Potente, Business Lawyer and Company Formation

When you wake up in the morning, what is the first app you open on your phone? Most likely, if you are not checking your emails, you are tuning into Instagram, Facebook, Twitter, Snapchat, Pinterest, or other social media platforms. While most people use social networks for leisure activities and daily communications, social media is also being used in many other capacities.

Businesses are utilizing social platforms to drive new product sales and increase consumerism overall. Additionally, celebrities and influencers are partnering with businesses to monetize their own platforms. Companies are building more in-depth business relationships with social media influencers, allowing them to employ marketing strategies to increase online purchasing activity through sponsored social media content. As a result, our timelines have become flooded with our favorite influencers constantly posting material for the same fashion brands, weight loss supplements, and cosmetic lines, to name a few.  While it is tempting to purchase the products we repeatedly see while scrolling through our feeds, as consumers, we may be “misled” or “deceived”, according to the Federal Trade Commission (FTC).

The FTC’s regulation of social media sponsorships and endorsements is based on maintaining truth-in-advertising principles and ensuring compliance with federal codes regulating unfair competition. The FTC created its Endorsement Guides to aid businesses and their advertising partners in ensuring the endorsements and testimonials that result from their relationships are compliant with federal regulations. The Endorsement Guides include information to help influencers and companies ensure they are clearly distinguishing sponsored content from non-sponsored content. In addition to making accurate and truthful claims, celebrities and influencers must also make some key disclosures when they publish material on their social networks that endorse, advertise, or market brands and products. Clear disclosures of business relationships, monetary compensation, or furnishing of free products are required when an influencer’s display or opinion of a product would impact consumers’ purchasing decisions.

In 2017, the FTC sent over 90 letters to influencers who published content on Instagram lacking the requisite disclosures. The FTC also contacted the sponsoring companies to ensure they were aware of the advertisement and marketing regulations. While influencers are not required to share the more intricate details of their business and financial relations, the FTC is encouraging influencers to maintain some degree of transparency. Some influencers are now disclosing their relationships with companies by using the hashtag “ad” (#ad), adding “Paid Partnership with…” above their posts, or making statements like, “This video is sponsored by…”. Despite the letters the FTC sent out in 2017, many businesses and social media gurus still fail to reference the Endorsement Guides to evaluate their use of endorsements and testimonials.

The FTC encourages companies that partner with influencers for marketing purposes, to avert deceptive behavior by implementing programs to ensure their partners in advertising make appropriate disclosures. It is important for businesses and advertisers to engage in marketing strategies that are not deceitful or misleading to their consumer audience. While adding hashtags in promotional captions and using Instagram business features are efficient ways to make some disclosures, these techniques might not achieve full compliance with federal regulations.

To conduct an evaluation of your social media use or the use of those you partner with, please visit the FTC website. The Endorsement Guides and FAQs provide further guidance on how to ensure compliance with federal regulations.

By Bria Chappell, Law Clerk

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This post is for informational purposes only, and merely recites the general rules of the road. Lots of legal rules have exceptions, however, and every case is unique.  Never rely solely on a blog post in evaluating your situation — always contact an attorney when your legal rights and obligations are on the line.

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