As of late, social media influencers are on the Federal Trade Commission (FTC)'s radar because of the rise of social media being used as a marketing tool. Due to the high financial stakes involved and the influencers' ability to reach millions of consumers, the FTC is keeping a very close eye on influencer posts.

In fact, the FTC sent warning letters to over 90 social influencers and brands in April 2017 to remind them that, if there is a material connection between a brand and an influencer, then that connection must be disclosed or clear to consumers in materials where the influencer endorses the brand. This has been an increasing issue that needs to be addressed, given that the dollar amount of endorsement contracts between brands and social media influencers including celebrities, athletes and reality stars, who are bringing in as much as seven figures. And, violating FTC advertising requirements could cost influencers and brands a lot of money—not to mention their reputational.

In September 2017, the FTC sent follow-up letters to 21 of those influencers and cited specific social media posts by the influencers that concerned the FTC staff because they did not appear to include required “material connections” disclosures. The FTC requires that commercial relationships between influencers and brands be clearly disclosed or otherwise known to consumers.

Char Pagar, of VLP Law Group, sat down with Inside Counsel to discuss the issue of celebrity social media influencers.

“My experience is that brands – both startups and established brands — are increasingly turning to social influencers to get the word out about their products and services,” she explained. “As more brands spend more money in the space, I suspect the FTC wants to spend its attention in the space as well — so marketplace participants are aware that the traditional FTC rules that apply to material connections disclosures apply to endorsements made via this new technology as well.”

Marketers often carefully gather and utilize their resources – sometimes over the course of years – to build their brand and ensure that the brand means something of value to their customers. For their part, social influencers often take the same careful approach when building their own personal brands.

“The negative reaction from an FTC spotlight on a brand or influencer resulting an agency enforcement action can reduce or eliminate value that took a long time to build,” she said. “Prudent marketers realize this, and structure their marketing plans and relationships in ways that comply with the FTC's guidance to protect their own hard-earned brand value.”

The FTC recently announced its first enforcement action against social media influencers. In that case, they accused two social media influencers in the online gaming community of failing to disclose their ownership in an online gambling service that they endorsed. As more money and attention is spent in the social media space and with social media influencers, it only makes sense that the FTC will direct some of its enforcement resources and attention to that space, per Pagar.

So, what are some best practices for social media influencers to protect themselves?

According to Pagar, social media influencers should endeavor carefully to comply with the material connections disclosure standards outlined by the FTC. Brands should also consider having a written social media policy in place for third party advocates like social influencers, attaching that policy to written agreements with social influencers and social influencer agencies, training associates on compliance with that policy, auditing social media influencers for compliance with that policy on a regular basis. And, they should take appropriate actions against influencers who do not act in accordance with the policy.