Influencer endorsements on social media have dramatically changed the world of native advertising over the past decade. Native advertising has been around for a long time—it’s advertising designed to look like editorial or content instead of paid promotion. Think of all the photos celebrities post on social media of themselves sporting expensive clothing or jewelry, hashtagging and praising the brands. But influencer endorsements on social media have muddied the waters, causing confusion about what is and isn’t an ad.

However, over the last few years, the Federal Trade Commission (FTC) has taken notice of the changes social media has brought. At the same time, advertisers are becoming increasingly aware of FTC guidelines for online endorsements and the potential penalties for ignoring them.

But the FTC isn’t alone in voicing concern over ads disguised as objective content. In September 2016, the Commission received a letter from three consumer organizations calling out the lack of disclosure by endorsers on Instagram.

The Letter to the FTC

Public Citizen, Campaign for a Commercial-Free Childhood and the Center for Digital Democracy had Instagram in their sights on September 7, 2016. That’s when they sent a letter to the FTC targeting non-compliance with the Commission’s endorsement disclosure rules on social media. The letter urged the Commission to investigate and take aggressive enforcement action against non-disclosed advertising posted by Instagram influencers.

The letter also expressed concerns that the FTC wasn’t keeping up with the sway that influencers on social media hold over young people. It pointed out that non-disclosed native advertising had become a growing and lucrative industry.

The letter also cited an industry agent, who estimated that there were 100,000 influencers on Instagram who were paid to endorse brands. However most influencers don’t disclose that they are actually posting advertisements, not objective, independent content. The letter also pointed to Instagram as one of the biggest and most problematic platforms for violations of FTC policy.

In June 2017, Instagram offered a “paid partnership with” label for influencers to post above pictures to make endorsement disclosure easier. However, Public Citizen didn’t think Instagram went far enough with the new feature. In another letter to the FTC, the group countered that the disclosure feature should be a red frame around every sponsored photo labeled “advertisement.”

And according to Public Citizen’s letter, when the group investigated celebrity influencers, it discovered 113 had endorsed products in posts without disclosing material connections. Looking at industry norms, Public Citizen surmised that most, if not all of them were paid to endorse the products.

The FTC Ramps Up Against Non-Disclosure

The year 2017 proved to be a busy one for the FTC. That’s when the Commission’s fight against consumer deception by influencers on Instagram began to ramp up. In September 2017, the Commission sent letters to 21 influencers cautioning them to follow the FTC guidelines on the disclosure of material connections.  Together, these celebrity influencers had social media followings in the multi-millions.

With the September letters the FTC was following up on 90 letters it had sent earlier in the year to influencers. The Commission considered the first batch of letters to be educational, however it viewed the second batch of letters as warnings.

What Is a Material Connection?

A material connection is a relationship between an endorser, such as an influencer and an advertiser, such as a brand. It’s a connection that can involve payment and/or free product the brand gives the influencer, as well as family or business ties.

When influencers don’t disclose these types of material connections, consumers can be misled into thinking their endorsements are independent and objective. Since it’s the FTC’s job to protect consumers from misleading business practices, disclosure failures on social media can catch the Commission’s attention.

Warning Letters to Social Media Influencers

On September 6, 2017, the FTC sent letters to influencers including Naomi Campbell and Sofia Vergara concerning some of their social media posts. The letters referenced the earlier educational letters the Commission sent the influencers about the regulations for disclosure of material connections.

They also included screen shots of the posts that the FTC believed might be paid endorsements that didn’t include disclosures. In the posts, the influencers promoted products including Globe-Trotter luggage, Dolce & Gabbana, Beluga Brand Vodka and Haculla Clothing.

In the letters, the FTC requested responses from the influencers asking them whether they had material connections with brands mentioned in their posts. The Commission also asked the influencers to describe actions they were taking to ensure proper disclosures.

The FTC Guidelines: What Advertisers and Influencers Need to Know

If you’re involved with social media marketing and uncertain about how to properly disclose material connections, the FTC has the information you need. The consumer protection agency has published The FTC’s Endorsement Guidelines: What People Are Asking. The guidelines answer typical questions about endorsement that advertisers and influencers have. They also go into helpful detail about some of the finer points of endorsement disclosure on social media and blogs.

Clear and conspicuous disclosure of material connections is at the heart of the FTC guidelines for advertisers and influencers. That means you should treat disclosures the same way you would treat marketing messages, which wouldn’t be tucked away out of sight. They should be front-and-center, the first thing that consumers see. That way, consumers know right away that what they’re about to read or watch is an ad, not independent, objective editorial or content.

The FTC advises advertisers and influencers not to play games with endorsement disclosures. That means you shouldn’t do things like bury disclosures in a long line of hashtags or at the end of a video. Advertisers and influencers also need to use language that clearly indicates if a post is sponsored. Don’t use vague terms that a lot of consumers might not understand, like “#sponsored.” Instead, it’s best to use a straightforward disclosure, like “Company Z paid me to review this product.”

The FTC guidelines point out that the basis for Commission endorsement disclosure investigations and cases is Section 5 of the FTC Act. It was designed to protect consumers against deceptive advertising, a responsibility the Commission takes seriously.

Advertisers and influencers shouldn’t assume that there are no serious consequences for defying the FTC guidelines. The Commission also cautions that repeat offenders can lose the money they made from endorsements if they don’t obey the laws.

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