Barry Benjamin
Kilpatrick Townsend & Stockton

With social media posts often heavy with sponsored adverts, Barry Benjamin of Kilpatrick Townsend & Stockton explains how brands can ensure they are compliant with new consumer protection rules in this area

What does a sponsored advert look like on social media and how does the FTC come into it?

Many different ways to communicate now exist—blogs, videos and so on—where ‘influencers’ present their opinions to the public. The US Federal Trade Commission (FTC) is concerned mostly with situations where the consumer does not know that an advertiser is behind the message or communication in some way.

There are situations where ‘influencers’ receive free goods from an advertiser, to induce the influencer to talk about the advertiser’s product or services in a social media context. Brands will send the influencer products and they will comment on their own or on the brand’s respective Twitter/Instagram page, typically saying something positive about the brand and product. But there’s no guarantees: the implicit exchange between the advertiser and the influencer is that if the influencer has a poor experience with the product, they will not write a post, nor a mention via social media. The influencer simply won’t issue a negative review, because if they do, they know that that ‘gravy train’ of free products from the advertiser will stop.

The US Federal Trade Commission (FTC) says that the brand-influencer relationship is something that should be factored in to the consumer’s evaluation of the influencer’s message—the consumer has a right to know about the material connection between the influencer and the brand.

It’s not always money, and there are many situations which aren’t as clear-cut. The brand could ship free merchandise, provide a free hotel stay, free backstage passes to meet a celebrity, ‘points’ in the brand’s points programme, or other kinds of “material benefits” that, in the FTC’s view, should be disclosed to the consumer.

Which party is liable—the brand or the influencer—if the ad does not fully disclose information about a promoted product?

All participants in the chain could be subject to the FTC’s wrath—the advertiser, the influencer, an ad agency that connected them, and anyone else in on the situation. All participants are responsible for disclosing the material connection to consumers, otherwise they could be charged with violating the FTC Act, which prohibits unfair or deceptive advertising practices.

Recently, the FTC brought proceedings against Lord & Taylor, for working with many different influencers to advertise and sell a particular dress, but the influencers failed to disclose the fact that they received free merchandise or other benefits from Lord & Taylor for their social media posts about the dress.

There seems an argument for the ‘influencer’—must they specify where they write ‘promo’ or ‘ad’?

The FTC has touched on this and they just want the disclosure of the material connection to be seen by the reader/viewer. Creative disclosures are permitted as long as it gets the point across, but the most common these days is merely ‘#ad’ or ‘#sponsored’. In a tweet, it doesn’t matter where the phrase is placed because it’s so short. If it’s in the same text, font size, colours, then that is deemed as an effective notification that the following message is sponsored or part of a promotion.

Going forward, how aware do social influencers need to be of disclaimers about sponsored posts?

Very much so, but fortunately, the social media industry, including influencers, are quickly becoming much more comfortable with these disclosures of materials connections with brand advertisers. It can be difficult sometimes, given limited character space, but the FTC’s position is that if disclosures are necessary, but insufficient real estate exists to make the disclosure, then don’t put up the post to begin with because it would be, in essence, false advertising.

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