It has been over two weeks since the Federal Trade Commission (“FTC”) sent influencers, celebrities, and brands a strong message by sending 90 or so letters centering on the required usage of disclosures in connection with sponsored content, and garnering extensive press coverage in the process. Regardless of whether a company or individual was on the receiving end of a warning letter, the FTC’s move signifies that the government organization is, in fact, paying attention to undisclosed sponsored content, particularly on Instagram, and advertising/endorsing entities should take note.
In light of this significant first step, we looked to see how influencers – namely those we included on our first Bi-Annual Brand and Influencer Report – are reacting, and the results are somewhat surprising. Despite an overarching warning from the FTC, only a small number of the industry’s most heavily-followed influencers have made noteworthy changes to their disclosure (or lack of disclosure) practices.
The FTC’s Guidelines
In order to adequately determine who is abiding by the FTC Act and who is running afoul of it, a summary of the FTC’s guidelines on the matter is warranted. For the uninitiated, the FTC is an independent government agency tasked with promoting consumer protection and eliminating and preventing anticompetitive business practices.
With this in mind, the FTC Act states that an act or practice is deceptive if there is a material misrepresentation or omission of information that is likely to mislead consumers acting reasonably in the circumstances. The FTC has released a number of lengthy guides that serve to detail how to properly disclose sponsored posts. Note: “sponsored” does not only refer to explicitly paid-for posts; it also encompasses other forms of compensation, such as free garments and accessories, free travel accommodations, and other gifted perks. Additionally, the FTC recently reiterated that material connections, such as “a business or family relationship,” must also be disclosed.
Its recent letters highlight a few key guidelines that must be observed when posting sponsored content. The key takeaway is that any connection between brands and influencers must be "clearly and conspicuously" disclosed. The FTC elaborated on this, stating that not all disclosure language will be deemed acceptable.
In a corresponding blog post, the FTC held that disclosures, such as “Ad,” “Promotion,” or “Sponsored,” or with a hashtag like “#Ad,” are acceptable forms of disclosure. On the other hand, it stated that “#sp,” “Thanks [Brand],” or “#partner” are not. This likely means that “#collab” is also questionable, given the ambiguity of the shorthand term.
The FTC also held that “when multiple tags, hashtags, or links are used, readers may just skip over them, especially when they appear at the end of a long post – meaning that a disclosure placed in such a string is not likely to be deemed a valid, conspicuous disclosure."
Beyond that, the FTC held that when making endorsements on Instagram, the material connection must be indicated above the “more” button (which appears when Instagram captions longer than three lines are shortened). This effectively requires the disclosure hashtag to precede the caption content, or to be located within the first three lines of the caption – again, on its own, and not in a string of other hashtags.
The FTC also recently reiterated that material connections, such as “a business or family relationship” must also be disclosed. This likely does not bode well for influencers who promote their own non-eponymous collections without disclosures.
As we told you in connection with the Influencer Report, while it may be obvious to some that Danielle Bernstein, for instance, is behind the Second Skin overalls line or Archive Shoes, this is almost certainly not known to the average reader or viewer, and as such, this connection would likely require a disclosure in each post promoting either of the collections. The same could likely also be said of Khloe Kardashian’s Good American collection, as well, but probably not as much for Chiara Ferragni’s eponymous label, as it bears her name.
(Note: Ferragni's business partner Riccardo Pozzoli was on the receiving end of an FTC letter in connection with the mega-influencer's failure to disclose sponsored posts).
In this same vein, because the FTC requires “business connections” to be disclosed, if an influencer is the face of a brand, she must likely disclose that fact if posting about the brand on her Instagram or other social media account or website.
It is also worth noting that the FTC’s letters cite it’s “The FTC’s Endorsement Guides: What People Are Asking” document, which specifically speaks to the need to disclose when affiliate links are used. According to that reference guide, “Consumers might not understand that ‘affiliate link’ means that the person placing the link is getting paid for purchases through the link.” As such, if an influencer is participating in affiliate programs (by including links within their captions) – common ones include RewardStyle and/or LikeToKnowIt – this must be disclosed, as well.
What Has Changed?
With such increased clarity set forth by the FTC and its recently reinforced stance that it will, in fact, take action against both brands and influencers, if such disclosure requirements are not met, has anything changed? Not really.
While some influencers have recently begun utilizing the “#ad” and/or “#sponsored” disclosures, they would largely be deemed improper by the FTC, as such hashtags are either being hidden amongst other hashtags (as indicated by the Aimee Song/Song of Style and Julia Hengel posts below) or being placed at the end of captions and below the “more” button. Some influencers, such as Arielle Charnas of Something Navy, Louise Roe, and Gary Pepper Girl, have continued to use #partner” and/or “collab,” despite the FTC’s guidance. Still others, including ManRepeller and Blaire Eadie, have posted affiliate links, such as those directing users to LikeToKnowIt, without indicating any compensation connection.
But maybe most distressing is the fact that some of the routine abusers of the FTC’s guidelines (including the Kardashian/Jenners, Bella and Gigi Hadid, Chiara Ferragni, Kristina Bazan, Olivia Palermo, Julie Sarinana of Sincerely Jules, Danielle Bernstein of WeWoreWhat, Wendy Nguyen of Wendy’s Lookbook, and Rocky Barnes, among others) have continued to blatantly flout the disclosure rules despite the recent FTC developments.
While the vast majority of fashion’s most well-paid and highly-followed influencers were not named in letters sent by the FTC, that does not mean they are not subject to the FTC’s guides and will not be targeted in future action by the FTC. With that in mind, get to disclosing, fashion friends. As for brands: you need to carefully monitor your influencers and ensure that they disclose sponsorships properly. If parties are found in violation of federal law, the FTC could disgorge the parties of all related profits.
UPDATED (5/10/2017): Chiara Ferragni has begun including "#ad" in some of her Instagram posts.