Recently, the Federal Trade Commission (FTC) enacted its first enforcement action against businesses using influencer marketing in ways that violate its regulations against deceptive business practices. (The first crackdown occurred in April 2017, when the FTC sent “reminder letters” to influencers and businesses.) Companies realize that, while influencer marketing is an incredibly effective method of small business marketing, it must comply with FTC and global trade regulations.

Wading through the Code of Federal Regulations governing influencer marketing can be challenging at best, and coma-inducing at worst. While this article should not be substituted for the advice of a retained attorney (seriously; get an attorney if you have questions about the law), it does provide some easy-to-understand tips and checklists for complying with FTC regulations in the hopes of making small businesses and other marketers aware that the issue of influencer compliance is not going away.

Everything begins with disclosure

The FTC asserts that disclosure is required when there is a “material” relationship
The FTC asserts that disclosure is required when there is a “material” relationship (photo by Timothy Barlin)

The FTC is primarily focused on instances where a product or service is recommended and the online personality has a business relationship to the product or service. In the current enforcement action, involving two YouTube video gaming personalities, that relationship was a direct ownership interest in the product business, but it is likely that the FTC would see a relationship if the internet personality has a relationship anywhere in the food chain related to a product (i.e., with distributors, marketing consultants, manufacturers, or retailers). (See 16 CFR 255.5.)

When there is some material relationship between the internet personality and product in their content, there needs to be a disclosure of the relationship. For example, when I use an affiliate link to a product on Amazon, I need to disclose (as I do) on this site that I am a participant in the Amazon affiliate program and benefit from purchases associated with my site. Note, too, that the material relationship does not end with getting paid to display and endorse a product. If I recommend a product or take a picture of a product in exchange for a chance to win something for free, that is a material relationship that requires endorsement. No matter the benefit, it is safe to assume that if I benefit from putting a picture of a product on my blog, on Facebook, or on Instagram, I have a disclosure requirement.

How to make a proper disclosure

The FTC intended for the disclosure requirements to be straightforward (whether they succeeded at making the regulations easy to understand is another story entirely). The requirements are based on the following elements
– disclosures of all material relationships;
– disclosures that are unambiguous in both form and content;
– disclosures that are side by side with the influencer content

Disclosures of all material relationships

The FTC asserts that disclosure is required when there is a “material” relationship, and in this case, the use of the term “material” rather than “financial” is significant. Expanding the scope of relationships to any instance in which it is material means that the influencer content is subject to the regulation when there is a personal, familial, romantic, or other similarly meaningful relationship, regardless of whether the influencer gets paid in a traditional “quid pro quo” method.

Thus, if Jane Doe begins posting influencer content on Instagram about the hot new nightclub in her city, and that hot new nightclub happens to be owned by a partnership that includes John Doe, Jane’s brother, then there is a material relationship for which the regulations would be imposed.

Disclosures that are unambiguous in both form and content

The FTC, in its web pages regarding endorsement marketing/influencer marketing, repeatedly reminds influencers (and the marketers and businesses that work with influencers) that they should not rely on the native endorsement tools within an app to adequately indicate whether the content is paid advertising. Instead, it is the obligation of the influencers and the marketing firms directing the influencers to ensure that their disclosures are unambiguous and easy to see.

Disclosures that are side by side with the influencer content

The FTC addresses the question of whether endorser disclosures are adequate if buried in a linked page somewhere, stating:

Do you click every CLICK MORE link? We don’t either. When disclosing a brand relationship, the better approach is to hit ‘em right between the eyes. Furthermore, on image-only platforms, superimpose your disclosure over the picture in a clear font that contrasts sharply with the background.
FTC, Three FTC Actions of Interest to Influencers

Plainly put, the disclosure must be up front, superimposed on the image or video in a way that is legible and meaningful to the consumer.

Conclusion

Influencer marketing is a useful subset of digital marketing, a low-cost option for small businesses or businesses just getting started to get their products and services in front of potential customers. However, small businesses and the marketing firms that represent them need to make sure that, if they are using influencer marketing, their content complies with FTC regulations concerning endorsements.

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