By: Nicole M. Chew
Tic Tok, Instagram, Twitter (now X), Facebook, & YouTube. To say that the world of social media is expansive would be an understatement. The boom of the virtual world, exacerbated by the COVID-19 pandemic, has created jobs that no one would have dreamed of 10 years ago: social media advertising specialists, social media managers, and an ever-increasing number of content creators and influencers. Numerous companies have taken advantage of this new world, and ground is constantly being broken in the field of marketing and advertisements. The Federal Trade Commission is responsible for regulating fair advertising practices, and more companies than one have run into federal regulations pertaining to social media marketing and product endorsements.
Celebrity product endorsement is nothing new, companies like Nike and Under Armour have long-since sponsored athletes. Celebrity personalities like the Kardashians have been present in television ads for cosmetics for years. It’s easy to see that these athletes and personalities are being paid for their time and testimonials. The question gets more complicated when you look at “small-time” social media influencers like makeup artists, and fitness gurus who posted the majority of their content Instagram and Tic Tok. These influencers will often recommend makeup brands like MAC or Fenty Beauty, and fitness equipment like Peloton Bikes or clothing brands like Gym Shark. Are these influencers being paid to recommend these brands? What obligation do these companies have to make sure that consumers know that these influencers are being paid to recommend these products and brands? What obligation do these influencers have? Not knowing the answers to questions like these can cause your company to get investigated by the Federal Trade Commission (FTC), resulting in damage to your company, both in financial and in reputation.
Playing it safe
The Federal Trade Commission (FTC) is responsible for regulating commercial activity in the United States. This agency regulates advertisements made by companies, and endorsements made by individuals, celebrity or not. Specially, section 5 of the FTC Act prohibits deceptive advertisements, and endorsements fall underneath that very broad umbrella. There are specific rules for endorsements, and the FTC makes it clear that the larger corporation is responsible for keeping their “endorsers” in line with the these regulations, and they adopt liability for the failure of their endorsers to comply with the FTC’s Endorsement Guidelines.
To play it safe in the social media marketing sphere, here are 5 simple steps to make sure that you’re in compliance with the FTC Guidelines:
- Make sure that your endorser is using the product that they are endorsing, and they continue to use it for as long as they are endorsing it.
- Make sure that your endorser shares their HONEST opinions of the product (even if they are the same as yours).
- Make sure that your corporation is checking up on your endorser that the endorsements they are making are not misleading.
- Make sure the partnership between you and the endorser is CLEARLY disclosed (it needs to be obvious to every viewer that your company is giving some benefit to the endorser).
- Take action to correct any non-compliance of an endorser to these guidelines.
These steps are not a safe harbor, but they are a good step into ensuring that your corporation stays in compliance with the FTC Guidelines. The FTC is aware of the ambiguity of the Endorsement Guidelines, and as such, they have taken steps to make it easer for you to find out from them directly if your business and endorsement practices fall under their guidelines.
But what if i have questions about what is allowed?
The “What People are Asking” page has been developed so that you can bring your questions and concerns to the FTC directly, and while the answers given here are not official, they can certainly provide some guidance. Quite simply, you can’t go wrong by asking. This page is set up in an easy Q&A format that easy for someone unfamiliar with the FTC to navigate and understand.
You can get to that page here.
The FTC has also provided access to their enforcement policy for deceptive advertisements (or endorsements). Having access to the enforcement policy statement made by the FTC can provide you with an official answer to any of your questions. Reading over this brief document can help set you up for success in advertising your brand in accordance with the FTC guidelines. Falling under these guidelines can help ensure that you never get investigated, keeping your brand well respected and saving the money involved in lawsuits and settlements.
You can access that document here.
what happens if i don’t abide by the rules?
There are several companies that have failed to abide by the Endorsement Guidelines set forth by the FTC. One of the main criticisms of the FTC is that it relies too much on self-enforcement by corporations, but this does not mean that these guideline violations go unchecked. Companies like Lord & Taylor, Cole Haan, and CSGO Lotto have violated these guidelines and engaged in unfair or deceptive advertising practices as a result of their endorsers failing to disclose the relationship between themselves and the company. The ramifications of such conduct include recurrent monitoring by the FTC, tarnish of a brand name, fines, and the cost of lawsuit settlements.
There has been a trend of the FTC going after the corporation partnered with the endorser, and holding them liable for the statements made by the endorser. As such, it is of the utmost importance that you follow the above steps to keep your company in good standing with the FTC and that your budget can be spent on corporation development, not lawsuits and settlements.
the big picture takeaway
Overall, the FTC incorporates a huge aspect of self-regulation amongst companies. This is in part due to effective allocation of resources, but also because regulation between companies embodies some of the main ideas behind the U.S. economy – free enterprise and capitalism, where the consumer is the one who wins out by finding the best product for the best price. False or misleading endorsements deceive consumers, which undermines their ability to find the best product. By following these simple steps, you can make sure that your company stays free of investigation, establishing the integrity of your company and the integrity of your endorsers and your products.
Nicole Chew is a rising second-year J.D. candidate at Penn State Dickinson Law. She is from Montgomery County, Maryland, and holds a B.S. in Psychology from Frostburg State University. She plans to pursue a career in criminal law litigation, as her background in psychiatric care has given her a unique insight into how the field of psychology interacts with our legal system.
Sources:
16 C.F.R. & sect; 255.0-2
15 U.S.C.A. & sect; 45 (West)
Ashley Luong, All That Glitters Is Gold: The Regulation of Hidden Advertisements and Undisclosed Sponsorships in the World of Beauty Social Media Influencers, 11 Wm. & Mary Bus. L. Rev. 565, (2020).
Aimee Khuong, Complying with the Federal Trade Commission’s Disclosure Requirements: What Companies Need to Know When Using Social-Media Platforms As Marketing and Advertising Spaces, 13 Hastings Bus. L.J. 129, (2016).
Image Sources:
Influencer Marketing – https://www.google.com/imgres?q=influencer%20marketing&imgurl=https%3A%2F%2Fwww.legalandcreative.com%2Fwp-content%2Fuploads%2F2019%2F03%2Finfluencer-marketing-596×300.jpg
Khloe Kardashian Image – https://oscwebdesign.biz/social-media-influencer-marketing/
FTC Logo Image – https://www.google.com/imgres?q=federal%20trade%20commission&imgurl=https%3A%2F%2Feconomie.fgov
