Influencer marketing on social media—estimated to be worth $15 billion in 2022—has proven to be so successful, in part, because consumers view influencers’ opinions as more authentic than traditional advertising. While social media can be a useful forum for both sharing honest recommendations as well as paid advertising, the line between the two is often blurred, leading to consumer deception as to what content is truly authentic and what is sponsored.
Commissioner Rohit Chopra of the Federal Trade Commission (“FTC”) highlights the problem: “[I]t [is] difficult for families and small businesses looking for truthful information” when influencers and companies utilize “[f]ake accounts, fake likes, fake followers, and fake reviews.”
With the rise of these misleading practices, the FTChas called for increased civil penalties on companies that employ deceptive advertising on platforms like Instagram, YouTube, and TikTok. In his statement supporting a “close and careful” review of the FTC’s Endorsement Guidelines and a “critical analysis” of its enforcement approach, Chopra notes that “[m]isinformation is plaguing the digital economy, and recent no-money, no-fault FTC settlements…may be doing little to deter deception.”
However, as shown by the recent $15.2 million judgment against the seller of “detox” tea, Teami, the days of “no-money, no-fault FTC settlements” for deceptive social media advertising may be behind us
Liability was imposed against Teami for failing to ensure that its celebrity influencers, such as rapper Cardi B, were “clearly and conspicuously” disclosing their relationships with Teami, and for Teami’s use of unsubstantiated claims to market its products (including that the ingredients in Teami’s products cause rapid weight loss and fight cancer).
According to the complaint filed against Teami, in April 2018, the FTC advised Teami that it was not in compliance with the FTC Act, and specified that each influencer who posted endorsements on Instagram was required to disclose its relationship with Teami within the first two lines of each post—i.e., before the “more” link.
In response, Teami implemented a written social media compliance policy, which required its influencers to use certain words that made their material connection to Teami obvious to consumers, to make disclosures above the “more” link on Instagram, and to obtain approval from Teami before posting endorsements of the company’s products. However, according to the FTC, Teami failed to enforce its policy, resulting in hundreds of non-compliant posts.
Failure to enforce its social media compliance policy proved to be costly for Teami
The company was recently ordered to pay $15.2 million (which was subsequently reduced to $1 million based upon Teami’s inability to pay the full judgment), an amount equal to Teami’s sales of challenged products from 2014-2019, and to: (i) provide each influencer with a clear statement of his or her responsibilities; (ii) establish, implement, and maintain a system for monitoring and reviewing influencers’ representations and disclosures with material connections to Teami (or any other person or entity affiliated with the relevant product); and (iii) terminate its agreements with influencers who fail to disclose their material connection with Teami properly.
While the FTC may, and certainly has the right to, take action against individual influencers, the Endorsement Guidelines make clear that when enforcing the FTC Act, the “focus usually will be on advertisers, or their ad agencies and public relations firms.”Given that any of these entities can be held liable, brand owners, advertisers, and public relations firms should all consider implementing written social media compliance policies and educating their marketing teams and influencers about the FTC’s disclosure requirements.
Social media policies should include specific expectations rather than blanket statements to increase the likelihood of compliance. For example, the policy should include a provision requiring the influencer to place the disclosure where consumers are likely to see it (i.e., for an Instagram post, in the first two lines of the post so consumers do not have to click “more”; for Snapchat or Instagram Stories, the disclosure should be superimposed over the picture/video; for live streaming, the disclosure should be repeated periodically). Further, policies should instruct influencers that they are prohibited from making claims about products that require proof that the advertiser does not have.
As shown by the Teami case, it is not enough merely to have a social media compliance policy on paper
Brand owners, advertisers, and public relations firms must also be vigilant about monitoring the content published by influencers and enforcing their policies when faced with incidents of non-compliance. Importantly, social media compliance policies should be specifically tailored to address the risks associated with the company’s social media marketing program and periodically reevaluated and updated to address any changes in the program or changes in the law.
In the past, companies that used influencers to promote their products and were found to be non-compliant with the FTC Act may have been merely met with a slap on the wrist. However, in light of the FTC’s more aggressive approach and focus on advertisers, ad agencies, and public relations firms, it is imperative now, more than ever, for these businesses to review their social media advertising strategies and compliance programs to ensure that they are updated, specifically tailored to the business, and that their marketing teams as well as influencers understand what is required under the FTC regulations.
Danielle Garno is an attorney at Cozen O’Connor in Miami. She focuses her practice on issues faced by the fashion community, including startup phase and commercial advice, intellectual property such as trademark and copyright infringement, social media marketing, advertising, and anti-counterfeiting.
Brianne Polito is an attorney at Cozen O’Connor in New York. She focuses her practice on trademark and copyright counseling, litigation, prosecution, and enforcement, including social media and domain name issues.