October 13, 2021, wasn’t a Friday, but it was still a memorably bad day for more than 700 companies, including Amazon.com, Microsoft, Louis Vuitton, BMW of North America, and Ralph Lauren. That’s the day the Federal Trade Commission (FTC) sent each of them a “Notice of Penalty Offenses.” In the Notice, the FTC warned the firms that the FTC considers paying people—such as social media influencers—to endorse a service or product without disclosing the paid relationship is a deceptive advertising practice subject to serious civil fines. And if the companies use deceptive ads in the future, they can be fined up to $43,792 for each violation.
Those Notices should send a shiver down the spines of every social media influencer. Because they demonstrate that an influencer can’t count on a client (no matter how large or famous) to help them with compliance. Instead, influencers are legally on their own. So let’s talk about some major legal concerns every influencer should be aware of.
Endorsements and Similar Posts Are Advertising
It isn’t just the companies that can be held liable for FTC violations. A social media influencer can be held personally liable for violations of relevant state and federal laws, too.
Under 16 CFR §255, an endorsement or testimonial is considered advertising if the endorser is communicating any message from a sponsor, and consumers are likely to believe that the statements are the individual’s views.
FTC rules require a testimonial should reflect an endorser’s honest opinion, and it should also disclose the paid relationship. In other words, the fact an influencer truly likes a product does not make them exempt from the disclosure requirement. On the contrary, they still must say they’ve been paid to publicly post their praise.
Furthermore, it doesn’t matter where or how the endorsement occurs: Whether someone has written a blog, posted a Tweet, or sang in a TikTok video, the same rules apply.
Think of it this way: An influencer can be held as accountable for any ad they run as a television station or newspaper would be.
Influencers Are Being Held Liable for Failure to Disclose
The FTC has published guidelines for influencers, even including where disclosure should be included in an endorsement post. As one example, if an influencer publishes an Instagram post about a product, the FTC says the disclosure should be included in the first three lines of the text, so it’s clearly visible to anyone who sees the post.
And the federal government isn’t just sending warnings. It is taking action against influencers who violate the rules.
In 2017, the FTC filed complaints against gaming influencers Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell because they posted videos of themselves using the CSGO Lotto website, encouraging others to use CSGO, without disclosing that CSGO was paying them to promote the site.
About a year later, boxer Floyd Mayweather, Jr. and music producer DJ Khaled had to pay the Securities and Exchange Commission (SEC hundreds of thousands of dollars in fines to resolve charges against them for allegedly promoting a cryptocurrency in their social media accounts without disclosing they’d been paid by the crypto company.
There Are Other Potential Liabilities for Influencers, Too
It’s also important to remember that states have statutes governing advertising practices, but exposure to a social media post isn’t limited by state jurisdiction. What might be fine in an influencer’s home state may not be acceptable where their audience resides.
Then there are other possible liabilities out there as well.
Currently, model and blogger Molly Simms is being sued for trademark infringement. Simms allegedly posted an endorsement on her blog that did include advertising copy from a customer—material that supposedly infringed upon the plaintiff’s trademark—but it did not include a disclosure of her paid relationships. Therefore, the rival is suing Simms, saying she is as responsible for the infringing content as the customer who created it.
The bottom line is that, even if their content is casual, once money (or free samples and goods) is involved, influencers need to think of their influence as a business. And this is definitely a case where an ounce of prevention is worth much more than a pound of cure.
If you have questions about endorsements, advertising, or other social media issues, contact Earp Cohn’s Carrie Ward to discuss your concerns.