The Federal Trade Commission (“FTC”) has been asked to investigate advertisers who are compensating "influencers" to endorse products on Instagram. According to a complaint filed with the FTC on Tuesday by Public Citizen, the Center for Digital Democracy, Commercial Alert and the Campaign for a Commercial-Free Childhood, such advertisers and influencers are failing to meet their obligations under federal law by not disclosing their connections. The parties' complaint states: "A longstanding, core principal of fair advertising law in the United States is that people have a right to know when they are being advertised to.”
The complaint continues on to note: "Disguised advertisements are inherently deceptive, because consumers do not know to apply appropriate screens. The issue is acute with disguised ads featuring paid endorsements, where deceived consumers believe admired celebrities are making genuine, self-directed and enthusiastic endorsements of brands, not realizing that those celebrities are instead paid and may not even use the touted brand."
The organizations refer to a recent study by Public Citizen, which found 113 celebrities – ranging from musicians, actors and athletes to fashion industry influencers – who have endorsed products for pay and without valid disclosures to indicate such a relationship.
"This investigation was by no means exhaustive as the total number of illicit endorsements would likely be too high to measure manually," the letter states. "From Rihanna (pop music star) advertising Puma to Kim Kardashian (famous for the teen reality show Keeping Up with the Kardashians) endorsing Express Smile (a teeth-whitening company), these idols have a primarily young and impressionable audience."
Public Citizen and the other groups point to cosmetics and weight loss companies as major offenders. "The 'influencers' in this case are overwhelmingly reality TV stars idolized by young girls and teens, a demographic especially susceptible to advertising preying off of unrealistic standards of beauty," the organizations say. Weight loss companies such as Fab Fit Fun and Flat Tummy Tea appear to employ dozens of celebrities and influencers to endorse their goods without any disclosure."
The advocacy groups are urging the FTC to bring cases against the advertisers, and also warn the "prominent influencers" that they could be subject to enforcement actions in the future.
As we’ve told you in the past, The FTC is an independent government agency tasked with promoting consumer protection, and eliminating and preventing anticompetitive business practices. Established in 1914, the FTC garners its investigative and enforcement authority largely as a result of the FTC Act, under which it is empowered, among other things, to “prevent unfair methods of competition, and unfair or deceptive acts or practices in or affecting commerce.”
In line with its “unique dual mission to protect consumers and promote competition,” the FTC issues guidelines to aid the public in ensuring that advertisements are not misleading and thus, do not violate Section 5 of the FTC Act, which provides that "unfair or deceptive acts or practices in or affecting commerce are declared unlawful."
The principles and policy considerations upon which the FTC Act and the corresponding FTC guidelines are predicated are simple. Consumers have the right to have access to “information they need to make informed [purchasing] choices,” and sellers “deserve the opportunity to compete in a marketplace free of deception and unfair practices." Moreover, basic truth-in-advertising principles hold that it is deceptive to mislead consumers about the commercial nature of content, and advertisements/promotions are deceptive if they appear as though they are something other than ads.
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. Note: a misrepresentation is “material” if it is likely to affect consumers’ buying choices.
Hardly a novel concept, the FTC has long required advertisers and promoting parties – alike – to disclose material connections that consumers would not expect so that consumers can make purchasing decisions accordingly. So, when a celebrity or influencer is compensated (with money or free clothes or other perks) to endorse or promote a product outside of a traditional advertising medium (and thus, is not exclusively touting the product as a result of a genuine desire to do so), the parties must disclose this to consumers. The same holds true if the parties maintain a relationship of some sort, such as a brand ambassadorship. If the parties fail to disclose, the content will be deemed to be misleading and deceptive, and thus, in violation of the FTC Act.
The medium in which the promotion or endorsement is made does not matter, and so, the FTC's standards apply to influencers in the same manner as they apply to more traditional entities, such as magazine publishers and television broadcasters. Therefore, if an influencer is acting on behalf of an advertiser, “what she or he is saying is usually going to be commercial speech – and commercial speech violates the FTC Act if it’s deceptive,” per the FTC.
This same concept also applies to social media, as well as native advertising. The FTC describes native advertising content as content that bears a similarity to the news, feature articles, product reviews, entertainment, and other material that surrounds it online, and this may include social media postings in the FTC’s opinion.