Recently, the Federal Trade Commission (FTC) for the first time went after social media influencers who did not disclose their interest in a website that they promoted to their subscribers. Trevor Martin and Thomas Cassell are popular social media influencers in the online gaming community. They posted videos on their YouTube channels (with 3.3 million and 10 million subscribers respectively) showing them participating in an online gambling service without disclosing that each had a 42.5% ownership interest in the online gambling company, thereby violating FTC disclosure laws. The FTC’s complaint can be read here.
The case was settled with a Consent Agreement that requires the parties to:
- Comply with FTC disclosure guidelines, with an additional burden to properly monitor and ensure compliance by any endorsers they partner with for promotional purposes in the future;
- Submit a compliance report in one year;
- Keep records of activities related to the business for up to 10 years; and
- Submit to ongoing compliance monitoring by the FTC for a period of up to 10 years.
The FTC is troubled with endorsements that are made on behalf of a sponsoring advertiser. For example, an endorsement by a blogger would be covered by the FTC Act if he or she was paid to mention a product. Even if not paid, if one receives free products or other benefits with the expectation that the blogger will promote a product in a blog, the blogger is potentially violating the law. Such practices may constitute unfair or deceptive acts affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.
The FTC publishes endorsement guides to provide guidance as to the rules and laws that apply. A single disclosure on a home page may not be adequate to insulate yourself from liability if visitors would not see the disclosure when reading a review or watching a video on your site.
Mark Litwak