Feds Crack Down on Social Media "Influencers" Over Instagram Plugs

FTC Influencers_Comp - Publicity - H 2017

Stars are now "in the crosshairs" as the FTC demands they reveal sponsorship deals when peddling products.

Stars who endorse brands on social media are on high alert following a series of warning shots fired by the FTC, and experts say it's only a matter of time before the Feds take action against a well-known personality to get the rest of the industry's attention.

Influencers earn their name by doing just that: influencing their millions of followers online. The agency is cracking down on common Instagram post practices like burying sponsorship disclosures in a string of hashtags, saying only "thanks to" a company in a post or merely tagging the brand.

"A big part of the influencer economy, which has been booming, is based on posts that likely violate the endorsement guidelines," says attorney Jesse Saivar, who reps both companies and influencers. “I remember having to kill a deal a few years ago because neither the brand or the influencer understood that they couldn’t just post without notifying users that it was sponsored.”

It’s a natural conflict, pitting brands that want marketing to seem organic against the agency that’s dedicated to making sure consumers aren’t misled. To avoid trouble, endorsers need to say — where it's easy to see — that they were paid to post or given a product for free. Using "#Ad" can be enough.

The FTC in April sent 90 warning letters to individuals and brands, including actress Ashley Benson, singer Ciara and model Amber Rose. In September, it sent a second letter to 21 of those influencers asking them to disclose any “material connection” with the company and, if one exists, detail what they plan to do to ensure their fans understand that relationship.

“The fact that the FTC is following celebrity Instagram feeds tells us that celebrities are now in the crosshairs,” says top advertising lawyer Jeffrey Greenbaum. “It’s a big red flag to talent and their representatives that they need to make sure these posts are being managed properly.”

Experts say the letters are a clear warning, and a recent settlement with two gaming influencers could portend further action. The FTC in September also announced it had struck a deal with Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell, who endorsed the online gambling service CSGO Lotto and failed to tell fans they owned the company.

“Given the amount of action the FTC has already taken this year, I think we should expect additional high-profile cases in the next few months,” says Greenbaum.

Former FTC government counsel Char Pagar says the agency is likely to target a serious violation, rather than someone who buried the disclosure in a string of hashtags. “Historically they tend to go after the low-hanging fruit first, the more egregious conduct first,” she says.

Things like owning a stake in the brand you’re promoting or touting false effects of health products are generally considered more sinful — especially if there’s no attempt at telling the public you’ve been paid or received something for free.

“Most of these influencers don’t know one person who’s ever had the FTC come after them,” says Saivar. “Maybe that's why the FTC feels this is the time to act. This is the time to prove to those stragglers they need to comply.”

While an administrative action from the FTC isn’t likely to carry a hefty fine (on a Hollywood budget, anyway) and may seem like nothing more than a slap on the wrist, experts say it’s not to be taken lightly. Anyone who comes to a settlement agreement with the agency is typically obligated to share that with any business partners moving forward.

“It’s more than just a hassle and a PR embarrassment,” says Greenbaum. “If a celebrity is under a consent order, brands may think twice about working with that person.”

And it’s not likely to end anytime soon, so Hollywood should heed the warning. “You could be on that list of 90 next time,” says Pagar. “I seriously doubt they’re going to drop it.”

A version of this story first appeared in the Oct. 4 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.