The Federal Trade Commission (FTC) appears to be using its ongoing review of current rules and guides to revisit its approach to driving home the message that the relationship between a social media “influencer” and the brand he or she is endorsing must be disclosed. As we have described previously, the FTC has interpreted its Guides Concerning the Use of Endorsements and Testimonials in Advertising (the “Endorsement Guides”) to require that online advertisements — like all other advertising — clearly and conspicuously disclose material connections between endorsers (i.e., influencers) and the brands they promote because such connections may affect the credibility of the endorsement. And, in recent years, the FTC has — through enforcement actions, press releases, guidance, closing letters, and letters sent directly to endorsers (including prominent public figures) — made clear its belief that: (1) appropriate disclosures by influencers are essential to protecting consumers; and (2) in too many instances, such disclosures are absent from celebrity or other influencer endorsements.
Now, in connection with a request for comments on the Endorsement Guides, FTC Commissioner Rohit Chopra has issued a scathing statement calling on the FTC to “take bold steps to safeguard our digital economy from lies, distortions, and disinformation.” In this regard, Commissioner Chopra suggests that the FTC’s efforts to date have not been effective in “deterring misconduct in the marketplace” relating to inauthentic and fake reviews, and that, in particular, elements of the Endorsement Guides should be codified as formal rules so that violators can be liable for civil penalties and damages under the FTC Act.
Also of note is that Commissioner Chopra has asserted that the FTC should refocus its efforts on advertisers themselves, and not the influencers that promote their brands. According to the Commissioner, “when companies launder advertising by paying someone for a seemingly authentic endorsement or review, this is illegal payola,” and “companies paying for undisclosed influencer endorsements and reviews are not [being] held fully accountable for this illegal activity.” Seeking to aggressively penalize advertisers themselves would be a shift in emphasis for the FTC, as its recent efforts to combat inadequate disclosures in influencer advertising have focused on influencers. For example, the FTC recently produced a brochure detailing the responsibility of influencers “to make [required] disclosures, to be familiar with the Endorsement Guides, and to comply with laws against deceptive ads.” The FTC also brought an enforcement action against influencers, and foreshadowed that more enforcement will happen in the future.
Comments on the Endorsement Guides are due April 21, 2020. In the federal register notice, the FTC outlines ten questions, summarized below, that are of particular interest. In addressing these questions, commenters should also consider whether to respond to the concerns raised by Commissioner Chopra regarding how to ensure that material connections between advertisers and endorsers are appropriately disclosed, including whether a ratcheting up of FTC enforcement powers is warranted.
1. Are the practices addressed by the Guides prevalent in the marketplace and are the Guides are effective when addressing those practices?
2. Are consumers benefiting from the Guides and what impact, if any, are the Guides having on the flow of truthful information to consumers?
3. Are changes in technology or the economy requiring changes in the Guides?
4. Should guidance in “The FTC’s Enforcement Guides: What People Are Asking” be incorporated into the Guides?
5. How well are advertisers and endorsers disclosing unexpected material connections in social media?
6. Are children capable of understanding disclosures of material connections and how those disclosures might affect them?
7. Do incentives like free or discounted products bias consumer reviews, even when a favorable review is not required to receive the incentive, and how should those incentives be disclosed?
8. Are composite ratings that include reviews based on incentives misleading even when reviewers disclose incentives in the underlying reviews?
9. Should the Guides address the use of affiliate links by endorsers?
10. What, if any, disclosures do advertisers or operators of review sites need to make about the collection, processing, and publication of reviews to prevent them from being deceptive or unfair?
Material changes in the Endorsement Guides and the FTC’s approach to combatting deceptive advertising involving influencers could have a significant effect on all participants in the digital advertising ecosystem. Accordingly, all ad agencies, advertisers, and endorsers should consider a review of the Endorsement Guides compared with their own approaches to compliance, as well as whether to weigh in on the FTC’s request for comments.