FTC x Influencer: the FTC’s Rules on Influencer Marketing Disclosures
The rise of social media has facilitated the birth of influencers, and over the past several years, influencer marketing has ballooned to become a multi-billion-dollar industry according to various sources. (See https://www.shopify.com/blog/influencer-marketing-statistics#7.) It comes as no surprise that the FTC has already extended advertising rules into the world of influencer and social media marketing. This article will explore the rules around influencer marketing, specifically on brand/influencer collaborations.
An Intro to Influencers
Influencers are individuals who generally have high social net worth and who have developed large social media followings. (Colgate v. Juul Labs, Inc. (N.D.Cal. 2019) 402 F. Supp. 3d 728, 742.) Influencers can be anyone from a professional athlete to a built-from-scratch social media sensation. However, whether your favorite influencer is an A-list celebrity or a stay-at-home dad who gained millions of followers by making comical TikTok videos, influencers share a key characteristic: they have the ability to greatly affect the purchasing decisions of their followers.[1]
An influencer’s ability to affect the purchasing decisions of followers boils down to relatability and authenticity. In essence, uploading content on social media is a type of disclosure of one’s personal life to the public. This in turn allows influencers to connect with the general public on a more personal level, which ultimately leads to an increase in followers. An influencer’s followers feel connected to the person they follow and are willing to trust this person’s words.
Influencer Marketing
Businesses have recognized the impact influencers have in the market and have continued to tap into these connections to create lucrative business opportunities. For instance, one frequently used method of marketing through influencers involves brand collaborations wherein businesses release limited edition products in collaboration with a popular influencer. You have likely seen the shorthand “x” to denote collaborations between brands: “Nike x sacai”, “adidas x Disney”, “Fendi x Versace”, etc. This moniker stylization can also be used for brand/influencer collaborations, e.g., “Brand x Influencer”.
Whenever a business decides to partner with an influencer on a marketing venture, it is important to be familiar with the FTC’s rules regarding disclosure. 16 C.F.R. Section 255.5 states that “[w]hen there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed.” (16 C.F.R. § 255.5) “[I]nfluencers should clearly and conspicuously disclose their relationships to brands when promoting or endorsing products through social media.” (Ariix, LLC v. NutriSearch Corp. (9th Cir. 2021) 985 F.3d 1107, 1116; quoting Federal Trade Commission, FTC Staff Reminds Influencers and Brands to Clearly Disclose Relationship (Apr. 19, 2017), https://www.ftc.gov/news-events/press-releases/2017/04/ftc-staff-reminds-influencers-brands-clearly-disclose.) The reasoning behind this requirement is that the courts simply view influencer marketing as a form of advertising, and disclosure is necessary to prevent false, misleading, or fraudulent advertising.
Generally, disclosure is required if the connection is not reasonably expected by the audience. (16 C.F.R. § 255.5.) That said, disclosure isn’t always necessary. Section 255.5 includes several examples describing various scenarios where disclosure is not required by law. For instance, let’s say a food business ran an ad featuring an endorsement by an A-list celebrity and the endorsement regards only points of taste and individual preference. The celebrity’s compensation is likely ordinarily expected by viewers and so no disclosure is required. (Id.) The key here is that when assessing whether or not disclosure is required, a business should take into account whether a representation is being made by the endorser, whether the endorsement relationship is clear and conspicuous, and whether the connection should be reasonably expected by the audience.
Going back to our collaboration scenario, what happens with “Brand x Influencer”? Does the “x” between the names require additional disclosures by the influencer? In this specific situation, the answer is arguably “no”. It is well known in the industry that the “x” in, for instance, “Brand x Influencer” implies a collaboration between the brand and the influencer. It is also likely apparent to consumers that a collaboration generally implies a financial relationship if not a material connection between the Brand and the influencer. This arguably should be enough to make consumers aware of such relationship/connection, especially considering the “x” between names is commonly used to announce a collab (see examples above). In this instance, the audience should reasonably expect that both names on either side of the “x” will incur some sort of benefit, if not a financial one due to the clear and widely accepted implications. In short, “Brand x Influencer” should be enough of a disclosure to make consumers aware of the financial relationship between the two because the expectation of such a relationship is baked into the name via the “x” between the names.
If you plan on venturing into the world of influencer marketing, be sure to follow the FTC’s guidelines surrounding disclosure.
[1] Sometimes, this power can even influence stock prices of companies. For example, Cristiano Ronaldo, for all intents and purposes, is a mega influencer. During a press conference earlier this year, he moved a bottle of Coca Cola out of frame and instead, held up a water bottle and said, “Water!” in Portuguese. This immediately resulted in a $4 billion dollar drop in Coca Cola’s market value.
