Whose Guide is it Anyway? Update to the FTC Endorsement Guide impacts influencers, brands, and agencies

The last time the Federal Trade Commission (the “FTC”) updated the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising (the “Guide”), many of the social media platforms that are widely used today like Instagram, TikTok, and Snapchat didn’t exist, and influencer marketing only existed via traditional media or to the extent paparazzi were able to snap a picture of a celebrity wearing a particular brand (think Paris Hilton x Von Dutch). But the FTC has updated the Guide for the first time since 2009 due to the widespread use of social media platforms and the ascent of the influencer marketing industry. Some of the most notable updates to the Guide include the ability for “intermediaries” such as advertising or PR agencies to be liable for deceptive marketing practices and new restrictions on paying for positive reviews and fake followers. If your agency or company works with influencers, read on to learn how you can stay on the right side of the updated Guide!  

The FTC Act and the Guide

The FTC Act is the main US statute that regulates influencer marketing.1 The Act applies to all persons engaged in commerce in the US2, which includes both US-based influencers/brands and influencers/brands from other jurisdictions whose content reaches US consumers.3 In short, the Act prohibits persons engaged in commerce (ie. influencers/brands) from engaging in false or misleading practices in endorsements or testimonials which could cause harm to consumers.

The Guide was originally developed in 1980 to help businesses advertising and marketing practices comply with the FTC Act.4 While the Guide itself is not binding law, the Guide provides the FTC’s interpretation of the Act and outlines that practices inconsistent with the Guide can result in corrective action by the FTC.5

The Guide was updated in 2009 for the first time, and some of the most significant changes included: 

• Advertisers and endorsers could be liable for false or unsubstantiated claims in an endorsement or for failure to disclose material connections; and, 

• Celebrities have a duty to disclose their relationship with advertisers outside the context of traditional ads, such as on talk shows or on social media.6

While the 2009 update to the Guide touched on the topic of social media, in November 2019, the FTC released a supplementary guidance document called “Disclosures 101 for Social Media Influencers” which largely shaped the disclosure requirements to where they are today.7 For example, the Disclosures 101 Guide included concepts such as: 

• Influencers must disclose when they have any financial, employment, personal, or family relationship with a brand; 

• Use simple and clear language to disclose a relationship, such as “advertisement”, “ad”, and “sponsored”; and, 

• Don’t assume that a platform’s disclosure tool is good enough to disclose a material connection, but consider using it in addition to another disclosure. 

2023 Changes to the Guide

On June 29, 2023, the FTC made several changes to the Guide for the first time since 2009 (the “Updated Guide”). We have listed below some of the most significant changes that influencers, agencies, and companies should be aware of in light of the new requirements: 

1. “Intermediaries” such as advertising agencies may now be liable for their roles in (i) creating or disseminating endorsements containing representations they know or should have known are deceptive or (ii) failing to disclose material connections.8

With the Updated Guide now saying that intermediaries can be liable for the products they have influencers endorse, agencies must be extra careful about the brand clients that they work with. For example, under the Updated Guide, advertising or PR firms that ran campaigns advocating for FTX as a safe crypto exchange (breaking news: FTX was not safe) or Prime Energy drink as a healthy sports drink (recently revealed to have six times the amount of caffeine as Coca Cola) could bear some responsibility for deceptive marketing practices. 

To avoid being subject to penalties under the Updated Guide, agencies should perform extra due diligence with all new and existing brand clients to ensure the representations they have influencers make are truthful. 

2. The Updated Guide pays special attention to fake positive reviews. The Updated Guide specifies that fake positive reviews are now considered endorsements,9 and that advertisers should not distort or otherwise misrepresent what consumers think of their products through “procuring, suppressing, boosting, organizing, publishing, upvoting, downvoting, reporting, or editing consumer reviews of their products”.10

The updated language about reviews is particularly important for any brands that use consumer reviews as a tool for additional promotion. The Guide explains that paying or incentivizing consumers to post positive reviews of the brand on third-party websites constitutes a deceptive practice, since the review would be influenced by payment and was not a genuine or truthful belief.11 While the Guide uses the example of paying consumers $20 for a review, offering consumers discounts or other incentives in exchange for positive reviews may also be caught by the Updated Guide. 

3. The Guide explicitly mentions that it is considered a deceptive practice to purchase fake social media followers in order to misrepresent a person’s influence to “potential clients, purchasers, investors, partners, or to anyone else for a commercial purpose”. It is also now considered a deceptive practice to sell or distribute such indicators to such users.12

The acknowledgement that purchasing fake social media followers is a deceptive practice is extremely significant. This has the potential to attract liability for stakeholders across the influencer marketing spectrum, such as:

(i) influencers who purchase followers to try to secure brand deals for themselves; 

(ii) agencies that try to secure brand deals for their influencer clients, who may have fake followers; and/or, 

(iii) companies that try to use their social media following as an indicator of “reach” to attract venture capital dollars or other commercial opportunities. 

Misrepresenting how many followers an influencer or company has remains one of the most unethical yet prevalent practices in the influencer marketing industry. Similar to our recommendation for intermediaries, it remains important for brands and agencies to perform due diligence on any influencers they look to use in campaigns or represent. Paying special attention to metrics such as engagement rate, conversion rate, and past campaign results and having proper contractual protections in place with influencers can help protect companies engaging in influencer marketing campaigns. 

It is a bit surprising that it took 14 years for the FTC to formally update the Guide. However, it is encouraging to see the Updated Guide putting additional responsibility on agencies and brands to ensure that their influencer marketing practices are not deceptive. While influencer marketing campaigns may seem simple, the Updated Guide highlights the importance of performing due diligence on (1) the authenticity of followers, (2) the brand’s messaging, and (3) the parties you are contracting with. Even if thorough due diligence is performed, whether you are an influencer, agency, or brand, you will want to be sure that you have strong contracts in place to protect you from liability in case another stakeholder engages in a practice that could get you in trouble. If you would like to talk about your influencer marketing campaigns or contracts, please reach out to zack@gmelawyers.com.