FTC Settlement Imposes New Duties on Companies Hiring Influencers

A recent Federal Trade Commission (FTC) action may impose new duties on companies that hire influencers to promote their products and services through social media and online channels.

Recently, the FTC and Teami LLC (Teami) reached a $1,000,000 settlement in an action involving claims of false advertising and deceptive failure to disclose material connections in relation to Teami’s promotion of its tea and supplement products online and on social media. The FTC had alleged that Teami made false health and weight-loss claims and failed to disclose the connection between Teami and the influencers it hired to promote and endorse its products. The FTC also issued warning letters to Teami’s popular Instagram influencers (including Cardi B) for their failure to properly disclose their endorsements of Teami products in Instagram posts. In each instance, the disclosure was either not immediately apparent in the post’s caption or not always accessible in the videos.

A Unique Settlement

The FTC settlement placed affirmative duties on Teami to ensure that all future influencer posts bear proper disclosures. Specifically, the FTC required Teami to:

• Obtain a signed and dated statement from the influencer that they understand their obligation to make clear and conspicuous disclosures in close proximity to the endorsement.
• Establish, implement, and maintain procedures to monitor contracted-for influencer posts promptly after publication.
• Immediately terminate and cease payment to any influencer who misrepresents their relationship to the company or fails to include proper disclosures.
• Maintain records of its monitoring efforts.

Defining Clear and Conspicuous and Close Proximity

Under the settlement, a clear and conspicuous disclosure is one that is easily noticeable and understandable by ordinary consumers. If the communication includes both a visual and audio portion, the disclosure must appear both visually and audibly. A disclosure is in close proximity to the communication if it is very near the triggering representation, meaning disclosures in pop-ups or hyperlinks are not permitted.

Next Steps and Best Practices

While this settlement is not a law, regulation, or even an official guideline from the FTC, it indicates that the FTC is aiming to hold companies liable for influencers who fail to disclose their sponsors. To avoid enforcement actions based on influencer activities, we recommend the best practices below:

• Obtain written representations from all influencers that they understand the FTC’s disclosure requirements and that they will indemnify you from any claims that arise out of their failure to follow those requirements.
• Obtain written representations from all marketing agencies that each influencer it hires understands the FTC’s disclosure requirements and that the agency will indemnify you for any claims that arise out of the influencer’s failure to follow proper disclosure requirements.
• Require pre-approval of all contracted-for influencer online and social media endorsements, and include specific requirements for disclosures that meet the FTC’s clear and conspicuous and close proximity
• Adopt a system for reviewing influencer post immediately after posting, and make a record of your review.
• Promptly terminate relationships with any influencers that fail to make adequate disclosures or misrepresent their connection to you.
• Maintain all influencer agreements and records of your review.

We understand that you may have questions regarding this FTC decision and these best practices. Please contact a Winston & Strawn Brand Protection attorney below for more information, or if you would like our assistance in:

• Evaluating whether your influencers fit into any exceptions to these rules;
• Evaluating whether the disclosures meet the “clear and conspicuous” or “in close proximity” requirements;
• Establishing monitoring and record-keeping procedures; or
• Reviewing agreements with current influencers.