Commentary Addressing Risks and Opportunities Through the Lifecycle of Data, Technology, Advertising and Innovation

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Advertisers’ and brands’ use of social media influencers has continued to grow in importance as brands seek to reach new consumers while marketing to a widespread demographic. Traditionally, influencers are known as people who leverage their social media presence to endorse or promote a brand or product for some form of compensation. As influencers have gained prominence on social media platforms, the Federal Trade Commission (FTC) has paid increasing attention to influencers’ disclosures of a relationship to those brands.

The FTC’s Testimonial and Endorsement Guides require that endorsers disclose any material connection to the brand, unless the connection is otherwise obvious to the consumer. The FTC has previously warned social media influencers against endorsing a brand or product without disclosing a material connection, such as payment, employment or receipt of anything of value including free product and sweepstakes entries, and has brought previous enforcement actions against marketers whose social influencers have failed to disclose their connections to the brand. However, despite persistent warnings and enforcement actions, social media influencers have continued to endorse products without clearly disclosing a material connection, therefore prompting the FTC to take action.

The FTC recently filed its first ever <a href="https://www.ftc.gov/system/files/documents/cases/1623184_csgolotto_complaint.pdf">complaint</a> against two individual social media influencers who endorsed a video game gambling site known as Counter-Strike: Global Offensive Lotto (CSGO Lotto) without providing adequate disclosure. The CSGO game uses collectible virtual items called “skins” and the CSGO Lotto website allows consumers to gamble using skins as virtual currency. Importantly, the social media influencers named in the complaint were officers and owners of the company operating the CSGO Lotto website and received a portion of the revenues generated from the service.

The complaint alleged that Respondents Trevor Martin and Thomas Cassell posted videos of themselves using the CSGO Lotto website on their YouTube channels and Twitter with video titles and tweets such as “HOW TO WIN $13,000 IN 5 MINUTES (CS-GO Betting),” without disclosing their interest and ownership rights in the CSGO Lotto website. Also, the respondents allegedly ran an “influencer program” and paid other social media gaming influencers to promote the CSGO Lotto website without a clear disclosure, and prohibited these influencers from posting anything negative about the site.

The FTC and Respondents reached a <a href="https://www.ftc.gov/system/files/documents/cases/1623184_csgolotto_agreement_and_decision_and_order.pdf">settlement </a>that prohibits Respondents Martin and Cassell, as well as company operating the CSGO Lotto website, from misrepresenting that their endorsements and other paid endorsers were from independent users of the CSGO Lotto site. The settlement also requires Respondents to clearly and conspicuously disclose any material connections that Respondents have with social media influencers and to monitor those endorsers to assure they provide adequate disclosure of a material connection.

This recent complaint and settlement from the FTC marks an important shift in the FTC’s approach to disciplining the influencers, and not just the brands that engage them. Last April, the FTC sent 90 <a href="https://www.ftc.gov/system/files/attachments/press-releases/ftc-staff-reminds-influencers-brands-clearly-disclose-relationship/influencer_template.pdf">warning letters</a> to Instagram social media influencers in April reminding them of their obligations to disclose material connections, and then sent follow-up letters again just prior to announcement of this enforcement action. Based on these warning letters and this recent action against CSGO Lotto’s individual influencers, other social media influencers are now on notice that the FTC will file complaints directly against individual influencers if they do not follow the endorsement guidelines.

In addition to this enforcement action, the FTC has also updated its <a href="https://www.ftc.gov/tips-advice/business-center/guidance/ftcs-endorsement-guides-what-people-are-asking">FAQ</a>s – a document intended to provide more specific guidance to influencers and brands regarding when, where and how disclosures need to be made. These revised FAQs will surely serve as a basis for future enforcement actions as well.

The FTC’s press release regarding this CSGO Lotto complaint and settlement is available <a href="https://www.ftc.gov/news-events/press-releases/2017/09/csgo-lotto-owners-settle-ftcs-first-ever-complaint-against">here</a>.

For other blog posts we have written on this topic, please see <a href="https://www.copyrightcontentplatforms.com/2017/05/ftc-turns-attention-to-social-media-influencers-working-for-advertisers/">here</a>, <a href="https://www.dataprivacymonitor.com/mobile-privacy/2016-mobile-data-privacy-and-security-update-and-2015-review/">here</a> and <a href="https://www.dataprivacymonitor.com/marketing/ftc-clarifies-native-and-online-ad-obligations/">here</a>.

FTC Takes Action Against Individual Social Media Influencers