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Blog Posts: Retail Law Advisor

Paid Celebrity Endorsements in Social Media: The FTC Is Watching

How much trust do you place in celebrities who endorse products on social media platforms such as Instagram, Snapchat, Facebook, Twitter, and YouTube?  Do you stop to consider whether they are compensated for their efforts and, if so, how much? Studies have shown, for example, that influencers who have 50,000 – 500,000 followers on Instagram or Snapchat might charge $1,000 per post while those with three to seven million followers might charge up to $75,000 per endorsement.

As the marketing power of television wanes, social media platforms have become the preferred destination for many companies to invest their marketing budgets. Creative celebrity endorsements, such as Justin Bieber’s promotion of Calvin Klein, have resulted in major payoffs for savvy brands. Since these social media endorsements can be easy money for the celebrities, the sincerity of the endorsements is questionable.

Concerns about deceptive use of endorsements and testimonials in advertising are nothing new. The Federal Trade Commission (“FTC”) issued its revised Endorsement Guides in 2009, and in 2015 provided answers to some frequently asked questions about the Endorsement Guides (“FAQs”). The FAQs include many questions arising in the context of social media. As a general matter, an endorsement should disclose any connection between the endorser and the marketer that consumers would not expect and that would affect how consumers evaluate the endorsement. Such a connection would exist if the endorser has been paid or given something of value to promote the product. We have previously blogged about the dangers of fraud in online reviews, such as when employees or freelancers are paid to give positive reviews. The dramatic increase in the use of social media for marketing purposes is drawing increased scrutiny from the FTC.

According to a recent Bloomberg interview with Michael Ostheimer, a deputy in the FTC’s Ad Practices Division, the FTC is planning to get tougher on influencer marketing. One challenge of ensuring sufficient disclosures is the limited space or time available in social media such as Twitter and Snapchat. As explained in its FAQs, the FTC does not mandate the specific wording of disclosures but requires that they be clear and conspicuous. Thus, starting a tweet with “Ad:” or “#ad” would likely be effective, whereas burying disclosures in footnotes, in blocks of text people are unlikely to read, or in hyperlinked sources would not.  As Ostheimer stated, “If consumers don’t read the words, then there is no effective disclosure. … The real test is, did consumers read it and comprehend it.” The same concept applies in video and audio disclosures.

Although the FTC has not ruled out going after celebrities and other endorsers, its primary focus will be on advertisers, their ad agencies and their public relations firms. Therefore, to minimize their exposure, advertisers should instruct their social media influencers in how to disclose their connections, should monitor compliance, and should follow up if they find questionable practices.