In depth

At the end of June 2023, the Federal Trade Commission (FTC) revised its Guides Concerning Use of Endorsements and Testimonials in Advertising ("Endorsement Guides") as well as its staff publication that serves as a business resource, "FTC's Endorsement Guides: What People Are Asking" ("Business Resource"). Amongst the changes and additions is a discussion of a company's responsibilities for what others say on social media. In the context of enforcement actions, the FTC had previously made clear that a company that uses social media influencers ("Influencers") is responsible for monitoring members of its network, but the updated Endorsement Guides and the Business Resource provide additional context and examples.

The Business Resource explains:

Advertisers need to have reasonable programs in place to train and monitor members of their network. The scope of the program depends on the risk that deceptive practices by network participants could cause consumer harm. Here are some elements every program should include:

1. Given an advertiser's responsibility for substantiating objective product claims, explain to members of your network what they can (and can't) say about the products – for example, a list of the health claims they can make for your products, along with instructions not to go beyond those claims;
2. Instruct members of the network on their responsibilities for clearly and conspicuously disclosing their connections to you, including exactly how you want them to make the disclosures;
3. Periodically search for what members of your network are saying; and
4. Take appropriate action if you find questionable practices.

The Business Resource does not provide hard and fast rules for what percentage of a company's Influencers' posts should be searched weekly or monthly, but suggests that "if regular monitoring is too much for you, you should probably switch to pre-approval of posts." Likewise, the Business Resource provides the following question and answer:

Question: How can my company be expected to monitor ephemeral or short-lived endorsements like those on Instagram Stories or Snapchat?

Answer: There is probably no practical way to monitor those posts in real time. That's why you should require that paid posts aren't made without you approving them in advance.

A company cannot escape its responsibility to monitor its Influencers by merely hiring a publications relations agency, advertising agency or some other intermediary. To that end, the Business Resource includes the following question and answer:

Question: Our company's social media program is run by our public relations firm. We tell them to make sure they – and people they pay on our behalf – comply with applicable laws and the FTC's Endorsement Guides. Is that good enough?

Answer: Your company is ultimately responsible for what others do on your behalf. You should make sure your public relations firm has an appropriate program in place to train and monitor members of your social media network. Ask for regular reports confirming that the program is operating properly and monitor the network periodically. Delegating part of your promotional program to an outside company doesn't relieve you of responsibility under the FTC Act.

In other words, everyone involved can be held liable for false statements and failure to disclose made by Influencers. Under 16 CFR Part 255.1(f) some of those entities are listed:

Advertising agencies, public relations firms, review brokers, reputation management companies, and other similar intermediaries may be liable for their roles in creating or disseminating endorsements containing representations that they know or should know are deceptive. They may also be liable for their roles with respect to endorsements that fail to disclose unexpected material connections, whether by disseminating advertisements without necessary disclosures or by hiring and directing endorsers who fail to make necessary disclosures.

The updated Endorsement Guides explain what is an "endorser" and the comments to those updates show that an endorser can be a "virtual influencer." 16 CFR Part 255.0:

(b) For purposes of this part, an "endorsement" means any advertising, marketing, or promotional message for a product that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser. Verbal statements, tags in social media posts, demonstrations, depictions of the name, signature, likeness or other identifying personal characteristics of an individual, and the name or seal of an organization can be endorsements. The party whose opinions, beliefs, findings, or experience the message appears to reflect will be called the "endorser" and could be or appear to be an individual, group, or institution

Not only can an endorsement be made by a virtual influencer, but one of the examples to the Endorsement Guides includes an endorsement by a dog influencer. In the example, if the dog has a social media account with a large number of followers and its owner receives coupons from a manufacturer with a request to feature the brand in future posts, resulting posts may be endorsements. 16 CFR Part 255.0, Example 7 (iv).

The FTC continues to take the position that not everyone understands that Influencers are being paid or otherwise being given something of value to make these endorsements and as long as a significant minority does not understand the connection, there must be a disclosure. 16 CFR Part 255.5 explains:

(a) When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement, and that connection is not reasonably expected by the audience, such connection must be disclosed clearly and conspicuously. Material connections can include a business, family, or personal relationship. They can include monetary payment or the provision of free or discounted products (including products unrelated to the endorsed product) to an endorser, regardless of whether the advertiser requires an endorsement in return. Material connections can also include other benefits to the endorser, such as early access to a product or the possibility of being paid, of winning a prize, or of appearing on television or in other media promotions. Some connections may be immaterial because they are too insignificant to affect the weight or credibility given to endorsements. A material connection needs to be disclosed when a significant minority of the audience for an endorsement does not understand or expect the connection. A disclosure of a material connection does not require the complete details of the connection, but it must clearly communicate the nature of the connection sufficiently for consumers to evaluate its significance.

Next steps

These updates and the FTC's continued focus on endorsements make this a good time to review your current use of Influencers and the processes that you have in place for monitoring the claims that the Influencers make about your products and services and how the Influencers disclose the relationship with your products and services. If you are using intermediaries such as an advertising agency to handle your Influencers, you will want to be sure that you have given those intermediaries clear instructions regarding monitoring claims and disclosures. You will want to be comfortable that there are processes in place that allow for the prompt discovery and immediate take down of non-compliant posts.