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Volume 21 No. 34
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FTC reminds us that #YouMustDisclose!

During a recent professional development trip with my graduate students to a leading sport sponsorship consulting agency, we were shown a number of case studies of promotions that included athlete endorsers and “influencers” using social media. All the social media posts we were shown complied with the Federal Trade Commission’s requirements under its “Guides Concerning the Use of Endorsements and Testimonials in Advertising.” Several weeks later, I was speaking with the marketing director of a major sports apparel brand and when I inquired about their social media endorser disclosure practices, was told it’s “confidential.” So, perhaps, it’s still not that simple.

In a nutshell, the FTC Guides require that if a “material connection” exists between a brand and an endorser/influencer that could affect the weight or credibility that consumers give the endorsement, the brand and the endorser/influencer must disclose that connection. A material connection typically includes cash payments or a cache of free products.

Candidly, in visiting the agency, I was surprised not only to actually see the disclosures — such as #[Brand]Influencer and #[Brand]Partner — but also by the level of knowledge of all the agency representatives in the room with regard not only to the FTC Guides, but also the best practices in “disclosing” the material relationship between their client brand and their endorsers. Having previously written on the issue of athlete endorser/influencer compliance with the FTC’s regulations — and having found largely concerns over non-compliance — I was very surprised to see just how diligently this agency was following the rules … and yet not surprised to hear another major apparel marketer invoke the Fifth Amendment on how they handle it.

Because, apparently, a lot of brands, advertising agencies and athletes continue, whether knowingly or not, to disregard or misunderstand the rules. As a result, the FTC, following a survey of Instagram posts by celebrities, athletes and other influencers, recently mailed out over 90 letters to brands and agencies reminding them of their rules requiring clear and conspicuous disclosures of material connections.

For instance, the FTC pointed out that consumers viewing Instagram posts on mobile devices typically see only the first three lines of a post unless they click on the “more” button, which many consumers may not do. The agency therefore advised influencers to disclose any material connection to the product or brand above the “more” button. This direction adds to the clarity offered by last year’s settlement of a Warner Brothers case, in which the FTC held that disclosures “below the fold” in YouTube video descriptions were inadequately conspicuous.

The FTC additionally noted that consumers may not bother reading a long string of hashtags, tags or links at the end of a post, so placing a disclosure in that string would not be considered “conspicuous” as required by the agency’s guidelines. The agency also explained that some tags or hashtags that were intended to serve as a disclosure weren’t clear enough, since many consumers probably won’t understand disclosures meant to indicate the post was sponsored, such as #influencer, #partner, #sp or #Thanks[Brand].”

In response to the FTC’s wave of letters, in July Instagram rolled out a new feature allowing influential users to add a new subheading to posts that reads “Paid partnership with …” It is designed to help users clearly and conspicuously tag the brand that sponsors a post. This tool is designed to streamline compliance with FTC disclosure requirements and bring more transparency to the platform. This new tool removes endorser discretion by providing on clear, conspicuous and standardized form of disclosure.

The FTC’s compliance suggestions, as posted in its blog, provide valuable advice for brands, athlete endorsers and hired influencers seeking to stay on the right side of the law. Although specific to Instagram posts, the general concepts apply to all social media posts:

Keep disclosures clear and unambiguous. Avoid using vague hashtags or tags to highlight material connections. “There’s no one-size-fits-all way to make that disclosure, but an unfamiliar abbreviation or cryptic word subject to multiple interpretations probably won’t do the trick,” the FTC notes.

Make disclosures hard to miss. What you say and where you say it matters, but so does how it looks. Be aware that disclosures may not appear the same way on different devices.

Avoid posting disclosures in a mish-mash of hashtags at the end of the post.

In sum, brands today are paying athletes as much for their followers as for their faces. As just one glaring example, according to Hookit, over a one-year period ending June 2016, Cristiano Ronaldo generated $176 million for his sponsors for the mentions and hashtags in his social media posts. That’s a lot of “influencing” going on! And they’re paying influencers to, well, influence.

Consumers, however, need to know that boasts about the brand are being bought. The FTC’s latest flurry of warning letters sends yet another flare to the industry.

WARNING No. 1: The failure to disclose material connections remains a major enforcement priority for the FTC’s Bureau of Consumer Protection;

WARNING No. 2: The responsibility to provide clear and conspicuous disclosures does not fall only on brands but also on influencers and athlete endorsers within the social media ecosystem. To athlete endorsers, influencers and the companies who use them, the message is clear: Continue to post at your own peril!

WARNING No. 3: BuzzFeed News now publishes a regular column titled “Is This An Ad?” that calls out ambiguous social media posts to determine if, in essence, the company and the poster have violated the FTC Guides.

In other words, people are watching! The bottom line: Although the FTC’s requirements for advertising to be “truthful and non-deceptive” have not changed, the mechanisms available by which companies and marketers can meet these requirements continue to evolve. #StayTuned

Steve McKelvey is associate department chair for external relations, and associate professor of sport management at the Isenberg School of Management at the University of Massachusetts.