Compliance Corner

Influencer Marketing: Where Transparency is Trendy, and #Ad is the New Black

By: Deborah G. Solmor and Terance A. Gonsalves

Welcome to “Inside Out,” where legal and digital converge. Each issue will offer thoughts from both the in-house and outside counsel perspective. We hope to bring you our combined wisdom, diving into legal and compliance topics that matter to digital marketers and lead generation enthusiasts. We will explore the ever-shifting landscape of this fast-paced industry. From the inside, an experienced in-house General Counsel who navigates the challenges from within the organization; while from the outside, a seasoned outside lawyer who provides a 360-degree view through the lens of client experiences.

Today’s column focuses on recent guidance from the Federal Trade Commission (FTC) related to endorsements, influencer, and affiliate marketing.  On June 29, 2023, the FTC, issued the first update to its guidance on endorsements and influencer marketing since 2009, and there is a lot to unpack. So let’s break down the revised guidance and explore how lead generation organizations can leverage it to boost their businesses while staying in the good graces of the law.

The FTC has made it abundantly clear that when it comes to endorsements, testimonials, affiliate, and influencer marketing, transparency is the name of the game. This means clear, conspicuous, and non-misleading disclosures. According to the FTC, a disclosure is clear and conspicuous when it “is difficult to miss.” Let’s take a look at what that can mean in practice:

Lesson #1: Transparency is Your Best Friend

If you are paying influencers, affiliates, or partners to promote your services or products, or linking to affiliate product sites, you need to shout it from the digital rooftops. Don’t leave your audience guessing about the nature of these relationships. Use clear and unambiguous language in your messaging that everyone can both easily find and understand.

Lesson #2: Use Hashtags Like Your Reputation Depends on It

Remember to use simple and widely recognized hashtags like #Ad, #Sponsored, or #Promo. It’s like having a giant neon sign that says, “This content isn’t just a random shoutout – it’s paid for!”

When influencers or affiliates share your content or products, make sure they include these disclosure hashtags prominently. Remember, the clearer, the better. Don’t bury them in a sea of irrelevant hashtags – put them right where your audience can’t miss them. This means that when using social media posts, the hashtag should appear on the first line of text to ensure that it is not cut off in the broader post.

Lesson #3: Almost Anything Can Be An Endorsement and Almost Anyone Can Be An Endorser

An endorsement is any advertisement, marketing or promotional message that a consumer is likely to believe is the opinion or experience of someone other than the advertiser. Social media tags or posts can be an endorsement. An endorser can be an individual, group or institution. Even expert gamers that are paid to play video games can be an endorser even if the gamer does not recommend the game.

Lesson #4: Be On the Lookout For State Rules

Several states have also enacted rules surrounding required disclosures. For example under California’s Consumer Privacy Act, influencers are required to disclose their relationships with brands and to disclose if they received payment for a post. And some State Attorney Generals issue guidelines for influencer marketing, such as requiring influencers to disclose any financial compensation they receive in exchange for promoting a product or service.

Some Practical Suggestions from the Inside

  • Work Collaboratively with Your Legal and Compliance Team: Strong partnerships with your legal and compliance teams is a good thing. Hopefully these people in your organization are strategically focused and can help you achieve your goals and do it in a way that minimizes risk.
  • Stay Informed: Regularly check the FTC’s guidelines for updates. Rules can change, and you don’t want to be the last one to know. It’s your responsibility to keep your organization informed and ensure compliance. Subscribe to FTC updates and law firm client advisories. Leverage your networks, including the folks at LeadsCon. Here are some useful resources:
  1. FTC Endorsement Guides: What People are Asking
  2. The Library of Congress Influencer Marketing: Research Guides
  3. Truth In Advertising.Org Guidance
  4. Disclosures 101 for Social Media Influencers
  • Focus On Ways to Minimize Risk: Make it clear to your partners that non-compliance with disclosure rules won’t be tolerated. It’s not just your reputation on the line; it’s theirs too. Develop clear contractual agreements with your partners that enforce compliance and outline consequences for non-compliance.
  • Review Any Agreements Related to Use of Influencers or Testimonials: Ensure your agreements reflect the most recent best practices guidance and if not, be sure to update them and incorporate these new guidelines into any agreements going forward.

Some Practical Suggestions from the Outside

  • Is That True? And Can You Prove it? Marketing compliance can appear to be complicated. A quick review of the FTC’s guidance can feel overwhelming and confusing to many marketing professionals. But the overarching principal is honesty and transparency. Your marketing statements need not only be truthful on their face, but if additional information would change how the consumer viewed that statement, that information should be provided to the consumer.
  • Disclosures Must Be Clear And Conspicuous: That means the disclosure must be difficult to miss (easily noticed) and easy to understand by ordinary consumers. A visual disclosure (by its size, contrast, location, the length of time it appears, etc.) should stand out from other text or other visuals so that it is easily noticed, read, and understood. An audible disclosure should be delivered in a volume and speed that ordinary consumers can easily hear and understand. By the way, ordinary consumers means your target audience, not the entire consumer population.
  • When In Doubt, Disclose: Any incentives for reviews must be clearly and conspicuously disclosed. And that applies to negative reviews of your competitor’s products or services. So, if you are providing early access, discounted or free products, payments, or points for prizes for reviews, you must tell your consumers about those offerings in no uncertain terms. And even if properly disclosed, an incentivized review that increases the average star rating may still be deemed deceptive by the FTC.
  • The Risk Isn’t Worth It: Advertisers can be liable for misleading or unsubstantiated statements made through endorsements or for failing to disclose material connections between themselves and their endorsers. An advertiser may also be liable for a deceptive endorsement even when the endorser is not liable. Advertisers should: (1) provide guidance to their endorsers; (2) monitor their endorsers’ compliance; and (3) take action to remedy non-compliance. A good faith compliance program can diminish inadvertently deceptive claims and reduce the risk of an FTC enforcement action.

Final Thoughts

By embracing the FTC’s guidance and making transparency a cornerstone of your lead generation strategy, you not only stay on the right side of the law but also gain the trust of your audience. Trust is like a golden ticket – it opens doors, builds loyalty, can be a true differentiator, and ultimately leads to more successful campaigns. Failure to comply could lead to significant penalties and potential liabilty for the influencer and the organizations that employ them. So stay compliant.