About 45 celebrities were reportedly part of a group of 90 social media influencers who recently received letters from the Federal Trade Commission (FTC) “educating” them about the government's advertising disclosure requirements.

This was an issue that needed to be tackled, given that the dollar amount of endorsement contracts between brands and social media influencers—such as celebrities, athletes and reality stars—are reportedly as high as seven figures. Violating FTC advertising requirements could cost influencers and brands a lot of money—not to mention reputational injury. In the past, FTC enforcement of advertising rules was focused on brands, however social media influencers are increasingly on the FTC's radar as a result of the rise of Instagram and other social media platforms as marketing tools. Given the high financial stakes involved and the influencers' ability to reach millions of consumers, the FTC is keeping a close eye on influencers and their posts.

The FTC monitors advertising activities pursuant to the Federal Trade Commission Act, which charges the FTC with, among other things, preventing “unfair or deceptive acts or practices,” including advertising that is false or misleading in any material way. The FTC published the Guides Concerning the Use of Endorsements and Testimonials in Advertising (also known as the Endorsement Guides) to provide guidance regarding how the FTC evaluates certain endorsements and testimonials in advertising. According to the Endorsement Guides, if there is a “material connection” between an advertiser and an endorser, the connection must be “clearly and conspicuously disclosed, unless it is already clear from the context of the communication.” This applies to both advertisers and endorsers. A “material connection” is something that may affect how a consumer may assess the credibility of the endorsement, such as a close relationship, the gift of a free product, or a payment. In other words, if an endorser/influencer is paid by a brand and endorses the brand or its product(s) on social media, the influencer's followers should be made aware of such payment so the followers can evaluate how much weight to afford the influencer's (paid) endorsement of the product. Complying with this requirement can be tricky due to social media's space constraints which can cause messages to be interpreted differently by consumers. So how should a material connection be disclosed? Following are a few guiding principles from the FTC that all brands and influencers should keep in mind:

• • All disclosures should be unambiguous. A consumer should not have to interpret what a purported disclosure means—it should be apparent. For example, the FTC believes that neither “thank you [Brand]” nor “#partner” is clear enough to disclose a material connection with a brand.
• • All disclosures should be easy to find and read. Consider how the post and disclosure will appear to a consumer in social media. Is the post long? If so, will a consumer have to click “more” to see the disclosure? Is the disclosure #buried #in #a #long #stringofhashtags that may make it harder for a consumer to read? If any of the above is true, the disclosure likely will not be effective.
• • Video disclosures should be embedded in the video. In the case of video endorsements, a disclosure could be separated from the video depending on its placement, or if it is shared in different social media outlets. For instance, if the disclosure is made only in a comment or caption to a video, the comment may be buried as other people comment on the video and the caption may disappear when the video is shared in other social media outlets. To avoid such a situation, any disclosure to a video should be embedded directly in the video. To help with that process, YouTube has a feature that will embed a standard disclosure into a video if the user simply checks the box that says “video contains paid promotion” in “Advanced Settings.”

The FTC letters signal the government's increased interest in social media and influencer marketing. Accordingly, brands should review the FTC's informal guidance document, FTC's Endorsement Guides: What People are Asking, and the FTC's press release about the influencer letters. They should also consult with legal counsel familiar with the legal issues involved in such campaigns to make sure they fully understand the FTC's requirements for advertising.