $1
million, based on Teami’s inability to pay the full judgment
amount.

As readers of this blog know, the steep penalties faced by Teami
are not uncommon. The FTC and state attorneys general frequently
investigate and prosecute companies for deceptive influencer
marketing practices. Accordingly, it is important that companies
work with experienced marketing attorneys to guide them through
state and federal consumer protection laws in order to avoid
regulatory trouble.

Similar Blog Posts:

FTC Settles Landmark Social Media Influencer
Investigation

FTC Clarifies Influencer Law with New Sponsorship
Disclosure Guide

SEC Issues Warning to Social Media Influencers
Endorsing Cryptocurrencies

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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