This past March, the Federal Trade Commission (FTC) sent out an “educational letter” to some 90+ celebrities, athletes and social media influencers warning them that their Instagram posts had violated the FTC’s endorsement guidelines.

In September, they sent out a follow-up letter to 21 of the original recipients, opening ominously with:“As you may recall, I wrote to you in March…”, and continuing from there to list further violations they had accrued. As of late November, the FTC had reached its first settlement regarding such endorsements with CSGOLotto, requiring they henceforth meet guidelines or face financial consequences. All of which got us wondering: are we breaking the law? And perhaps more importantly: what is the law?

In this nice little parable, the FTC explains their rationale: Suppose you meet someone who tells you about a great new product. She tells you it performs wonderfully and offers fantastic new features that nobody else has. Would that recommendation factor into your decision to buy the product? Probably.

coke, iceberg, ad, sponsor

Now suppose the person works for the company that sells the product – or has been paid by the company to tout the product. Would you want to know that when you’re evaluating the endorser’s glowing recommendation? You bet. Essentially, if you are going to endorse a product, and have been paid or given a free product to do so, “that connection should be disclosed,” allowing this to factor into a consumer’s decision.

Further, this disclosure should be made obvious, and should not require any special knowledge or maneuvering on the consumer’s part to become aware of it. Otherwise, what appears as an honest opinion may be given undue weight, when it is in fact a paid product placement, and not a true reflection of the influencer’s unbiased opinion.

The difficulty here is that it is much more profitable for a company to have its endorsements appear as honest opinions rather than paid sponsorships. Influencers typically rely on a foundation of trust they’ve built with their fanbase, and that trust is what influencers are paying for, not simply the platform; without it, an endorsement may be disregarded as “fake news.”

Case in point: a survey by SheSpeaks found that 1 in 4 influencers were asked by brands not to disclose their connection. For an industry currently worth one billion dollars a year and growing, this is an uncomfortable spot to be in. In an effort to find middle ground, this summer Instagram unveiled a tag for sponsored content which would be underneath someone’s handle and would read “paid partnership with [brand here].” More platforms are sure to do the same in the coming months.

However, it’s hard to be optimistic: since time immemorial, endorsements have worked by fooling the consumer into
thinking this person actually likes this product, no matter how unbelievable that may be. Think Tiger Woods really drove Buicks for all those years? Not likely.

This article was originally published in the Spring 2018 issue of Resource Magazine.  You can buy the whole issue here.

 Photo By Caitlin Hastings