Influencer posts lack necessary disclosures, FTC says

Influencer Campaigns - DJ Khaled Ciroc AppleChances are you have seen your favorite celebrities promoting products via their social media pages, whether it is DJ Khaled appearing with a bottle of Ciroc Vodka, or Kendall Jenner endorsing makeup or other fashion brands.  While such celebrity influencer posts are an acceptable way for brands to market their products, the FTC says that many of the celebrity influencer posts fail to disclose that the celebrity has been for his or her endorsement.

FTC to Crack Down on Celebrity Influencer Posts

In response to the lack of transparency, the FTC has said that it intends to crack down on celebrity influencer posts that fail to properly disclose that the celebrity was paid for his or her endorsement, and/or that the sponsored content is in fact advertising.  The FTC has said that the use of hashtags like #ad, or #sp, or #sponsored is not always enough.

Michael Ostheimer, a deputy in the FTC’s Ad Practices Division, has said the FTC is putting the responsibility on the shoulders of the advertisers to make sure their ads are complaint.  “We’ve been interested in deceptive endorsements for decades and this is a new way in which they are appearing,” Ostheimer said.  “We believe consumers put stock in endorsements and we want to make sure they are not being deceived.”

FTC Issues Endorsement Guides in the Fall of 2015

In the fall of 2015, the FTC announced updates to its Endorsement Guides to clear up questions related to a variety of endorsement-related issues, including special wording, Twitter disclosures, social media “like” buttons, affiliate marketing, employee endorsements, uploading, videos, and a host of others.  As it relates specifically to influencer ads, the FTC said in its introduction to its Endorsement Guides:

[I]f there’s a connection between an endorser and the marketer that consumers would not expect and it would affect how consumers evaluate the endorsement, that connection should be disclosed.  For example, if an ad features an endorser who’s a relative or employee of the marketer, the ad is misleading unless the connection is made clear.  The same is usually true if the endorser has been paid or given something of value to tout the product.  The reason is obvious: Knowing about the connection is important information for anyone evaluating the endorsement.

FTC Also Issues Native Advertising Guides

The FTC also issued native advertising guidelines and a corresponding policy statement in December 2015, which were meant “affirm[ed] the long-standing consumer protection principle that advertisements and promotional messages that promote the benefits and attributes of goods and services should be identifiable as advertising to consumers,” the FTC said.

FTC Settles With Machinima Inc. Over Influencer YouTube Video Ads

The FTC’s focus on celebrity influencer posts has resulted in three significant settlements since September 2015.  The first settlement was announced in September 2015 when Machinima, Inc., an Xbox One promoter, agreed to settle charges that it “failed to adequately disclose that they were being paid for their seemingly objective opinions” as set forth in their YouTube advertisements.

The FTC’s complaint alleged that the Machinima influencer campaign was carried out in two phases.  In the first phase of the influencer marketing campaign, a small group of influencers were given access to pre-release versions of the Xbox One console and video games in order to produce and upload two endorsement videos each.  According to the FTC, Machinima paid two of these endorsers $15,000 and $30,000 for producing YouTube videos that garnered 250,000 and 730,000 views, respectively.  In the second phase of the influencer marketing program, Machinima promised to pay a larger group of influencers $1 for every 1,000 video views, up to a total of $25,000.  However, the FTC said that Machinima did not require any of the influencers to disclose they were being paid for their endorsement.

Following a public comment period, the FTC approved a final consent order with Machinima in March 2016.  Under the final consent order, Machinima is required “to disclose when it has compensated influencers to post YouTube videos or other online product endorsements as part of influencer campaigns.”  More specifically, the final order “prohibits Machinima from misrepresenting in any influencer campaign that the endorser is an independent user of the product or service being promoted.”

FTC Settles With Lord & Taylor Over Native Advertisements

The second settlement arose out of an influencer campaign run by national fashion retailer Lord & Taylor.  In that case, Lord & Taylor agreed to settle charges that “it deceived consumers by paying for native advertisements, including a seemingly objective article in the online publication Nylon and a Nylon Instagram post, without disclosing that the posts actually were paid promotions for the company’s 2015 Design Lab clothing collection.”

The FTC’s complaint also alleged “that as part of the Design Lab rollout, Lord & Taylor paid 50 online fashion influencers to post Instagram pictures of themselves wearing the same paisley dress from the new collection, but failed to disclose they had given each influencer the dress, as well as thousands of dollars, in exchange for their endorsement.”  The FTC said that in neither case did Lord & Taylor “require the influencers to disclose that the company had compensated them to post the photo, and none of the posts included such a disclosure.”  In all, the FTC said that the influencers’ posts reached 11.4 million individual Instagram users over just two days, which led to 328,000 brand engagements with Lord & Taylor’s own Instagram handle.

Following a public comment period, the FTC approved a final consent order with Lord & Taylor in May 2016.  The final consent order “prohibits Lord & Taylor from misrepresenting that paid ads are from an independent source or that an endorser is an independent or ordinary consumer.”  The order also requires Lord & Taylor to “ensure that its endorsers clearly disclose when they have been compensated in exchange for their endorsements.”

FTC Settles with Warner Bros. Over Influencer Videos

The most recent influencer settlement came when Warner Bros. agreed to settle charges with the FTC that “it deceived consumers during a marketing campaign for the video game Middle Earth: Shadow of Mordor, by failing to adequately disclose that it paid online influencers, including the wildly popular PewDiePie, thousands of dollars to post positive gameplay videos on YouTube and social media.”

The FTC’s complaint alleged that, during an advertising campaign in late-2014, “Warner Bros., through its advertising agency Plaid Social Labs, LLC, hired online influencers to develop sponsored gameplay videos and post them on YouTube.”  The FTC further alleged that “Warner Bros. also told the influencers to promote the videos on Twitter and Facebook, generating millions of views.”  The FTC said that “PewDiePie’s sponsored video alone was viewed more than 3.7 million times.”

However, just like the cases involving Machinima and Lord & Taylor, the FTC said that Warner Bros. did not require influencers to disclose that the ad was sponsored content or that they were being paid for their endorsement video.

Under the proposed settlement with Warner Bros., “Warner Bros. is barred from failing to make such disclosures in the future and cannot misrepresent that sponsored content, including gameplay videos, are the objective, independent opinions of video game enthusiasts or influencers.”

Advertisers Want Better Direction From the FTC

While the FTC believes it has issued proper guidance as it relates to influencer ad campaigns, many influencers and/or marketing agencies disagree.  “We’re venturing into a little bit of ridiculous territory with the FTC saying these things because influencers really want to follow the rules,” Stefania Pomponi, the founder of Clever Girls Collective Inc., a marketing agency that works with brands including Disney and Ford, said.  “They want to do a good job — they want to be seen as useful to brands and don’t want to do anything that would jeopardize their relationships.”

Pomponi said it is up to the FTC to more clear and consistent about their policies.  For example, the FTC has said that the use of the hashtag #ad at the beginning of a social media post is ok, but that #sp or #spon is not.  Similarly, the FTC has said that the use of the aforementioned hashtags at the end of a post is not acceptable.  As it relates to sponsored video posts, the FTC has said that the disclosure must be spoken out loud or displayed on-screen.

“If consumers don’t read the words, then there is no effective disclosure,” Ostheimer said. “If you have seven other hashtags at the end of a tweet and it’s mixed up with all these other things, it’s easy for consumers to skip over that. The real test is, did consumers read it and comprehend it?”

Some Advertisers Feel Influencer Posts Are Not Traditional Advertisements

While some advertisers believe the FTC needs to be clearer about what it wants, at least one advertiser has said that it believes influencer posts do not deserve such special attention from the FTC because influencer ads are not the same thing as traditional ads.  According to Lauren Diamond Kushner, “I don’t know if I even think of it as an ad.  They say, ‘I’ll do this piece and I’m going to do it my way.’  Whereas if I’m scrolling in my Facebook feed and I see a big thing from H&M or whatever, that is an ad.”

However, the FTC disagrees.  In the FTC’s view: If a consumer knew an endorser was compensated in any way, would that alter the view of the endorsement?  In the overwhelming majority of cases, the FTC says yes.  This means that brands, and the celebrities or other influencers that advertise their products, must make sure that they properly disclose the fact that the celebrity or influencer was paid or otherwise compensated for their endorsement.  If not, the brand may find itself on the other end of an enforcement action with the FTC.

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Copyright 2016