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FTC tightens faces on social media influencers

By John K. Higgins

Oct 12, 2017 5:00 AM PT

Advertising on social media has become an important factor in e-commerce.

Marketers of large and small brands have long devoted large pieces of their advertising budget to mentions by known personalities, with the aim of encouraging consumers to buy products and services.

Social media influence campaigns are based on this proven formula, but the implication is that endorsements are voluntary.

The US Federal Trade Commission learned about social media influence programs and was concerned that endorsements were voluntary or offset by money. or other valid incentives.

Failure to disclose a commercial relationship between the marketer and the influencer constitutes an unfair or deceptive marketing practice, according to the FTC.

"Consumers need to know when social media influencers are getting paid, or whether they have other material links with brands," said Maureen Ohlhausen, Interim President of the FTC, when 39; agency recently settled a case of influence on social media. ]

This regulation should send a message that commercial connections in social media agreements "must be clearly disclosed, so that consumers can make informed purchasing decisions," said Ohlhausen last month in a Notice of Settlement.

The FTC's concern lies in its historic role of protecting consumers from misleading and deceptive advertising.

Aggressive approach

At the same time as it revealed the settlement, the FTC sent warning letters to a group of influential figures, including actresses Lindsay Lohan and Lisa Rinna, informing them of the need to observe federal regulations. In addition, the commission has issued updated regulatory guidelines specifically targeting the advertising of social media influencers.

The outbreak of FTC activity pointed to the Commission's increasingly assertive stance in regulating social media influence programs. The FTC recently entered into settlement agreements with Lord & Taylor, Warner Brothers and Sony for failing to comply with federal regulations governing social media campaigns.

The settlement last month was the agency's first enforcement action aimed directly at the influential personalities themselves.

"Although this is the first instance of social media influencers to settle claims of misrepresentation online, it will probably not be the last," said Phyllis Marcus, a partner of
Hunton & Williams, noted in an online post.

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The FTC's actions on social media "have gone all the way along the marketing chain," she told the E-Commerce Times.

Multiple connections

The recently settled case involved the owners of CSGO Lotto, an online gambling service. First of all, Trevor Martin and Thomas Cassell, two social media influencers widely followed in the Internet gaming industry, falsely endorsed the services of CSGO Lotto, "while failing to disclose that they jointly owned the company, "accused the FTC.

Second, the two owners have compensated various well-known personalities in the gambling industry with money or credits worth $ 2,500 to $ 55,000 per transaction to endorse CSGO Lotto, without properly disclosing the financial arrangements.

"Cassell, Martin and CSGO Lotto falsely claimed that their videos and social media posts – and the videos and posts of the influencers they hired – reflected independent opinions of unbiased users," said FTC.

The publishing platforms included YouTube and Facebook.

The settlement requires Cassell, Martin and the company to make endorsement disclosures clearly and conspicuously in the future. The failure could result in penalties of up to $ 40,000 per day.

In accordance with the normal terms of such consent agreements, the company and the two proprietors cited by the FTC neither admitted nor denied the charges. The settlement will become final after the FTC reviews the public comments expected in early October.

Warnings and notices

The warning letters that the FTC issued last month were sent to a group of 21 personalities of approval as a result of 90 educational letters that the commission sent to marketing brands and influencers earlier this year.

Despite this view, the FTC suspected that the 21 influencers still maintained associations with social networks via Instagram, which did not adequately clarify commercial connections. The commission required responses to the warning letters by September 30.

Updated FTC guidelines include answers to a number of newly generated questions relevant to social media advertising, including influencer messages. The guidelines cover not only endorsed personalities, but also branded marketers, advertising agencies, public relations agencies and even companies that recruit and bring together influencers.

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"Marketers, brands and advertisers are responsible for the lack of disclosure of material connections in social media by influencers whom they hire or otherwise encourage," said Michael Ostheimer, a FTC attorney at the division advertising practices of the Commission.

"The FTC has long demanded disclosure of important relationships in product mentions, and their recent action on social media influencers will be carefully scrutinized and evaluated by companies in the retail sector," said Paul Martino.
National Federation of Retail Trade.

The NRF "will seek the views of our member companies on this," he told the E-Commerce Times.

"It would be premature for us to judge its importance to our industry or take a position on the FTC's action before the end of the agency's public comment period," said Martino. .

The updates address not only the general legal concepts surrounding false or misleading practices, but also the technical presentation points, such as the use of hashtags, the placement of notices on device screens and the determination of compensation.

Excluded Social Media Platforms

Significantly, the social media platforms themselves are not affected by the FTC's activities.

"The platforms are not responsible for the social media publications of the influencers who use them," Ostheimer told the FTC at the E-Commerce Times.

Some platforms have even launched programs to help merchants meet FTC requirements. Earlier this year, Instagram launched an influence disclosure program on social media featuring the use of a subtitle "Paid Partnership", for example.

"Partnerships between community creators and businesses are an important part of the Instagram experience, and a healthy community should be open and consistent about paid partnerships," reads in an Instagram post. .

"Since June of this year, we have been working closely with a select group of creators and businesses in the Instagram community to test our new Paid Partnership With label," said the company. communicated to E-Commerce. Times by spokeswoman Jessica Gibby. "We have gradually extended tag access to more of our partners on Instagram."

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The Declaration & Paid Partnership With & # 39; "Instagram" clearly describes when creators and their business partners have entered a commercial relationship to post to Instagram, "according to the company.

In addition, Instagram has adopted a policy that is the same as
Facebook brand content policy.

While such tools provided by the platform may be useful, marketers should not necessarily rely on them.

The FTC warning that "brands should not assume that the proper disclosure tools of a social media platform are sufficient to bring a position into compliance," noted Marcus. from Hunton & William in an opinion.

The bottom line is that the FTC has well publicized its policy through actual instances of enforcement, press releases and notices, including
"FTC endorsement guides: what people are asking for."

Thus, social media marketers who fail to learn about FTC policies or who do not consider regulations could be subject to oversight by the FTC.

"The FTC's warning letters show that the agency is pledging to capitalize on its recent crackdown on brands and influencers," said Marcus, "and will continue to scrutinize the compliance of social networks with the approval guides. "

John K. Higgins has been a reporter for the ECT News Network since 2009. His main areas of interest are US government technology issues such as IT contracts, cybersecurity, privacy, cloud technology, big data and e-commerce regulation. As a freelance journalist and professional writer, he has written for many publications, including
The Body Report and Business Week .
Email John.