All Eyes on Influencers: How the FTC’s Revised Endorsement Guidelines Are Cracking Down on Influencer Marketing

All Eyes on Influencers: How the FTC’s Revised Endorsement Guidelines Are Cracking Down on Influencer Marketing

If you are a social media user, you have likely noticed an increase in posts on your feed beginning with phrases such as “#ad” or “#sponsored.” As Instagram, TikTok, and Facebook become the main avenues of commercial marketing, the Federal Trade Commission continues to regulate advertiser communication with consumers. This summer, the FTC made a widely anticipated move and updated its Endorsement Guidelines to further instruct marketers how to advertise truthfully.^[1] With modern marketing tactics evolving alongside the rise in influencer marketing, the updated guidelines are another reminder that the FTC is forcefully monitoring social media advertisers. Influencers, and their legal advisors, must pay close attention to this rapidly changing environment to avoid FTC enforcement action.

The 2023 FTC Endorsement Guidelines: Impact on Influencers

The Endorsement Guidelines outline what types of marketing tactics may be unfair or deceptive in violation of the FTC Act.^[2] The guides were revised on June 29, 2023, the first time since 2009, and expand upon the regulation’s prior provisions.^[3] The revised Endorsement Guidelines specify practices that constitute a deceptive or incentivized consumer review, expand upon the definitions of “clear and conspicuous” and “endorsements,” clarify liability schemes, emphasize concerns with child-directed advertising, and provide guidance on compliance and monitoring tactics.^[4] Specific to influencers, the guidelines expand the scope by which the FTC regulates these marketers’ social media endorsements.^[5] An overview of the key revisions which significantly impact the regulation of influencers follows.

Definition of “Endorsements”

The FTC defines an endorsement as “any advertising message that consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser.”^[6] The revised guidelines clarify the scope of this definition to include advertisements and statements made by virtual influencers, fake positive reviews, and tags on social media platforms.^[7] Prior to the revision, this definition was more closely tailored to traditional media advertisements via television or print ads.^[8] While the FTC has provided guidance specific to influencer advertising in its Disclosures 101 for Social Media Influencers, this revision solidifies the FTC’s firm commitment to regulate influencers under the FTC Act.^[9]

“Clear and Conspicuous”

The FTC requires influencers to disclose endorsements so that consumers are aware of their brand connections. These disclosures must be clear and conspicuous.^[10] The revised guidelines expand this definition and define a “clear and conspicuous” disclosure as one that “is difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers.”^[11] Specific to social media advertising, the disclosure must be “unavoidable.”^[12] For example, if a caption requires users to click “more” in order to view the remaining text, the disclosure must be before the “more” link in order to be unavoidable.^[13]

Liability

The revised guidelines emphasize that advertisers must be “responsible for and monitor the actions of their endorsers.”^[14] Further, the guides clarify that endorsers, including influencers, may face personal liability for statements about a product if they know or should know that the statements are false, misleading, or unsubstantiated.^[15] As the social media influencer market expands and these advertisers seek legal guidance on compliance practices, this expanded liability puts all parties on notice that influencer endorsements must be unavoidably clear and conspicuous and in line with the revised guides.

What Influencers Can Anticipate

While the revised Endorsement Guidelines have only been in effect for five months, prior FTC enforcement action may indicate the type of monitoring that influencers, agencies, and other intermediaries can expect from the Commission. For example, in April 2023, the FTC sent warning letters to over 700 companies recommending they review their practices related to endorsements and reviews to ensure those practices comply with the law.^[16] The letters put companies on notice that “deceptive practices in the future could result in penalties of up to $50,120 per violation.”^[17] In 2020, the FTC brought an enforcement action against the tea company Teami, LLC for making false and misleading health claims and paying for endorsements from well-known social media influencers, such as Cardi B and Jordin Sparks, who did not adequately disclose their partnerships.^[18] Teami, LLC settled with the FTC and was ordered a $15.2 million judgment (the total sales of the challenged products), suspended upon payment of $1 million.^[19] As of February, 2022, the FTC began returning $930,000 to over 20,000 consumers who were harmed by the brand’s false advertising.^[20]. As the new Endorsement Guidelines take effect, those subject to its revised liability scheme can view the FTC’s prior warning letters and enforcement actions as a baseline of potential penalties for deceptive social media practices. These actions make one thing clear: a misleading post can cost an influencer, and their intermediaries, a pretty penny.