Home | Business | FTC Cracks Down on Instagram Influencers to Disclose Endorsements

FTC Cracks Down on Instagram Influencers to Disclose Endorsements



Quick: Besides being famous, what do Jennifer Lopez, Allen Iverson, Sean “P. Diddy” Combs, Luke Brian, Naomi Campbell, Sofia Vergara, Lindsey Lohan, and Victoria Beckham all have in common?

If you guessed that they were all recipients of a letter from the Federal Trade Commission (FTC) about appropriate disclosures for Instagram influencers last month, you would be correct, and you probably already have a good sense of what I’m about to tell you. But if you didn’t guess correctly, or if you haven’t a clue what an “influencer” is, read on.

What’s an Influencer?

Owing in part to the rise of ad-blocking technology, advertisers have scrambled to find new ways of reaching internet consumers, and one such way that has proved effective is paying for endorsements by people with large internet followings — otherwise known as Instagram influencers. Some of these people are already in the public eye (like Jennifer Lopez or Victoria Beckham), others are less widely known, but popular among heavy social media users, making them especially valuable to marketers trying to reach the coveted 18-34-year-old demographic — the same group that has been increasingly difficult to reach through traditional media channels.

To be clear, we’re not talking about advertising that appears as advertising on these platforms: paid-for posts that appear in your news feed or obvious display advertising in the form of banner ads and the like. Those are either carefully identified as “sponsored” content or appear in an area that obviously contains advertising, which sets them off from the rest of the page. Instagram Influencers posts are a bit different. They are simple social media posts that incorporate references to a product or service, where the people – these so-called Instagram Influencers -doing the posting have been paid (or otherwise compensated) to associate themselves with that product or service and make endorsements.

Is Victoria Beckham endorsing Estee Lauder? That’s unclear from this post.

The concept of advertisers seeking paid endorsements is not especially new — brands have been doing it for years with major media personalities such as radio or TV stars. But those endorsements typically took place in a well-regulated environment where advertising was common and audiences were already attuned to the fact that programming would be peppered with commercial messages. Moreover, broadcasters and publishers were well acquainted with the standard and practices associated with properly identifying such messages as distinct from editorial content.

Today’s media landscape is very different. Social media platforms have essentially given everyone an opportunity to become a broadcaster or publisher. With just a few keystrokes anyone with an internet-connected device can disseminate a message to millions of people around the world. Generally speaking, that’s fine, but when it’s promoting a product or service, or soliciting an engagement for a commercial transaction, the FTC starts to get interested.

What is the FTC, Anyway?

The FTC is an agency of the U.S. government charged with protecting consumers against unfair or deceptive business practices. Traditionally the agency has focused its enforcement work on advertising and marketing practices, telemarketing and financial services fraud, privacy, identity protection, and it operates the national “Do Not Call” Registry. The FTC also has jurisdiction over antitrust enforcement, a power it shares with the Justice Department’s Antitrust Division.

The FTC finds its authority in the Federal Trade Commission Act, which provided for the creation of the agency as well as granted the agency broad powers to protect consumers and promote competition. Through administrative interpretations of that Act, the FTC has promulgated dozens of rules and regulations that it has the authority to enforce through its own administrative actions and through the courts.

The FTC is an independent agency, meaning it exists outside any of the three branches of government and is, theoretically, not susceptible to control by any one political party. The Commissioners are appointed by the President and confirmed by the Senate to serve seven-year terms, and no more than three Commissioners can be from the same political party. Typically that means that three seats are filled by members of the party that controls the White House, and the other two are filled by members of the minority party.

As of this writing, only two of the five seats on the Commission are filled — one by a republican and the other by a democrat.

The FTC’s Letter

In mid-April, apparently in response to a petition filed by activist group Public Citizen, the Federal Trade Commission issued informal warning letters to dozens of so-called “Instagram influencers” to remind them of their obligations under the truth-in-advertising laws and standards that interpret those laws set forth by the FTC.

instagram influencers
The FTC wants Instagram users to be clear about which posts are paid endorsements.

The action was notable for several reasons: First and foremost, the letter-writing campaign marks the first time that the FTC has flexed its enforcement muscle in the “influencer” space. The FTC routinely takes enforcement actions against violators of its advertising-related regulations, but those are typically against businesses and their brands; in its own words, these letters “mark the first time that the FTC staff has reached out directly to educate social media influencers themselves.”

Second, the FTC was very public about its action, issuing a press release describing the letters and even making its form letter available to the public. Although the press release states that the FTC would not publicly release the names of the recipients or the actual letters, they were subsequently released as the result of a Freedom of Information Act request by the National Law Journal.

Third, and finally, the FTC’s action is notable because the agency was very public about it, suggesting that it’s just the beginning of a newfound interest in online enforcement. Those who are themselves Instagram influencers, as well as those who engage them should take time to learn the rules…and then follow them.

Following the FTC Rules on “Influencing”

The basic thrust of the letter was to remind Instagram influencers, and the brands that engage them, that “if there is a ‘material connection’ between an endorser and an advertiser — in other words, a connection that might affect the weight or credibility that consumers give endorsements — that connection should be clearly and conspicuously disclosed, unless it is already clear from the context of the communication. A material connection could be a business or family relationship, monetary payment, or the gift of a free product.” The FTC also notes that the rules apply equally to influencers as well as the companies who engage them.

There is a lot packed into that paragraph.

First: the concept of a “material connection” is important. We tend to think of advertising as being an endorsement in exchange for money, but the FTC defines it more broadly: any relationship or an exchange of value — which might include free products — is a sufficient connection to warrant a disclosure.

Third, the “context of the communication” language is why commercials on radio or television don’t need to expressly state they’re an ad — we know they are ads by virtue of hearing them in a clear break in normal programming. Similarly, it’s why ads in newspapers or magazines that look like ads don’t need to expressly state as much, but the ones that try to look like an article typically say “Advertisement” or “Paid Advertising” across the top.

That same principle applies in a social media setting. Posts that are clearly identified as sponsored content or otherwise as some form of advertising are already likely compliant with the FTC’s rules. Those that aren’t must properly disclose whatever relationship exists between the advertiser and the Instagram influencers.

So what is the most appropriate way to comply with the disclosure rules short of expressly branding a particular message as an endorsement? Because the FTC sent letters specifically about Instagram posts, it focused on compliance techniques for that platform.

One issue that troubled the FTC specifically is the fact that on mobile devices users see only the first three lines of a post, meaning that in many cases, the disclosure language appears only after the user presses the “more” button which, the FTC observes “many do not do.” The FTC admonished that on Instagram specifically, the disclosure must be above the “more” button. Presumably that same logic would apply to other platforms, which means that Instagram influencers and marketers must take care to understand each of the platforms on which they post, and how those platforms look on different devices — for example, the “more” button may appear in different places depending on the type of device used, the size of the screen, and so on.

If you’re being paid to promote something on Instagram, be clear about it.

Another issue that the FTC raised in its Instagram letters is the use of hashtags. A popular way to disclose a material connection is through hashtags such as #sp (sponsored post), #Thanks [Brand], #partner, #ad, and the like, but the FTC points out that often these hashtags are used in a lengthy string along with others, and that typically users ignore them or simply don’t see them. That’s especially true today where posters often include a litany of hashtags not in the image description, but rather in a subsequent comment.

What This All Means For You

In short, if you are an influencer with endorsement deals, take the time to review the rules and ensure that your posts are compliant. If you engage influencers, make sure that the social media mavens you hire are well-versed in the disclosure requirements and provide guidance or perhaps even standard language for your influencer partners to use when posting on your behalf. You may also want to undertake periodic audits of your partners’ posts to ensure that they are in compliance.

To help guide your quest for compliance, check out The FTC’s Endorsement Guides: What People Are Asking, a plain-English guide for social media professionals to help understand the law. As with anything law-related, it may sometimes make sense to consult with a lawyer, though as the FTC itself notes, “[w]hat matters is effective communication, not legalese.”

The FTC isn’t out to get anyone, it’s just trying to make sure the public has the information it needs to make informed decisions about what products and services to buy, and knowing when a particular message is commercial in nature is a critical piece of the puzzle. The FTC took care to frame its recent letters as informational in nature, but it’s hard not to read between the lines — it’s clear that social media enforcement is on the FTC’s agenda for the future. Taking some time to understand the FTC’s rules and then applying them to your own practices will go a long way to ensuring you aren’t the next lucky recipient of an FTC letter (or worse).

One Final Note

In the spirit of disclosure, I feel compelled to note that the FTC didn’t compensate me to say nice things about its endorsement guides. #notanad #truestory

Are you an Instagram influencer getting paid endorsements? Did you receive an FTC letter? Let us know in the comments.

About the author

Chris Reed

Chris Reed is a Los Angeles-based photographer and lawyer. He practices copyright law in the  media and entertainment industries and is the author of Copyright Workflow for Photographers: Protecting, Managing, and Sharing Digital Images from Peachpit Press.

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