Indecent Disclosure: FTC Slams Advertisers and Influencers for Failure to Divulge Material Connections

Last June, the Federal Trade Commission (FTC) released its revised Endorsement Guides, the handbook for business practices that may be unfair or deceptive in violation of the FTC Act.[1] The Endorsement Guides had been last revised in 2009 and the recent revisions sought to align practices with the ways advertisers reach consumers to promote products and services, including on social media.[2]

Among the revisions were changes to the definition of “endorsement” to clarify the extent to which it includes virtual influencers and tags on social media, as well as adding a definition of “clear and conspicuous” and stating that a platform’s built-in disclosure tool might not be an adequate disclosure under the law.[3]

Moreover, the FTC issued a “frequently asked questions” supplement that provided guidance on how and when to disclose material connections between influencers and advertisers across different platforms.[4]

The FTC has now moved forward to begin applying these new Enforcement Guides to real world situations.

November 2023 Warning Letters

Two trade associations, the American Beverage Association (AmeriBev) and The Canadian Sugar Institute, as well as twelve registered dieticians and other online health influencers recently received FTC warning letters regarding the inadequacy of disclosures in their Instagram and TikTok posts promoting the safety of artificial sweetener and consumption of sugary products.[5]

The FTC expressed concern that the trade groups were in violation of the FTC Act by failing to disclose that the influencers were hired for the promotions.[6] The letters to individuals identified concerns with paid posts that either did not disclose a material connection, or that contained disclosures that may be inadequate due to inconspicuous placement, ambiguous language, or the failure to clearly identify the sponsor of the posts.[7]

Finally, the letters reiterated that misleading endorsements could lead to civil penalties of up to $50,120 per violation for future failures to disclose unexpected material connections, and asked the recipients to contact agency staff within 15 days and detail any actions the warned parties took or will take to address staff’s concerns.[8]

Key Takeaways

At the onset of the comment-seeking period for the proposed revision in May 2022, Chair Lina Khan released a statement highlighting that in 2022, the global influencer marketing industry was set to grow to approximately $16.4 billion and that more than 75% of brand marketers intended to dedicate a budget to influencer marketing that year.[9]

The proliferation of advertising using influencers on popular social media platforms coupled with the FTC’s stated mission to protect and educate consumers, as well as the newly revised Endorsement Guides signal a need for advertisers and influencers to review their compliance with the FTC’s truth-in-advertising principles.

First, both advertisers and influencers have an obligation to disclose material connections, ensuring those disclosures are prominent and easy for consumers to see or hear. Second, influencers should avoid relying solely on a platform’s disclosure tools, as those may not be sufficient to meet requirements in the Endorsement Guides. Finally, influencers should always clearly identify if and by whom they are sponsored. Failure to comply could otherwise prove costly for advertisers, influencers, or both.

The recent action here reinforces that this remains an enforcement priority for the FTC.

If you have any questions about the conduct listed in the policy statement or any other antitrust concerns, please contact one of the individuals listed above or your Mintz attorney.

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