What Will Happen to Influencer Marketing After FTC's $1M Teami Tea Settlement?
The Federal Trade Commission's action against Teami Tea could underline the agency's shift toward a more aggressive enforcement strategy that puts advertisers, media platforms and influencers on high alert.
March 11, 2020 at 05:49 PM
4 minute read
Social media advertising might become steeped in disclosures—and new tech—after the Federal Trade Commission took action against Teami Tea and online celebrities hawking the detox tea.
Teami Tea agreed to a $1 million settlement with the FTC over its unsubstantiated weight loss and health claims. But the FTC didn't just go after the company, it also issued stark warning letters to its online influencer "partners," including Cardi B and Jordin Sparks. Social media followers had to click "more" to see the disclosure on the celebs' posts promoting the tea, in violation of commission guidelines and the company's own procedures, according to the complaint filed Friday in the U.S. District Court for the Middle District of Florida.
The agency even threatened "legal enforcement action" against influencers in the future. Richard B. Newman, an FTC investigation and defense attorney at Hinch Newman, said influencers must take the FTC guidelines for clear and conspicuous disclosures seriously or face potential legal and financial trouble.
"Depending upon a number of legal and factual considerations, unless remedied, individual influencers that fail to make adequate disclosures about their connections to marketers risk, without limitation, the FTC issuing [civil investigative demands] or immediately proceeding to federal court to obtain injunctions and disgorgement of ill-gotten gains," Newman said in an email.
Renée Appel of Seyfarth Shaw in Washington, D.C., said the action is somewhat of an anomaly. "It's the first of its kind where we've seen the FTC utilize its enforcement powers through the federal courts," Appel said. "To date, the FTC has kept a lot of enforcement measures related to the influencers more or less in-house, through their administrative proceedings and warning letters."
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The $1 million financial penalty—reduced from the $15.2 million in total sales from the product, because of inability to pay—is also impressionable, she said. In past influencer marketing actions, there's generally no fault and no penalty, Appel said.
The complaint also emphasized form over substance, she said, focusing on the placement of the disclosure below the cutoff where readers would have to click to see more. "It really puts a finer point on the issues that the FTC has raised that, 'Hey you can have #ad, but if it's buried in your text or not in your video, the FTC is going to call it out.'"
The FTC's action means it's not enough to have an adequate contract or policy. "You kind of need an added layer of surveillance," she said. Appel expects to see more resources devoted to compliance oversight. Advertisers might change their agreements to include indemnification if the influencer doesn't follow through with guidelines or provisions that payment is contingent on compliance. "The flip side of that is while it insulates companies, it creates a little bit of risk exposure to the influencer who is being held to a higher level of accountability," she said. "So they might demand more money."
The enforcement action could also inspire new legal tech. "It sounds crazy, but you might see new products evolve and companies coming out with surveillance software," she said. The technology could track partners to ensure compliance or collect data about influencers to help inform companies about which celebs take compliance seriously, she said.
The action follows the FTC's rollout of updated endorsement guidelines for influencers in February. In a statement, Commissioner Rohit Chopra said the FTC would consider developing requirements for platforms, including Instagram, YouTube and TikTok, which facilitate and sometimes directly profit from influencer marketing.
"It's not just influencers that need to be in a heightened alert, but also these platforms like Instagram that are servicing this form of advertising," Appel said.
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