At a time when influencers are making a living – and sometimes millions of dollars – for promoting everything from eye shadow to the latest smartphone, the Federal Trade Commission (FTC) is reassessing its Guides Concerning the Use of Endorsements and Testimonials in Advertising (the Guides). The Guides provide direction to businesses that use influencers and endorsers on when and how to make disclosures concerning a “material connection” or commercial relationship between the advertiser and influencer.
The Guides were enacted in 1980. The FTC amended the Guides in 2009 to include new requirements for influencers to disclose material connections – whether in the form of cash, free products, or other consideration – with companies whose products or services they recommend. But in 2009, the FTC could not predict the massive growth of global platforms such as YouTube and Instagram where some influencers have millions of followers. The FTC is now seeking public comments on a range of issues including:
- whether the practices addressed by the Guides are prevalent in the marketplace and whether the Guides are effective at addressing those practices;
- whether consumers have benefitted from the Guides and what impact, if any, the Guides have had on the flow of truthful information to consumers;
- whether the FTC’s guidance document, The FTC’s Enforcement Guides: What People Are Asking, should be incorporated into the Guides;
- how well advertisers and endorsers are disclosing unexpected material connections in social media;
- whether children are capable of understanding disclosures of material connections and how those disclosures might affect children;
- whether incentives like free or discounted products bias consumer reviews, even when a favorable review is not required to receive the incentive, and whether or how such incentives should be disclosed;
- whether composite ratings that include reviews based on incentives are misleading, even when reviewers disclose incentives in the underlying reviews;
- whether the Guides should address the use of affiliate links by endorsers; and
- what, if any, disclosures should advertisers or operators of review sites make about the collection and publication of reviews to prevent them from being deceptive or unfair.
FTC Commissioner Rohit Chopra issued a separate statement in which he called for the FTC to perform a “self-critical analysis of the agency’s enforcement approach” and to focus on advertisers, not small influencers. He expressed a hope that after reviewing the comments, the Commission would consider going beyond the Guides by: (1) adopting requirements for technology platforms that facilitate and either directly or indirectly profit from influencer marketing; (2) codifying elements of the existing Guides into formal rules to allow for imposition of civil penalties; and (3) specifying the requirements that companies must adhere to in their contractual arrangements with influencers.
Interested parties should submit comments within 60 days of publication of the Request for Comments in the Federal Register, which is expected soon.