New FTC Guidance: How to Avoid Legal Problems with Influencer Marketing

In November 2019, the FTC issued its “Disclosures 101 for Social Media Influencers.” The publication reasserts the fundamental tenet that influencers who give product endorsements must reveal when they have a “material connection” to company. It also provides guidance about how to make disclosures. This blog addresses some frequently asked questions that this firm’s clients ask about influencer marketing. It provides a framework for avoiding legal problems with influencer marketing.

Q. The FTC’s new guidance is addressed to influencers. Does this mean that brands have no responsibility?

A. While this new guide gives advice to influencers rather than brands, brands cannot shift responsibility to the influencer to escape liability. Previous FTC cases and guidance make it clear that a brand has a legal responsibility for the influencers it uses. The brand should assert disclosure best practices, monitor influencer activities, and terminate influencers who do not comply.

Q. Have regulators taken an interest before in influencer marketing?

A. The FTC’s “Disclosures 101” publication comes in the wake of the agency’s investigation of influencers and brands who do not comply with the agency’s now well-established Endorsement & Testimonial Guidelines. In 2017,the FTC sent over ninety warning lettersto companies, celebrities, and influencers. The agency reminded all players in the social media ecosystem that consumers must readily understand the motivations behind endorsements and testimonials. Before that, there have been numerous cases in which the FTC or state regulators weighed in on influencer marketing that causes consumer confusion.

Q. What does the “Disclosures 101” guidance teach influencers?

A. The new guidance reminds influencers that a material connection between a brand and an influencer can be something as simple as a sweepstakes entry or it can be free products or other perks. Merely tagging a brand may trigger the need for influencer disclosures. When making disclosures, the influencer should make them prominent and avoid abbreviations. Unfortunately, platform tools for disclosure may be insufficient to pass legal muster. Of course, the testimonial must be accurate, truthful, and capable of substantiation.

Q. What action steps should a brand take to mitigate risk related to influencer marketing? 

A. Every brand should be assessing the importance of influencers to its marketing efforts. It is likely most brands interact with influencers in some way. They may have formal or informal arrangements, but in either case, the brand’s legal exposure needs management.

Q. How should a brand decide what influencers to use?

A. Create a formal process for vetting influencers. In particular, pay close attention to the quality of the influencer’s followers. Earlier this year, both the FTC and the New York State Attorney General announced groundbreaking settlements with Devumi LLC over peddling “fake followers” to influencers, celebrities, and brands. Selling fake social media influence is illegal. Any influencer should be warrant and represent the quality of his/her sphere of influence. The influencer’s activity should also align with brand values. These issues could, of course, be dealt with contractually, but brands should scrutinize the influencers with whom they work.

Q. What should a brand consider if entering into a formal contract with an influencer?

A. If working with multiple influencers, it is important that a brand create uniform contractual obligations. Using the influencer’s contract is not preferred. Instead, the brand should develop its own template contract. The brand’s influencer agreement should focus on tangible benchmarks for performance, strong warranties and indemnities clauses, and favorable termination rights. The contract should obligate the influencer to adhere to the FTC’s Guidelines on Endorsements & Testimonials.

Q. If my brand has a contract with the influencer, can we rely on the influencer to know how to make disclosures?

A. It’s not a good idea. To accompany any contract, the brand should provide the influencer with a copy of the FTC’s new publication on how to do disclosures. In addition, the brand should go further to create its own legal guidelines concerning influencer disclosures in social media. In the best case, the influencer guidelines would be platform specific.

Q. Influencers should be giving honest reviews. Can our marketing team dictate anything the influencers say about our products or services?

A. Remember the brand is responsible for what the influencer says about your products and services. Provide guidance about what kinds of claims are appropriate and have substantiation. Warn clearly about the kinds of claims that may be problematic.

Q. What else can a brand do to protect itself?

A. Consider running training programs or creating an onboarding training video that all influencers who work with the brand must watch. Review the brand’s advertising, marketing, and public relations agency agreements to ensure all agencies are aligned on their responsibilities in recruiting influencers and discussing the brand in social media. Develop active monitoring programs to ensure that your brand guidelines are being followed. Finally, develop best practices for managing influencers who do nota here to legal or brand standards.

What steps are you taking to protect your brand as your work with influencers? If you would like to discuss creating a risk mitigation plan for your brand’s influencer marketing, click here.