I recently acquired some new home gym equipment. Like most people, as part of my research, I watched a bunch of YouTube videos before I made my purchase so I could make a more informed decision. I assumed that the influencers whose endorsements I relied on were agnostic and weighed all the pros and cons. Moreover, I was recently reading several articles about the Democratic Party’s student loan forgiveness program, where one of the requirements to obtain debt forgiveness was that the student had been deceived by the educational institution’s claims about the number of job opportunities and income potential that graduate students might expect. Then, a few days later, John, a SCORE colleague, shared in a staff meeting that the Federal Trade Commission (FTC) had established guidelines for influencers who recommend or endorse products. John’s comment resonated with me as I was still reflecting on my experience with the gym equipment influencers and the article on student loan relief plans. Since many of my clients and I are influencers of sorts and often make recommendations about products and tools we use, the topic took on a high degree of importance. So, I took a deep dive into the legal issues surrounding recommendations and endorsements we often make in the course of a business interaction with a customer.
What Constitutes an Influencer?
The FTC defines an influencer as any individual, group, or institution that works with brands to endorse or recommend products or services to their audience or followers. Influencers are generally people who have a large and engaged following. They can be athletes, celebrities, YouTubers, Instagrammers, TikTok stars, X users (the platform formerly known as Twitter), brand ambassadors, or bloggers like me. Technically, to be considered an “endorser,” the influencer must receive some form of benefit in exchange for promoting a product or service on behalf of a brand. Benefits are not restricted to monetary compensation and can include free or discounted products or services, early access to a product, or the possibility of being paid.
Here are a few examples of influencers that I’m aware of:
Personal trainers, athletes, and fitness enthusiasts frequently endorse workout gear, nutritional supplements, and exercise programs. I often see fitness influencers showcasing their favorite supplements or recommending specific brands of exercise equipment or activewear to their followers.
Influencers in the beauty industry often endorse skincare, makeup, and haircare products. I have seen beauty vloggers my wife subscribes to recommend specific cosmetic brands or promote a new haircare product on their social media platforms.
Tech bloggers and industry experts often review and endorse electronic gadgets, software, and digital services. Recently, I was in the market for a new Bluetooth intercom for my motorcycle helmet, and I saw a Motorcycle YouTuber I subscribe to recommend a specific brand of Bluetooth intercom.
Food bloggers, chefs, and culinary enthusiasts frequently endorse cooking equipment, food products, and restaurants. Recently, I watched a cooking show where the YouTube personality showcased a kitchen appliance he used in his pizza video. He highly recommended that to achieve his results, you needed to buy the product he uses.
These are just some examples I have recently witnessed to illustrate how influencers leverage their platforms, make recommendations, and endorse products to their audiences. However, many of the influencers fail to comply with the FTC’s Endorsement Guides, ensuring transparency and integrity in their promotional activities. In fact, in my examples above, none ever disclosed that they had any relationship to the products they were recommending or endorsing.
What Constitutes an Endorsement?
The general definition of an endorsement refers to a recommendation or an expression of approval or support for something. However, according to the FTC Endorsement Guides, an endorsement constitutes an advertising message that consumers are likely to perceive as reflecting the opinions or beliefs of someone other than the brand itself.
After all, what a brand says about its products or services is taken with a grain of salt by consumers. However, when a recommendation or endorsement comes from someone the consumer perceives as having no bias toward the product or service, the endorsement is considered a word-of-mouth referral and comes across as more authentic and honest.
FTC Guidelines for Influencers
When, during your business dealings, you recommend or endorse a product or service, it’s crucial that you comply with the FTC guidelines. One of the primary goals of the FTC is to curb deceptive advertising practices, and its endorsement guides serve as a roadmap for both brands and endorsers to navigate the legal terrain responsibly. Whether promoting a product or service on social media platforms or other channels, transparency about your “material connections” with the brand is required.
What Constitutes a Material Connection
The FTC requires influencers to disclose any “material connections” to a brand when recommending or endorsing a product or service. A material connection is any relationship that might affect the weight or credibility of an endorsement. This could be a business or family relationship, monetary payment, or a free product gift. Importantly, the connection must be such that consumers don’t generally expect it to exist.
If you have a personal relationship with someone from the brand, be it a family member, a friend, or any type of employment or contractual relationship, that’s considered a material connection.
A financial relationship is where most influencers get into trouble. If you are getting paid in any way by the brand, whether it’s cash or free products/services, that is considered a material connection. Even if you’re not getting paid directly for the endorsement but are getting some type of benefit, such as discounts or free trips, that also counts as a material connection.
Remember, the FTC’s guidelines aim to ensure transparency and honesty regarding recommendations or endorsements for the benefit of consumers. It’s all about making sure prospects know when they are looking at a paid promotion so they can take that into account when deciding whether to buy a product or service.
By disclosing these relationships to your audience, you not only uphold the integrity of your recommendations or endorsements but also empower consumers to make more informed decisions by understanding if there is any bias on your part as an influencer. As an influencer, the onus is on you to understand and adhere to the FTC Endorsement Guides, ensuring your endorsements remain honest and compliant with anti-deceptive advertising laws.
When and How to Disclose a Material Connection
Determining when to disclose your material connection relationship with a brand is crucial to maintaining transparency and adhering to FTC guidelines. Here’s a breakdown of when and how to make proper disclosures.
When to Disclose
Financial, Employment, Personal, or Family Relationship: Any financial, employment, personal, or family relationship with a brand warrants disclosure. This includes receiving free or discounted products or other perks in exchange for mentioning a product.
Unsolicited Mentions: If a brand provides you with free or discounted products or perks, and you mention one of its products, disclosure is necessary, even if not explicitly requested by the brand.
Assumptions and Unbiased Evaluations: Never assume your followers know about your relationship with the brand. Even if you believe your evaluations are unbiased, disclosures are still required.
Social Media Interactions: Tags, likes, pins, and similar actions indicating your approval of a brand or product can also be considered endorsements and require disclosure.
No Brand Relationship: If you’re simply sharing information about a product or service you purchased and genuinely like and have no brand relationship, there’s no need to disclose the absence of a brand relationship.
How to Disclose
Visibility and Clarity: Ensure your disclosure is visible and easily understood by your audience. Place it where it’s hard not to miss, preferably alongside the endorsement message itself.
Avoiding Disclosure Pitfalls: Disclosures should not be buried in an “About Me” section, profile page, or at the end of posts or videos. Avoid mixing disclosures with hashtags or links.
Visual Endorsements: For endorsements in visual formats such as pictures on Snapchat and Instagram Stories, superimpose the disclosure over the picture and ensure viewers have sufficient time to read it.
Video Endorsements: In video endorsements, include the disclosure within the video itself rather than solely in the description. Consider viewers who may watch without sound and repeat disclosures periodically during live streams.
Simple and Clear Language: Use straightforward language to convey your disclosure, such as “Thanks to Acme brand for the free product,” or terms like “advertisement,” “ad,” and “sponsored.” Avoid vague or confusing terms and use hashtags like #ad or #sponsored when appropriate.
Language Consistency: Ensure the disclosure is in the same language as the endorsement to avoid confusion.
Platform Disclosure Tools: While platform disclosure tools may be available, they should not replace your own clear disclosure. Consider using them in addition to your disclosure for added clarity.
By following these guidelines, you can maintain transparency and credibility in your endorsements while complying with legal requirements.
Enforcement
The FTC may take action against influencers who misrepresent, fail to disclose, or include inadequate disclosures regarding their sponsorship or connection to the brand. Endorsers may be held liable for deceptive representations and for failing to disclose material connections between themselves and the brand.
Civil penalties are the FTC’s primary tool for discouraging behavior harmful to consumers. By levying penalties that exceed the earnings reaped through misconduct, these penalties send a resounding message that exploiting consumers will not yield profitability.
The Penalty Offense Authority allows the FTC to levy penalties against influencers engaged in unfair or deceptive practices. To exercise this authority, the FTC must establish two key points:
The influencer knowingly engaged in conduct deemed unfair or deceptive under the FTC Act.
The FTC had previously issued a written decision affirming the unfair or deceptive nature of the endorsement.
To activate this authority, the FTC first sends a “Notice of Penalty Offenses” to influencers, listing specific types of conduct that the FTC has determined to violate the FTC Act. Influencers receiving such notice and failing to address the violations can face civil penalties of up to $50,120 per violation.
Conclusion
Adhering to FTC guidelines isn’t just a best practice; it’s a legal requirement. Transparency in endorsements is the cornerstone of trust between influencers and their audiences, fostering credibility and authenticity in a crowded marketplace. Aspiring influencers and seasoned veterans must stay informed and up to date with the latest regulations to avoid legal repercussions and maintain their reputations. Remember, honesty is the best policy, both online and off.
