#AD: FTC Advice on Business Use of Influencers | Fox Rothschild LLP

Social media has taken over, with social media users nearly doubling from 2.3 billion in 2016 to 4.2 billion in 2021.[1] Social media platforms provide direct access to consumers, with the ability to focus on niche consumer groups. Beyond traditional ads, companies rely on “influencers” – from micro-influencer to Kardashians to showcase their products.

In response to this growing space, the FTC released influencer guidelines in 2019.[2] These guidelines create boundaries and pathways for the application of the FTC. Main takeaways include:

  • The endorsements must highlight the existence of a material link with the mark.
  • A material connection means not only paying the influencer to promote a product, but every time an influencer receives a free or discounted product or service.
  • Acceptable disclosure includes tags, likes, pins, etc. to show that the product or brand is an endorsement and should be placed in such a way that it is difficult for a viewer to miss it.
  • An influencer can’t talk about an experience with a product they haven’t tried, and can’t make claims about a product that would require proof that the brand or company doesn’t have (ie. i.e. claims related to health problems).

But who is responsible for making sure influencers follow FTC guidelines, and what happens if an influencer doesn’t follow FTC guidelines?

Ultimately, companies need to have programs in place that will train and monitor the influencers they use. The scope and reasonableness of the program largely depends on the potential risk of harm to the consumer, depending on the product or service being advertised. For example, when there is a risk of physical injury or financial loss.

The rise of financial advice influencers on social media is a prime example of potential risk to businesses. Personal finance influencers and finance influencers are targeting an exciting market for financial services companies, but without proper disclosure, there is a risk that influencers will violate the FTC.

The FTC offers the following approach[3] – companies must:

  • Explain to influencers what they can (and cannot) say about the product or service;
  • Ask influencers to disclose the material relationship with the brand;
  • Monitor and confirm that influencers are following FTC guidelines; and
  • Address potentially questionable practices.

A single FTC violation can result in penalties exceeding $40,000 per violation, so an influencer’s non-compliant Instagram story, tik tok video, blog, or post shared across multiple platforms can result in heavy fines for a company.[4]

Since the FTC began issuing notices about social media campaigns in 2014, it has gradually strengthened its enforcement in the social media space, issuing notices to brands and influencers. Companies should support increased law enforcement in the social media space and ensure they have formal influencer policies in place that adhere to FTC guidelines.

[1] Social media poses ‘existential threat’ to trustworthy mainstream news: UNESCO | | UN news; https://news.un.org/en/story/2022/03/1113702published March 10, 2022 (last accessed April 5, 2022.)

[2] Disclosures 101 for Social Media Influencers (ftc.gov)

[3] FTC Approval Guides: What People Ask | Federal Trade Commission

[4] Social media endorsements cannot escape FTC scrutiny (bloomberglaw.com)

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