Businesses are spending billions of dollars a year to reach the loyal followers of “social media influencers.” Whether this means sending a free product to an influencer asking that she post a video review on YouTube or paying an influencer to post photographs of a company's product on Instagram—businesses are spending big money to tap into the perceived authenticity, credibility and social network of influencers.

The informal nature of social media, however, makes it easy to overlook the legal implications of utilizing influencer marketing.

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But It's Just a Post on Social Media

Let's be clear: a social media or blog post by a company, or at the direction of a company, is a form of advertising. Thus, all the legal regulations applicable to traditional forms of advertising are applicable to social media posts by companies and by the influencers they engage.

The Federal Trade Commission (FTC) is the federal agency tasked with protecting consumers from unfair and deceptive practices in the marketplace. It has published endorsement guides that provide direction to brand owners and influencers about social media advertising. Businesses would be wise to adhere to the FTC endorsement guides. Running afoul of the FTC exposes brand owners to cease and desist orders, fines, mandated customer refunds, corrective advertising obligations and other penalties.

In 2016, national retailer Lord & Taylor settled with the FTC after failing to disclose that certain influencers' posts displaying the Lord & Taylor's Design Lab fashion collection were actually paid promotions. Lord & Taylor allegedly paid 50 influencers to post Instagram photos of themselves in the same paisley dress and tag the corporate social media account @lordandtaylor. The posts reached over 11.4 million Instagram users in two days. This marketing campaign led to 328,000 brand engagements with Lord & Taylor and caused the dress to sell out.

In April 2017, the FTC went on a campaign to educate influencers and brands about their duties to include clear and conspicuous material disclosures in social media posts. The FTC sent out more than 90 letters to influencers and brands questioning whether a material connection existed between the brand and the influencer. This campaign signaled that the FTC was serious about enforcing its guidelines.

Also in September 2017, the FTC settled its first-ever complaint against individual social media influencers. The FTC charged two gaming influencers, Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell, with false and deceptive advertising for posting tweets such as “I lied … I didn't turn $200 into $4,000 on @CSGOLotto … I turned it into $6,000!!!!” without disclosing that they were co-owners of the game being advertised. The FTC complaint also alleged that Martin and Cassell paid other gamers to post in their social media circles about their experiences playing the CSGO Lotto game—but prohibited the influencers from making any negative statements about CSGO Lotto. The FTC charged that these posts did not reflect the independent opinions of impartial users and the influencers failed to disclose the material connections they had to the company. The parties reached a settlement with the FTC in which they agreed to make changes to their advertising practices, establish a system that monitors, reviews, and reports all endorsers' online videos and social media postings, and make periodic reports to the FTC, among other terms.

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Best Practices For Brand Owners

While using influencers to market a product can be very effective, brand owners must be careful to avoid an FTC violation. Companies should ensure their influencer marketing campaigns comply with FTC requirements. Brand owners should also educate the influencers they work with and proactively monitor their adherence to FTC guidelines. Here are some best practices for brand owners to convey to their influencers.

  • Disclose all “material connections.” These include: |
    • Financial relationships, such as cash payments, free or discounted products or services, gifts or other benefits (equity/ownership interest, credits, royalties, VIP/priority access, cross promotional efforts, etc.);
    • Familial relationships, such as posting about a sibling's or in-law's product; and
    • Corporate relationships, such as posting about an employer.
  • All disclosures must be “clear and conspicuous.” |
    • Although some social media platforms have embedded disclosure notification tools, these may not be sufficient.
    • Do not bury disclosures in a “more” link, at the bottom of a blog post, or in a bunch of hashtags.
  • Space constraints are no excuse for inadequate disclosures. |
    • For platforms where space is not an issue (e.g., Facebook, YouTube), include simple statements like “'Brand' gave me this product to try …” or “'Brand” paid me to review this …” at the beginning of the post or video.
    • For platforms with space constraints (e.g., Twitter, Instagram), place unambiguous tags such as ad, sponsored, paid ad, or promotion in a location that is hard to miss.
    • For ephemeral platforms (e.g., Snapchat, Instagram stories), superimpose the disclosure over the images. The disclosure should be easy to notice and easy to read in the time that people would have to look at the page.
    • For video promotions, make the disclosure at the beginning of a video. A disclosure that appears only at the end of the video or in the video description text is likely insufficient.
  • Treat each post as a standalone advertisement. Each and every social media post should contain clear and conspicuous disclosures. A consumer may encounter a post in a vacuum (for example, if it has been reposted by a third party), and thus influencers cannot rely on disclosures in prior posts—even those published on the same day.

Laura Ganoza is a Miami partner and Katherine Califa is Washington, D.C., senior counsel with Foley & Lardner.