Beckett Writes for MusicRow

Friday, December 6th, 2019

“Full Disclosure” written by partner, Matthew Beckett, is featured in the 2020 Touring issue of MusicRow.

Full Disclosure

Social media platforms have dramatically affected the way advertisers reach consumers. In the last year, 18% of consumers have purchased an item after seeing it promoted on social media by an influencer; that number jumps to over 35% for consumers under the age of 25. By the end of 2019, advertisers will have spent approximately three billion dollars on social media influencer marketing, which is expected to double in 2020. Such expenditures are certain to attract the attention of the federal agency tasked with consumer protection, the Federal Trade Commission (“FTC”).

Social media influencers are users of social media who have established credibility in a specific industry. They have access to a large audience and can persuade others by virtue of their perceived authenticity and reach. Influencers may only have a social media presence, or they may be a celebrity through other ventures, such as recording artists.

With advertisers looking to maximize social media influencers in their marketing plans, the FTC is trying to protect consumers from what amounts to deceptive advertising. It has enforced rules for celebrity endorsements for years but always focused on the advertiser. In 2017, however, the FTC took action against ninety influencers whose endorsements on social media did not have proper disclosures.

An endorsement is an advertising message that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the advertiser, even if the party giving the message has the same views as the advertiser. Endorsements can be communicated by video, photograph, audio message, television program, personal appearances, and the most popular form – social media posts, including tagging. Consumers give certain credibility to the opinions of influencers and have no way of knowing the nature of the influencer-advertiser relationship. To protect consumers, the FTC requires a “clear and conspicuous” disclosure when there is a material relationship between the influencer and the advertiser, such as a payment, free sample, business relationship, family relationship, ownership, etc. In short, the influencer must disclose the relationship when it affects the weight and credibility of the influencer’s message.

How to properly disclose an endorsement relationship must be addressed on a case-by-case basis, depending on the message and medium. The FTC makes it clear in its guidelines that hyperlinks or a simple “thank you” are insufficient; as is positioning disclosures above or below photographs, in the corner of videos, or using audio-only disclosures in videos. The guidelines suggest superimposing the disclosure on the photo or video in easy to read fonts. Another acceptable approach is using “#ad” and “#sponsored.” In most cases, an influencer would be compliant by superimposing the applicable hashtag in the video or photo near the endorsed product.

These hashtags are particularly suitable for posts on Instagram and other social media platforms. In addition, the FTC has approved the hashtag “#xyz_partner,” where “xyz” is the name of the advertiser. The influencer should place the appropriate hashtags in the caption of the post, but if there is a string of hashtags, the disclosure hashtags must be placed at the beginning of the string and not buried in the middle or the end where the reader may not see them. If the influencer tags products in the post, there must be a disclosure in the caption for each product tagged for which there is a relationship that requires disclosure.

Influencers cannot rely on platform branding tools, such as Instagram’s “Paid Partnership Feature.” This feature places “Paid Partnership with XYZ” where the location tag usually appears, with “XYZ” being the name of the advertiser. The issue is that the placement is above the photograph where the viewer may not see it. If the influencer uses such a feature, he or she should include the appropriate hashtags as well.

In addition to informing consumers, disclosures protect the relationship between the influencer and the advertiser. The FTC will take the same action against the advertiser that it takes against the influencer. An influencer’s failure to disclose will likely breach the warranties and representations in his or her agreement with the advertiser, requiring the influencer to indemnify the advertiser for damages and attorneys’ fees.

The FTC’s goal for disclosure rules is to protect consumers from what amounts to deceptive advertising. For influencers, proper disclosures build trust with followers who value their opinions. We strongly recommend that artists and their support teams familiarize themselves with the Guides Concerning the Use of Endorsements and Testimonials in Advertising and The FTC’s Endorsement Guides: What People are Asking, which can be found at ftc.gov. As always, you should consult with an attorney whenever you have questions on FTC compliance.