Blog Post

The FTC V. Shady Online Marketing

By: Jennifer de la Chevotiere

How many ads do you think you’ve seen today? If you follow any popular Instagram or Twitter accounts, or sat back to watch a YouTube video at any point, the answer could be a LOT higher than you think.

Social media has revolutionized the way brands can reach their target audience. Instead of traditional ads, more and more brands are setting aside funds to compensate social media ‘influencers’ to help sell their products.

Now, having well-known personalities endorse products is nothing new, but this changing landscape is making it increasingly difficult to parse genuine interest in a new product from a compensated endorsement of it. As one writer at Tech News World put it, “Social media influencer campaigns are based on that tried-and-true formula, but the implication is that the endorsements are voluntary.”
 

 
And, while many brands are taking advantage of this ambiguity, the Federal Trade Commission (FTC) is taking action to show they will not let this exploitation stand. The crackdown on disclosure began earlier this year when popular YouTubers Trevor Martin and Thomas Cassell were exposed and charged for consistently promoting a gambling website on social media that they turned out to own: CSGOLotto. Posts would include videos or claims of them winning large pots on the website…which some accuse them of altering the software to achieve.

Further, the two men allegedly paid thousands of dollars to other online influencers to covertly promote the website. Although this incident reached a settlement, the FTC continues to send warning letter to social media influencers and marketers suspected of promoting products without disclosing brand relationships.

In addition to sending what FTC public affairs specialist Mitchell J. Katz claims are essentially cease and desist letters, the FTC has also updated their Endorsement Guidelines to make expectations crystal clear.
 

 
The new guidelines include the mandate that any “material connection” between an endorser and a company should be disclosed. According to the FTC, “a material connection could be a business or family relationship, monetary payment, or the gift of a free product.”

Despite the FTC’s show of strength, we predict that enforcing the new guidelines will be a case of legal whack-a-mole. Especially since:

  1. Proving non-financial compensation could be difficult in many cases.
  2. There are thousands of influencers in the USA and even more around the world working with US brands.
  3. The big-name offenders stand to gain more from companies than they will likely lose if charged.

 
We would love to hear what you think about the situation. Is the FTC fighting a losing battle? Will the threat of charges stop influencers from posting ads without disclosure?

Let’s take this conversation to Twitter!

You can tweet us @expertdepos and/or use the hashtag #expertdepostech

Posted by ExpertDepos  November 3, 2017  6:34 pm