All this is legal so long as influencers clearly disclose what, if anything, they get from the brands in return for their posts as well as any relationships that exist between them and the brands. In March 2017, the Federal Trade Commission ("FTC") issued more than 90 letters to brands and influencers warning them about appropriate disclosures. Some of these letters are available here.
In the letters, the FTC reminded both endorsers (influencers) and marketers (brands) that endorsers must disclose any "material connection" that exists between them because such connection can influence the weight or credibility that consumers give to the endorsement. A "material connection" may consist of a business or family relationship, monetary payment, or the provision of free products to the influencer.
The FTC letters refer to the Endorsement Guides that apply to both marketers and endorsers. There is also a helpful FTC staff publication "The Endorsement Guides: What People are Asking" that describes the Guides in a Q&A format. The publication explains that if an endorser is acting on behalf of an advertiser, then what the endorser is saying becomes commercial speech that may violate the FTC Act if it is deceptive.
It doesn't mean that endorsers have to disclose everything. The test here is whether knowing about the gift, the incentive or the special relationship would affect the weight or credibility the viewers give to the recommendation. There is no needed disclosure if the influencer bought the product herself. There is also no needed disclosure if the store was giving out free samples to all its customers and the influencer received one of them. However, disclosure would be warranted if the brand / advertiser gave something of value to the influencer in exchange for posting a review. For example, a reviewer of restaurants would need to disclose if she received any free meals at the places she reviewed. Or, in my case, I would need to disclose in this blog if I wrote a review of a book that the publisher sent to me for free. Or, according to the FTC letter, Sean Combs would have had to disclose that he is the owner and director of AQUAhydrate when he posted on Instagram a picture of two bottles of AQUAhydrate water and wrote "Let's GO!!! @aquahydrate #balance #hydrate #tryIT."
So, to summarize:
- Endorsers must disclose all material connections, including financial, family or friendship ties to the brands;
- Such disclosures must be clear and conspicuous, such that they appear above the "more" button in an Instagram post and are not hidden among the hashtags; and
- Endorsers should avoid unclear and confusing hashtags.
This article is not a legal advice, and was written for general informational purposes only. If you have questions or comments about the article or are interested in learning more about this topic, feel free to contact its author, Arina Shulga. Ms. Shulga is the co-founder of Ross & Shulga PLLC, a New York-based boutique law firm specializing in advising individual and corporate clients on aspects of corporate and securities law.