[Editor’s Note: An oft-heard phrase is that ‘the pandemic changed everything.’ While that’s debatable, the pandemic contributed to a lull in Federal Trade Commission (FTC) enforcement of social media influencers and the brands they promote. The Commission is spending time monitoring false COVID cures and scams, attorneys Allison Fitzpatrick and Paavana Kumar of Davis + Gilbert LLP tell us. Still, they recommend no laxity for brands and influencers. Use of FTC-approved disclosure practices prevail, they say. Moreover, an Aug. 6 ruling in a case against supermodel Molly Sims and the beauty brand she represented could herald a new chapter in brand-influencer relations. Relatively untouchable previously, influencers now may have a target on their back.]
PRNEWS: When you’re counseling new clients, what are you advising them about influencers, guidelines and FTC regulation? Have things changed much with the new administration? Are there guidance updates?
Allison Fitzpatrick: In general, all of the advice we gave earlier still applies, but there are some changed circumstances. For example, with COVID we’ve seen less enforcement by the FTC in the influencer area. The last major case the FTC announced was right at the beginning of COVID, March 2020. It was the Teami case where [10] celebrity influencers, including Cardi B, were allegedly not including sufficient disclosures [that Teami was paying them] in their influencer posts. There haven’t been any major influencer actions since then.
PRN: Why not?
Fitzpatrick: There are three reasons. The first is the most important. The FTC is in review and updating the FTC Endorsement Guide. They are focusing on the major areas and they’re going to come up with updated guidance, which we believe will come in the next few months. I don’t think it will be next year. I think it will come this year. They’re less inclined to bring a major influencer action when the Guide is being reviewed.
Also, with COVID, the FTC has been focused on real, traditional fraud. So, mostly COVID scams, fake COVID cures. That’s where a lot of their resources are. I think that’s a smart policy decision. These are prevalent and harmful to consumers.
Third, as you said, there’s a new regime at the FTC, the Biden FTC. They’re still getting their feet wet and determining their focus. I think [eventually] they will be focused on influencer marketing because there is some congressional pressure in this area, particularly with child influencers in certain areas. Right now, they’re more focused on traditional fraud.
PRN: So, your advice?
Fitzpatrick: Follow the FTC guidelines [on disclosing sponsored posts and videos and compensated influencers]. When the updated guides come out, I think there will be heightened enforcement and heightened risks. You don’t want to be the one on the tail end and get hit with an FTC action [under the revised guidance].
Paavana Kumar: I completely agree. It’s particularly true with respect to future enforcement in some of the categories where the FTC believes companies are targeting more impressionable groups of consumers and younger people, such as [industries like] beauty, cosmetics, health and fitness. Teami, for example, was a company promoting detox and weight loss claims. Even though we haven’t seen much regulation during the pandemic, we know these areas are currently under review and I think the FTC will be focused on those areas too.
So, our counsel is not to be more liberal during [this time] of relaxed enforcement.
PRN: A crystal ball question. What do you expect to see in the updated Guidance?
Fitzpatrick: I don’t have any insider knowledge, but based on [public] comments and [FTC] questions, there’s likely going to be further guidance about child influencers. Again, it is a high-priority for certain members of Congress and so there’s pressure on the FTC to have specific guidance on child influencers.
The other area we saw a lot of questions and comments on were ratings and reviews sites, particularly for companies that hire or pay regular consumers to rate and review their clients’ products. Often on these sites there’s no way to make a disclosure.
Kumar: I think [the FTC] will also come out with a lot of guidance on new platforms, like TikTok.
PRN: When you say ‘child influencers’ you mean children who are influencers or adults who influence children?
Fitzpatrick: Both. It’s a multi-million dollar industry to have children who review products. They’re particularly popular on platforms like YouTube. Certain members of Congress have claimed that certain child influencers have not made sufficient disclosures.
PRN: When we look at influencer posts, sometimes we spot disclosures, but not always. What’s your sense of compliance with FTC regulations from influencers and brands?
Fitzpatrick: My sense is that reputable brands, agencies and influencers all know they have to comply and they all want to comply. I think the question is not about making a disclosure but the adequacy of it. The debate isn’t whether or not to make a disclosure, they’re just not sure how to do it effectively.
So, the back and forth is about ‘Is the disclosure above the fold or below the fold?’ ‘Are we using the correct terms when disclosing?’
Some may think ‘#Partner’ is enough. But we know from the FTC that it should be ‘#BrandPartner.’ Other common pitfalls include putting the disclosure in a string of hashtags, which the FTC doesn’t like.
Another issue that complicates it is that Facebook, Instagram and YouTube have built-in disclosure tools. And there’s probably a lot of influencers and brands thinking, ‘Well, why can’t I just rely on those?’ They seem relatively sufficient. The problem is that we need to explain to influencers that the FTC has said [the built-in disclosure tools] are not sufficient. You need another disclosure.
Kumar: The FTC expects influencers to know [the regulations] and is trying to make it easier for them to understand and learn about it. In 2019, the FTC put out a publication, “Disclosures 101.”
PRN: Yes, there’s also a video with it.
Kumar: I think we will see more practical advice and back-to-basics guidance for the influencers, especially as the FTC is looking more and more for influencers to know what their obligations are.
PRN: Whose fault is it that more influencers don’t know the regulations? Is it anyone’s fault?
Fitzpatrick: It’s technology’s fault. As soon as the FTC comes out with guidance about how to make a disclosure on Facebook, how to make a disclosure on Instagram Stories, how to make a disclosure on Snapchat, another platform arises. They can’t just rush out guidance; it has to go through a review. It just feels like as soon as new guidance is issued and makes its way through the industry, new platforms with different structural issues come out and you must figure out the best way to make a disclosure on these platforms.
PRN: Speaking of relatively new platforms, what about TikTok? Is the FTC’s disclosure regime similar to other platforms?
Kumar: The FTC hasn’t issued specific guidance for TikTok. We expect they will. In the absence of that, we’ve extrapolated guidance they have for other visual platforms, such as Instagram and Snap, and apply it to TikTok. The FTC has said when people are scrolling through visual platforms, they’re looking at the videos and photos, not the captions. They’re not going to stop to see if a disclosure might be hidden there. So, on Snap Stories [the FTC] said you should be superimposing that disclosure. So, we think it’s reasonable to assume the same guidance for TikTok, which has a similar visual style. We recommend using high-contrast lettering [for disclosure], for example.
There was an NAD (National Advertising Division) action a few years ago when a disclosure on a TikTok video [for a brand's dance challenge] wouldn’t attach…when the content was re-posted [on Instagram; oddly, or perhaps not, the disclosure didn’t fall off when the video was shared on Facebook and Twitter].
Fitzpatrick: To the question of ‘Who’s to blame?’ once again it’s technology. Look at the NAD case. Reputable companies and influencers used the correct hashtag, but they weren’t aware it didn’t travel to Instagram…Not every platform is the same. Each one has its own structure that needs to be tuned. So, you need to understand the technology and stay up to date on it, because it might not be very intuitive.
PRN: We recently had a case where a competitor sued a company and its influencer, the supermodel Molly Sims. In a sponsored post, Sims wrote about a hair care product and used a phrase to describe the product that the competitor, Petunia, trademarked for its product. Petunia sued Sims for trademark infringement, unfair competition, unfair business practices and false advertising. Sims asked the court to drop the suit. In early August, a CA federal court said it will allow most of the suit to stand. What does that tell you?
Fitzpatrick: I’m expecting to see more brands and competitors bringing actions against influencers and their brands. I’m surprised it’s taken this long to see a competitor going after the influencer and the brand. It is clear these sponsored posts are the brand’s content.
If there’s going to be heightened risk of a liability to a brand because of an influencer’s posts, [brands] must look at their influencer contracts more closely. Make sure there’s strong indemnity language. Make sure there’s approval rights. Make sure there’s monitoring.
Most celebrity influencers aren’t lawyers. They’re not going to be able to [know when they’ve possibly crossed a line]. It’s up to the brands to make sure.
With our clients, we try to see a post before it goes out. We try to make sure we have approval rights over it. Much of that was dictated by the FTC Endorsement Guides, but a lot of it was dictated by intellectual property (IP). We want to make sure we weren’t being exposed to any third-party liability.
With this case, you’ll see more brands reviewing their influencer contracts, knowing they could be exposed to liability [for an influencer’s content re IP, false advertising or disparagement claims]. This may have opened the door to a lot more lawsuits involving brands and influencers and their competitors.
Kumar: I think you’ll also see, from a contractual viewpoint, more-sophisticated influencers starting not to take responsibility for trademarks or claims in their posts. They’ll claim they’re not in a position to know [whether a company trademark is infringing]. I’m sure this will come up more in contract negotiations.
Fitzpatrick: And the more powerful influencers will push back harder against [these responsibilities] than smaller influencers.