A Year After Major Actions, FTC’s Influencer Marketing Guidelines Still Overlooked

In the year since the U.S. Federal Trade Commission first took action against social media influencers for not following its guidelines for disclosure, little has changed, according to experts.

Just a quarter of the celebrities, YouTube stars or Instagram models are following FTC rules for how to disclose sponsored content, according to one report, potentially affecting millions of consumers who may be confused about the financial motivations behind a post or endorsement.

Experts say the FTC could do more to clarify how influencers label their ads on their social media accounts -- whether by hiring more people to enforce the existing regulations or adding clarifications to help influencers work through an ambiguous system.

The issue came to the forefront on Sept. 7, 2017, when the FTC for the first time took two public actions on the issue, broadening the scope of what it would monitor as influencer marketing and sending a message to the community that enforcement would be taken seriously.

First, the owners of CSGO Lotto Inc., an online gambling platform, settled the commission’s first formal complaint against influencers for not properly disclosing they were the owners of the company they were promoting: Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell allegedly posted videos of themselves winning virtual currency on their website and encouraging others to use the service -- without revealing they owned the service. The FTC for the first time included company owners in its enforcement of influencers, but did not levy any fines.

Martin and Cassell also allegedly paid other influencers thousands of dollars to promote their site on other social media platforms without requiring disclosure.

In the settlement, the commission ordered Martin and Cassell to clearly disclose any material connections with endorsers or between an endorser and any promoted product.

The same day, the FTC announced it had sent warning letters to 21 influencers, including Naomi Campbell, Lindsay Lohan and Nicole “Snooki” Polizzi, according to a Reuters report, citing specific social media posts that did not appear to be in compliance with the FTC’s regulations. That followed a batch of more than 90 so-called “educational letters” the agency sent in April 2017, which informed influencers about the rules.

Since those actions, the FTC said it has seen attempts from both influencers and brands to ensure they’re following the rules, but noted that some may still not be compliant.

“There has been a lot of interest in understanding how to do it right, and I think that there has been a lot of effort on many in the marketplace to do it right,” Mamie Kresses, senior attorney in the FTC’s advertising practices division, said in a Sept. 27 phone interview. “That doesn’t mean that everybody is making it clear when you’re endorsing a product.”

The FTC said it has not taken any public actions against noncompliant influencers since last year.

Angeline Close Scheinbaum, a professor at the University of Texas at Austin’s advertising and public relations school, said many influencers are failing to disclose financial ties to brands.

“It needs to be crystal clear as a disclosure and we’re really not there yet,” Close Scheinbaum said. “We’re supposed to be doing this, but there are a lot of influencers who are failing to disclose the fact that this is a sponsored post -- or if they do it, it’s in a subtle way where you don’t know.”

Close Scheinbaum said the FTC could be doing more to ensure the guidelines are followed.

“There’s many people who don’t necessarily know that bloggers are getting paid to share a product. I think that the FTC could do a better job of enforcing it,” Close Scheinbaum said. “I don’t know if there’s a healthy fear out there yet for these bloggers.”

A May report from U.K.-based photo-printing shop Inkifi looked at 800 Instagram accounts from the United States, United Kingdom and Canada that could have reached U.S. audiences and had posted about collaborations with brands and recommended items. Of those accounts, 71.5 percent disclosed their monetary partnerships, but only 25 percent did so in a way that was compliant with the FTC’s recommendations, which require disclosures to be clearly stated within the first three lines of a caption.

Beyond saying where influencers should disclose their relationship with brands, the FTC does not state exactly how it should be done, contributing to the confusion, experts say.

“There’s nothing that’s specifically required” as far as the FTC guidelines for disclosure, said Ellie Altshuler, a partner at law firm Nixon Peabody who focuses on entertainment, influencer and advertising clients. “If the FTC drew really clear lines, like you must use the word ‘ad,’ then people would follow suit because there’s less gray.”

Altshuler also urged the FTC to go public with another case against influencers to clearly make its point. While the FTC’s compliance letters set off alarm bells, the case with CSGO Lotto didn’t have the same impact because the company works within a niche online gaming world that most consumers and influencers might not identify with.

Close Scheinbaum said ultimately, the FTC is stretched too thin to fully regulate the issue on its own, without either hiring more regulators or enlisting the assistance of artificial intelligence or a similar tool that could automatically flag posts that disobey the rules.

The FTC declined to comment on whether it has enough staff to enforce disclosure requirements.

Considering the scope of the problem, Close Scheinbaum said it might be more effective if influencers could regulate themselves.

“Realistically this is a lot of digital space to manage,” Close Scheinbaum said. “Maybe the influencers themselves need to speak up more when they see this happening in their industry. They need to make it so it’s not tolerable.”