Jennifer Satterfield, MJLST Staffer
Social media sites like Instagram and YouTube are filled with people known as “influencers.” Influencers are people with a following on social media that use their online fame to promote products and services of a brand. But, with all that power comes great responsibility, and influencers, as a whole, are not being responsible. One huge example of irresponsible influencer activity is the epic failure and fraudulent music festival known as Fyre Festival. Although Fyre Festival promised a luxury, VIP experience on a remote Bahamian island, it was a true nightmare where “attendees were stranded with half-built huts to sleep in and cold cheese sandwiches to eat.” The most prominent legal action was against Fyre’s founders and organizers, Billy McFarland and Ja Rule, including a six-year criminal sentence for wire fraud against McFarland. Nonetheless, a class action lawsuit also targeted the influencers. According to the lawsuit, the influencers did not comply with Federal Trade Commission (“FTC”) guidelines and disclose they were being paid to advertise the festival. Instead, “influencers gave the impression that the guest list was full of the Social Elite and other celebrities.” Yet, the blowback against influencers since the Fyre Festival fiasco appears to be minimal.
According to a Mediakix report, “[i]n one year, a top celebrity will post an average of 58 sponsored posts and only 3 may be FTC compliant.” The endorsement guidelines specify that if there is a “material connection” between the influencer and the seller of an advertised product, this connection must be fully disclosed. The FTC even created a nifty guide for influencers to ensure compliance. While disclosure is a small burden and there are several resources informing influencers of their duty to disclose, these guidelines are still largely ignored.
Evens so, the FTC has sent several warning letters to individual influencers over the years, which indicates it is monitoring top influencers’ posts. However, a mere letter is not doing much to stop the ongoing, flippant, and ignorant disregard toward the FTC guidelines. Besides the letters, the FTC rarely takes action against individual influencers. Instead, if the FTC goes after a bad actor, “it’s usually a brand that [has] failed to issue firm disclosure guidelines to paid influencers.” Consequently, even though it appears as if the FTC is cracking down on influencers, it is really only going after the companies. Without actual penalties, it is no wonder most influencers are either unaware of the FTC guidelines or continue to blatantly ignore them.
Considering this problem, there is a question of what the FTC can really do about it. One solution is for the FTC to dig in and actually enforce its guidelines against influencers like it did in 2017 with CSGO Lotto and two individual influencers, Trevor Martin and Thomas Cassell. CSGO Lotto was a website in which users could gamble virtual items called “skins” from the game Counter-Strike: Global Offensive. According to the FTC’s complaint, Martin and Thomas endorsed CSGO Lotto but failed to disclose they were both the owners and officers of the company. CSGO Lotto also paid other influencers to promote the website. The complaint notes that numerous YouTube videos by these influencers either failed to include a sponsorship disclosure in the videos or inconspicuously placed such disclosures “below the fold” in the description box. While the CSGO Lotto action was a huge scandal in the video game industry, it was not widely publicized to the general population. Moreover, Martin and Cassell got away with a mere slap on the wrist—“[t]he [FTC] order settling the charges requires Martin and Cassell to clearly and conspicuously disclose any material connections with an endorser or between an endorser and any promoted product or service.” Thus, it was not enough to compel other influencers into compliance. Instead, if the FTC started enforcement actions against big-name influencers, other influencers may also fear retribution and comply.
On the other hand, the FTC could continue its enforcement against the companies themselves, but this time with more teeth. Currently, the FTC is preparing to take further steps to ensure consumer protection in the world of social media influencers. Recently, FTC Commissioner Rohit Chopra acknowledged in a public statement that “it is not clear whether our actions are deterring misconduct in the marketplace, due to the limited sanctions we have pursued.” Although Chopra is not interested in pursuing small influencers, but rather the advertisers that pay them, it is possible that enforcement against the companies will cause influencers to comply as well.
Accordingly, Chopra’s next steps include: (1) “[d]eveloping requirements for technology platforms (e.g. Instagram, YouTube, and TikTok) that facilitate and either directly or indirectly profit from influencer marketing;” (2) “[c]odifying elements of the existing endorsement guides into formal rules so that violators can be liable for civil penalties under Section 5(m)(1)(A) and liable for damages under Section 19; 7;” and (3) “[s]pecifying the requirements that companies must adhere to in their contractual arrangements with influencers, including through sample terms that companies can include in contracts.” By pushing some of the enforcement duties onto social media platforms themselves, the FTC gains more monitoring and enforcement capabilities. Furthermore, codifying the guidelines into formal rules gives the FTC teeth to impose civil penalties and creates tangible consequences for those who previously ignored the guidelines. Finally, by actually requiring companies to adhere to these rules via their contract with influencers, influencers will be compelled to follow the guidelines as well. Therefore, under these next steps, paid advertising disclosures on social media can become commonplace. But only time will really tell if the FTC will achieve these steps.