Increasingly, influencers are being used by social media-savvy advertisers to encourage consumers to buy their products. And it works: these influencers have an outsized impact on what we buy. In this week’s podcast Meghan Stoppel and Hannah Cornett discuss warnings from the FTC to advertisers about how and when they should disclose influencer endorsements, while considering the likelihood that where the FTC leads, state AGs will follow.

TRANSCRIPT

Hannah Cornett

Welcome to the third season of State AG Pulse. In this season, we’re selecting one story every week from the state AG news. Over the next  minutes, we’ll take a quick dive into that story to analyze the impact of AGs as regulators and consumer protection guardians, and provide tips to help your business work successfully with state AGs.

Meghan Stoppel

Hello and welcome back to State AG Pulse. My name is Meghan Stoppel. I’m a partner here at Cozen O’Connor in our State AG Group. It is my pleasure today to be joined by my colleague, Hannah Cornett, for our final episode of the season. Hannah, thank you for joining the podcast today.

Hannah Cornett

Thanks, Meghan. Happy to be here.

Meghan Stoppel

Yeah, so Hannah, today we’re talking about social media influencers. Now, I will readily admit that I know less about what is trending on social media these days than I used to. I know my -year-old-…

Hannah Cornett

So, you’re not influenced by influencers?

Meghan Stoppel

I love the pun, Hannah. No, I am afraid I’m not their target demographic most likely. I just know that my -year-old daughter pesters me pretty much almost daily for an Instagram account that she does not yet have. But I do know, even though I’m not their target demographic, that influencers are used by businesses large and small for advertising purposes, whether it’s celebrities, thought leaders, just those random individuals or families on YouTube and TikTok that have millions of followers and no one knows why or how they got there. Those are the people that we’re talking about, the folks that have the ability to shape opinions, to influence our decisions based on what they say and do online. Hannah, you’re much younger than I am, or probably more savvy on social media than I would ever hope to be. You know what we’re talking about here, right?

Hannah Cornett

When you’re thinking about influencers in a traditional sense, I have friends who will follow a lifestyle influencer, whatever products they use that will then be like, oh, maybe I should get one of those too. I don’t really follow individuals like that. If I’m making a big purchase and I know that I’m interested in this particular couch, I actually will search for that couch on TikTok and see what people are saying about it. So I almost use it from a review standpoint, I guess, versus inspiration of what products to purchase.

Meghan Stoppel

Yeah, that’s really interesting because it makes me sort of feel like an old fuddy-duddy. I would go to the local furniture store’s website and look for that couch and then click on the review section to see if anybody, probably older than I am, had left a review for that couch. I wouldn’t even think to go to TikTok. But that’s really interesting, because I would imagine some influencers have posted on multiple social media platforms. Actually it appears that’s what happened In this particular case we’re going to talk about where the FTC identified some social media influencers that were posting across multiple platforms, Instagram, Reels on Facebook. Again, I had to look up what that was because I didn’t know what Reels was. But before we digress and do a whole podcast on my lack of savviness with respect to social media, let’s talk about this headline, Hannah. Give us a quick recap and then we’ll talk about why it matters.

Hannah Cornett

Yeah, absolutely. So the FTC sent warning letters to two trade associations and  health influencers about their… the FTC is alleging that influencers were posting posts about the products using aspartame or sugar – it’s interesting, because it was like both – and not including adequate disclosures about the fact that they were being incentivized to promote about this.

Meghan Stoppel

All right. So they had a connection to the trade association. They were being paid by the trade associations?

Hannah Cornett

Yes.

Meghan Stoppel

Allegedly, or at least that’s the FTC’s understanding of what was happening here?

Hannah Cornett

It looks like based on the letter that there were several instances where they did include disclosures about it. They did say, this is an advertisement. It’s just the method of how that was disclosed that the FTC is taking issue with, whether it’s appropriately clear and conspicuous. We don’t know the facts here, so take it with a grain of salt, I guess. It is, at least on FTC’s radar.

Meghan Stoppel

A couple of things I think that are interesting about this particular headline. One, you’ve got the FTC, right, the primary regulator here with respect to deceptive advertising, sending these letters not just to the trade associations that arguably paid these influencers, but to the influencers themselves, is my understanding. I think there were . And they were folks like dieticians. I mean, these were not pseudo celebrities necessarily, these were again, what I would call thought leaders.

Hannah Cornett

Exactly.

Meghan Stoppel

And they were being paid to promote the safety of aspartame-containing products, or at least that’s the allegation. And I do think it’s important to note that the letters were going to both sets of individuals and organizations, right? Because sometimes what you see with regulators is they sort of take the, let’s cut off the head of the snake approach, and they go after just the deepest pockets or just the biggest organizations.

That’s not what the FTC is doing here. They’re sending the letters to the influencers themselves and putting those individuals on notice that they are equally liable for potential violations of federal law here. But I also think what’s really fascinating is what the FTC is calling out here with respect to the conspicuousness of the disclosure.

Hannah Cornett

Right? Exactly.

Meghan Stoppel

What you see in the letters is the FTC citing to the fact that from their perspective, they believe these disclosures have to be easily noticeable, hard to miss. And when you’ve got things like an Instagram video or a Reel being posted, a video of someone saying something and they post it on the platform, the disclosure of the connection, the fact that this is a paid endorsement, the FTC is saying that disclosure has to not only go in the hashtag that sits alongside the video or the written post, it also has to go in the video itself. And I’ve been doing this work for the better part of  years now. That’s a little bit of a sea change here, and I think it’s coming out of the recent revisions to the FTC’s endorsement guides that came out earlier this year. But it is a very aggressive position, I think, for the FTC to take. And what’s really interesting, from our perspective, will be to see whether we see the state attorneys general take the same position.

Hannah Cornett

I think this has been a priority for the FTC for a while, and through just frequent partnerships with the AGs, it’s also becoming a priority for them. I believe you went to the NAAG Consumer Protection Conference, and I think this came up a few times?

Meghan Stoppel

I did. One of the panels was about dark patterns, essentially. Another one was about fake reviews, and there were FTC attorneys on each of those panels. And it wasn’t this topic explicitly, the idea of how do social media influencers make their disclosures, but this idea of endorsements. And how do you make it clear to consumers that either your testimonial, your review or your endorsement is somehow coming from the marketer or the manufacturer or the retailer itself and isn’t an independent endorsement? That topic came up and it came up in the conversation around, again, these updated endorsement guides that came out earlier this year. But then the FTC also mentioned that they’ve got a new rulemaking that’s also, I think, in progress right now, isn’t it?

Hannah Cornett

Yeah, it is, it’s pending. Yeah. The “Trade Regulation Rule on the Use of Reviews and Endorsements”, and that’s currently pending. I think businesses should definitely keep an eye out because there are going to be some updates in this area of law.

Meghan Stoppel

I completely agree, and the endorsement guides have been around for a while, they just sort of went through a revamp earlier this year. So some of our listeners may be familiar with the prior iteration of those guides; definitely want to take a look at the more recent version, because I do think that’s where some of these more, what I’ll call maybe draconian standards are coming from, in terms of if you’re running a video ad, the disclosures need to be in the video. If you’re running a print ad, the disclosure needs to be in the print. If you’re doing it both ways, they need to be in both places. That is a more recent development, I will say.

Hannah Cornett

Yeah. It feels like, I guess like television advertising, if you think of in the pharmaceutical industry, you think about all of going through the list of warnings on the video and then here having that kind of disclosure in the video itself. That’s just not really something I’ve seen much in videos that I view on social media. So the fact that that’s now going to be an expectation of the FTC, you’re right, I think that’s a pretty dramatic change.

Meghan Stoppel

Yeah, no, exactly. I mean, the first example I thought wasn’t actually the pharmaceutical ads. It was the car dealership ads where they get to the last screen and half of the last screen is all that really, really tiny font. It’s like  lines of font. It’s got all the restrictions and the exclusions.

Hannah Cornett

Do you, as a side note, not to get entirely off base, but do you watch TV with commercials? I know that’s a really weird thing to say.

Meghan Stoppel

I think we established this at the outset, Hannah. I’m the older generation, but yes, I do still occasionally see a commercial for cars and….

Hannah Cornett

Right? I do too, but it’s just my husband and I were talking about it, watching CNN nowadays, it seems like the advertising itself has shifted so much in the past five to  years.

Meghan Stoppel

Right? Well, yeah. We could do, again, a whole ‘nother podcast on targeted advertising and why you’re seeing the ads you’re seeing. So to bring us back to the point of this conversation and those guidelines, they aren’t just for companies that are worried about the FTC; the state attorneys general often use those guidelines and rely upon those guidelines just as much as the FTC does, if not more.

Hannah Cornett

They’re getting involved in the investigations. You’ve got the Google and iHeart media investigation. There were six states that joined with the FTC on that, in that settlement. Same with Roomster. I think that’s more recent. So yeah, AGs are getting active in this space.

Meghan Stoppel

No, they are, and that Google, iHeartMedia multistate, if we want to call it that, that settled about a year ago now, was really interesting. It was a little bit of a different use case because those endorsers were basically endorsing a product they had never used, which I would hope most of our listeners would agree that that’s probably a no-no. Don’t hold yourself out as having used a product that you have not in fact ever used. And that’s not a sea change. That’s not something you’re going to see in the new version of the guides. That’s sort of a more traditional endorsement principle.

And I think the Roomster settlement had more to do with sort of “buying” reviews, incentivizing reviews, shifting the incentive to solicit positive reviews, and not really disclosing that..

Hannah Cornett

Yeah, absolutely.

Meghan Stoppel

… dynamic to people who were on the platform so that consumers could weigh that incentive when they’re giving weight to those reviews. So slightly different scenarios there. And in both of those cases, you saw the AGs teaming up with the FTC. But I think the point I’m trying to make, and it’s not just in the endorsement space, is that the AGs will look to these guides to decide what is a violation of their respective deceptive trade practices statutes.

Hannah Cornett

Right.

Meghan Stoppel

And so they don’t have to necessarily partner with the FTC in order to point to these guides and say, well, we think the conduct you’ve engaged in is a violation of our law.

Hannah Cornett

The UDAP statutes themselves are a lot more modeled off of the FTC Act, so it’s natural that even without partnering with the FTC, they’re still going to look to their guidance documents in terms of how to interpret their law in terms of deceptive practices.

Meghan Stoppel

So let’s talk about looking forward, Hannah. Other than reading the guides or going back and looking at these warning letters, what else can businesses do to start to get their arms around this challenge about “How do I make sure an endorser that I’m paying to say great things about my product is complying with the law?” I suspect that if it’s a problem technology created, it’s a problem that technology might be able to help our listeners solve.

Hannah Cornett

AI has been attributed to creating some fake online reviews and that kind of thing, but I think Amazon just announced right before Black Friday that they have been using advanced AI to identify fake reviews and take them down.

Meghan Stoppel

I guess it’s not surprising that we’re seeing some of the biggest actors in this space, right? Amazon, some of the bigger social media platforms, leading the way here, probably as they should.

Hannah Cornett

Well, I think it’s important to their business model, too. It’s in their interest. I don’t think they would disagree. They pride themselves on, we have a good product. You’re going to view the reviews. You want to be sure that this is legitimate. So I am not surprised at all that they’re really being proactive about this and trying to take on the reviews that might be fake.

Meghan Stoppel

There was an Amazon representative on that fake review panel at the NAAG conference in early November talking about exactly what it was they were doing and sort of why it was so critical to their organization that they get their hands around the fake review issue. And I think we’ll continue to see that be a high priority conversation, not just for e-commerce platforms, but for regulators, at the state and federal level as we move into . Where the FTC leads the AGs are likely to follow, and so we also need to keep an eye on what the AGs are doing in the endorsement space as well.

So thanks again, Hannah, for joining us. We’ll have to schedule that other podcast to talk about how unsophisticated I’m in respect to social media.

Hannah Cornett

And next season, right?

Meghan Stoppel

Today’s the last podcast, I think. Yeah, We’re saving that conversation for season four. We are going to take a break for the holidays, but are planning to launch season four early next year, so please stay tuned. Keep an eye on your favorite podcast platform for more information and thank you again for tuning in.