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On February 12, 2020, Commissioner Rohit Chopra of The Federal Trade Commission (FTC) issued a statement suggesting that the Commission plans to revisit its approach toward influencer marketing. This comes after a unanimous vote by the FTC to update the current Endorsement Guides. What is seemingly a “crackdown” on influencer marketing throughout social media sites like YouTube, TikTok and Instagram might have major implications, including:
• Requiring social media sites to more stringently monitor their influencer marketing activity.
• Holding companies legally liable and accountable for failures to comply with current Endorsement Guides.
• Creating a stricter set of guidelines that companies seeking the endorsement of influencers must follow, which could include specific terms and conditions that must be incorporated into all contracts with influencers.
These decisions are the result of the perceived increase in unclear or intentionally deceptive paid endorsements in influencer marketing. In addition, after recent major cases, like those brought against Lord & Taylor and Sunday Riley, were settled with limited penalties, the FTC believes that tougher consequences are necessary.
With the FTC looking to take a more active role in influencer marketing, here is a closer look at some of the things brands should consider in preparation for the Commission’s new review of influencer marketing policies:
1. Clear, Direct Disclosure Language
The truth is, virtually every large advertiser in this space already takes influencer marketing disclosures very seriously, soliciting the help of legal teams to develop and validate all language contained therein. It is likely that the bulk of the intentionally deceptive influencer ads are coming from newer, less mature brands that see themselves as too small to be a target for the FTC.
If you plan to pay an influencer, you should always use clear and direct disclosure language. There should be no ambiguities about what is expected of influencers and how the influencers are working with you. Contrary to what some may think, disclosing that a sponsored post is an advertisement doesn’t detract from its credibility.
2. Tight Approval Process
As an advertiser, you will need a tight approval process in place for all sponsored influencer content. By maintaining strict adherence to such a stringent approval process, you will safeguard your brand against future FTC violations. It is best to articulate your disclosure requirements in all influencer-facing contracts and to make proper disclosure a contingency for payment.
3. Indemnity Clauses
Influencers are only human. They might occasionally make mistakes. Some such mistakes could include going off-script and saying or showing something that could damage your brand, cause you to be held legally liable for any consequences that may result or simply make it seem like you are not complying with FTC guidelines.
That is why it might be useful for you to also include indemnity clauses in the contract between you and the influencer. These clauses could help both parties legally since they will minimize the possible legal ramifications for either of you if things do not go according to plan.
4. The Effect On Everyone
The statement issued by FTC Commissioner Chopra explicitly states that the Commission’s primary focus in this new review and the eventual enforcement of any rules established as a result will be major companies — some for liability as social media sites that provide the venue for the proliferation of influencer marketing efforts, and others for legal responsibility regarding deception of the public with regards to their brands. But that does not necessarily mean that up-and-coming brands and influencers themselves should not be made aware of all of this.
Everyone involved with influencer marketing, no matter the scale or level, must have a clear understanding of the new disclosure policies based on what the FTC decides because it will be applicable to everyone, even if they are not the primary target of the FTC. Given that the majority of violations will happen on the long-tail of advertisers — meaning the small brands that don’t have the deep pockets — enforcement by the platforms themselves will be crucial. There is the possibility that many platforms will use this as a justification to build tools to manage more of the influencer workflow directly. Facebook’s branded content tool is a great early example of this.
The Takeaway
The FTC is doing all of this for the consumers’ benefit. The Commission does not want the consumer to be deceived. And they also do not want brands and companies that are operating according to the rules and regulations to be put at a competitive disadvantage in the market by those that are violating the guidelines.
While it may seem more “authentic” or impactful when influencers do not disclose a piece of sponsored content, it is not. Most consumers know an ad when they see one and, at best, not disclosing a sponsorship will make consumers suspicious, which is not great if you’re looking to establish trust. Influencers have more to lose, given that their income is based solely on the trust they build with their audience. Overall, the FTC’s new updates won’t change much for the market, but they will further codify the best practices of those influencers, advertisers, brands and social media sites that are already doing it the right way.
