The Federal Trade Commission (“FTC”) recently announced that it had reached a settlement in an investigation of social media influencers’ alleged deceptive business practices. According to the FTC, the subject administrative complaint was the agency’s first ever investigation of individual social media influencers for product endorsement-related practices.
What was the nature of the FTC allegations?
The FTC’s complaint alleged that the individual social media influencers were the owners and operators of a company, CGSO Lotto, that allowed consumers to gamble using online gaming-related virtual items as currency. According to the FTC, the owners posted videos on YouTube and disseminated tweets on Twitter in which they promoted CSGO Lotto and encouraged viewers to use the gambling service without disclosing that they were officers and owners of the subject company. Further, the owners were alleged to have also paid other social media influencers to promote the company and its website on various social media platforms without requiring the influencers to disclose those payments in the posts. As a result, the FTC initiated administrative proceedings against CSGO Lotto and its owners for: (1) falsely claiming that the social media posts represented the independent opinions of impartial users of the service; (2) failing to disclose that their social media influencers were providing paid endorsements; and (3) failing to disclose that they were the owners and officers of the company in their own social media endorsements. The FTC alleged that the foregoing amounted to deceptive business practices in violation of the law.
Social Media Influencers and the Law
As we have previously blogged, the FTC’s regulations concerning social media influencers require that each influencer disclose the relationship that s/he has with the subject advertiser, as well as his or her receipt of any compensation and/or free products or services in exchange for the endorsement that s/he is providing. The use of social media influencers in advertising campaigns can generate tremendous benefits and brand recognition for businesses. However, it is important to be aware of the associated pitfalls, which may put advertisers, marketers and social media influencers at great legal risk. As such, it is important for businesses to work with knowledgeable counsel before commencing any online advertising campaign which will employ social media influencers.