Individual Influencers Settle with the FTC over Undisclosed Endorsements

Published On September 12, 2017 | By Austin Mooney | FTC, General

Continuing the enforcement of its endorsement guidelines, the FTC announced its first settlement with individual influencers rather than focusing only on advertisers who work with influencers. In the action, the FTC alleged two YouTube personalities engaged in deceptive practices for failing to disclose material connections—in this case, ownership—with a video game item “lottery” company that they were promoting. This settlement could help advertisers demonstrate the importance of compliance to the influencers and endorsers with whom they work. In conjunction with these actions, the FTC updated the Endorsement Guides, What People Are Asking, with new examples of online endorsements to clarify when and how disclosures should be made, which we highlight below.

According to the complaint, Trevor Martin and Thomas Cassell (better known by their online aliases, “TmarTn” and “Syndicate”) founded CSGOLotto, a website that allowed players of the popular game Counter-Strike: Global Offensive to gamble in-game item “skins,”— digital items that can carry thousands of dollars of real-world value. Martin and Cassell, who each have millions of followers across various social media sites, promoted CSGOLotto in a series of videos, tweets, and Instagram postings, which did not disclose their ownership. The titles and descriptions on their postings included “HOW TO WIN $13,000 IN 5 MINUTES” and “I lied… I didn’t turn $200 into $4,000 on @CSGOLotto…I turned it into $6,000!” In addition to leveraging their own online followings, the duo enlisted fellow influencers to promote the site, many of whom in turn failed to disclose their relationships with CSGOLotto.

Despite being the first such complaint issued against influencers, this settlement does not reflect a shift in FTC policy. In fact, in April 2017, the agency sent 90 “educational” letters to entities who potentially failed to comply with the Endorsement Guides, roughly half of whom were individual influencers. The CSGOLotto settlement is a natural next step for the agency, signaling that influencers will not be immune from future FTC investigations into deceptive endorsements. Further, even though Martin and Cassell were indeed influencers, they were also owners and advertisers for the purposes of promoting CSGOLotto, offering the FTC a convenient fact pattern to illustrate this point.

Alongside the CSGOLotto settlement, the FTC announced it had mailed second “warning” letters to 21 entities that had not remedied their violations of the Endorsement Guides after receiving one of the letters sent in April.

Refreshed Guidance – What People Are Asking

While the refreshed endorsement guides do not provide new guidance, they provide some additional examples of when and the how the Endorsement Guides apply. Some notable changes indicate that:

  • Influencers should disclose when products were free, even in cases where reviewing the product was not a condition of receipt.
  • Section 5 of the FTC Act applies to international influencers promoting products that are sold in the US, provided it is foreseeable that the promotion would be viewed by US citizens.
  • Disclosures for Snapchat and other image-only platforms should be superimposed over images, not reserved off-screen.

In light of this new guidance and the CSGOLotto settlement, both advertisers and influencers should consider reviewing their advertising and endorsement disclosures, policies, and contracts with one another.

 

About The Author

Austin assists ZwillGen attorneys and clients on a variety of Internet and technology law issues including FTC matters, civil litigation, responding to surveillance requests under the Electronic Communications Privacy Act (“ECPA”), and compliance with the EU General Data Protection Regulation (“GDPR”).

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