By: Ann K. Ford and James K.S. Stewart

The immense rise in popularity of social networks has led to the proliferation of social media celebrities—individuals who have amassed a great number of “followers” based on their unique ability to artfully curate content designed to create an idyllic impression of everyday life and along the way present consumer goods designed by others. In the United States, the Federal Trade Commission has taken notice of the increase in the number of brands working with social media influencers to promote their products and services and has taken a more active role in monitoring effective disclosure. The FTC’s recently revised Endorsement Guides provide that if there is a “material connection” between an endorser and the marketer of a product, that  connection should be clearly disclosed, unless such connection is clearly apparent from the context of the communication or endorsement. Examples of material connections include, but are not limited to, monetary payment, free or discounted products, or sweepstakes entries.

Under the FTC guidelines, both brands and endorsers are responsible for ensuring that disclosures are “clear and conspicuous,” such that they are easily noticed and understood by consumers. The language should be unambiguous. In social media, these disclosures are commonly accomplished through use of hashtags such as #Sponsored, #Ad, #Paid, or #Promotion.

While seemingly simple, in order to be effective, the disclosure must be made before any text in the post is truncated by the social media platform where the post appears. Additionally, the disclosure should not be buried in a string of hashtags or hidden at the end of a post. The FTC has signaled that influencers thanking a brand and tagging its official account does not constitute an effective disclosure of a material connection. The FTC has also cautioned brands against relying solely on in-platform mechanisms to make disclosures, given that consumers may fail to notice such disclosures. Therefore, even where a platform provides such a mechanism, the best practice is to also require that the endorser make clear a conspicuous disclosure of the material connection within the text of the post.

Non-compliance with the FTC’s guidance may result in a warning letter from the FTC or a law enforcement action, which could result in an order requiring a defendant to give up any money received for violating the FTC Act and requiring defendants to abide by the FTC’s guidance in the future.

Brands should provide influencers with simple, easy-to-understand and implement instructions on how to make effective disclosures. Brands should also include provisions in influencer agreements requiring that all posts made in support of the partnership comply with any disclosure guidelines provided by the brand. Moreover, to ensure compliance, brands should carefully monitor and track all posts made by influencers in support of paid promotions. If the influencer fails to include a disclosure, or fails to make the disclosure in a way that is clear and conspicuous, the brand should promptly contact the influencer to ensure that the appropriate disclosure is included. In this way, brands can avoid penalties and bad press that could erode trust in the brand.