Social Media Influencers and Effective disclosures in the US: A delicate balance

The immense rise in popularity of social networks has led to the proliferation of social media celebrities -individuals who have amassed a great number of "followers" based on their unique ability to artfully curatecontent designed to create an idyllic impression of everyday life and along the way present consumer goodsdesigned by others. In the United States, the Federal Trade Commission (the FTC) has taken notice ofthe increase in the number of brands working with social media influencers to promote their products andservices and has taken a more active role in monitoring effective disclosure. The FTC’s recently revisedEndorsement Guides provide that if there is a "material connection" between an endorser and the marketerof a product, that connection should be clearly disclosed, unless such connection is clearly apparent fromthe context of the communication or endorsement. Examples of material connections include, but are notlimited to, monetary payment, free or discounted products, or sweepstakes entries.

Under the FTC guidelines, both brands and endorsers areresponsible for ensuring that disclosures are "clear andconspicuous," such that they are easily noticed and understoodby consumers. The language should be unambiguous. Insocial media, these disclosures are commonly accomplishedthrough use of hashtags such as #Sponsored, #Ad, #Paid,or #Promotion.

While seemingly simple, in order to be effective, the disclosuremust be made before any text in the post is truncated by thesocial media platform where the post appears. Additionally,the disclosure should not be buried in a string of hashtagsor hidden at the end of a post. The FTC has signaled thatinfluencers thanking a brand and tagging its official accountdoes not constitute an effective disclosure of a materialconnection. The FTC has also cautioned brands against relyingsolely on in-platform mechanisms to make disclosures, giventhat consumers may fail to notice such disclosures. Therefore,even where a platform provides such a mechanism, the bestpractice is to also require that the endorser make clear aconspicuous disclosure of the material connection within thetext of the post.

Non-compliance with the FTC’s guidance may result in awarning letter from the FTC or a law enforcement action,which could result in an order requiring a defendant to give upany money received for violating the FTC Act and requiringdefendants to abide by the FTC’s guidance in the future.Brands should provide influencers with simple, easy-to-understandand implement instructions on how to makeeffective disclosures. Brands should also include provisions ininfluencer agreements requiring that all posts made in supportof the partnership comply with any disclosure guidelinesprovided by the brand. Moreover, to ensure compliance,brands should carefully monitor and track all posts made byinfluencers in support of paid promotions. If the influencerfails to include a disclosure, or fails to make the disclosurein a way that is clear and conspicuous, the brand shouldpromptly contact the influencer to ensure that the appropriatedisclosure is included. In this way, brands can avoid penaltiesand bad press that could erode trust in the brand.