Soup-To-Nuts Podcast: FTC warning to influencers includes new disclosure principle

For example, in the letters sent to American Beverage, the Canadian Sugar Institute and several health influencers with which they worked, FTC suggested the common use of #ad or #sponsored somewhere in the text of a social media post is not the silver bullet that some people hoped. Likewise, the letters indicate a single passing reference to the sponsorship status of a post also may not be enough – especially if the platform uses multiple types of media to convey a message or if the players involved are not immediately clear.

In this episode of FoodNavigator-USA’s Soup-To-Nuts Podcast​, Laura Brett, vice president of the BBB National Programs’ National Advertising Division, breaks down the significance of these and other shifts in FTC’s expectations around disclosures and endorsements for marketers and influencers. She also highlights what she says could be a new principle that FTC outlines – possibly for the first time – in the letters, which is a requirement that influencers not only disclose sponsorships but also who sponsored them if it is not immediately evident. And finally, Brett puts FTC’s action in context of other enforcement efforts and offers best practices for avoiding consumer confusion and staying on FTC’s good side.

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Warnings follow investigation by journalists at The Washington Post​

The letters sent to the two trade associations and influencers focus on posts on Instagram and TikTok that appear to deflect some of the criticism of aspartame following a World Health Organization warning about the sweetener.

While the FTC does not take issue with the content or claims in the videos, they express concern that the posts did not sufficiently disclose that the influencers were creating the posts at the behest of the trade groups – a realization that was brought to light by The Washington Post in September.

Those same influencers called out in the story were among those who FTC sent warning letters – prompting a follow-up story in the Washington Post with the headline “FTC cracks down on food industry for paid dietitian ‘influencer’ posts.”​

‘This is not a crackdown,’ it is a clarification​

According to Brett, this characterization may be an overstatement, but she adds the content of the letters is still important.

“Everybody should just take a deep breath and exhale. This is not a crackdown. This is the FTC sending warning letters. They’re using their authority not to bring an enforcement action, but to send warning letters … really illustrate for companies, some of the principles that were outlined in the endorsement guides,” which were updated earlier this year, Brett said.

The biggest takeaway from the letters, according to Brett, is FTC’s emphasis not just on disclosing a sponsorship but also clearly stating in a way consumers can understand who the sponsor is – a potentially new principle that shakes the foundation of how many companies have handled disclosures on social media.

“The FTC letters make it clear that when you're making a disclosure, you should be looking at the disclosure from the eyes of a consumer and specifically the consumer who's going to be looking at it. So while several of these posts did have a disclosure, indicating a sponsor whether AmeriBev or some sort of abbreviation for the Canadian Sugar Association, the FTC said that that was insufficient … because the FTC is looking at this from the point of view of a consumer who may not be that familiar with those associations,” she said.

Letters underscore advertising best practices​

The FTC also stresses in the letters that where the disclosure is matters. As Brett notes, it needs to be prominently placed and in a format – or formats – that match the multi-media nature of social platforms, which may mean repeating disclosures several times in the same post. This means providing the disclosure in the audio and the video – even if there is a disclosure before the video starts. And, the disclosure should appear early – so in the first or second lines of text, not the sixth or tenth.

FTC also makes clear in the letters that visual disclaimers need to be “clear and conspicuous.” This may sound obvious, but FTC notes in the letters that text disclaimers in some of the TikTok and Instagram Reels promotions were too small, at the bottom of the screen or were poorly contrasting and didn’t stand out.

Influencers and brands who rely on paid partnership disclosure tools provided by social media platforms also may be in for a rude awakening, as FTC once again points out that these tools are not always sufficient.

In addition, the FTC also reiterates when they disclosures are needed  -- i.e. anytime there is what FTC calls a “material connection” between a brand or company and an influencers. Notably, Brett points out, this is not restricted to a paycheck. It could also include free product, coupons or other perks both big and small.

Could enforcement be on the horizon?​

For now, the warning letters are just that – warnings – but Brett notes they do caution recipients about the potential for sizeable civil penalties if the companies and influencers do not take satisfactory corrective action.

“There is no consequence at the moment. There are no fines, no consequences. What we do have though, is the FTC has asked these companies to follow up with them on what they are going to be doing in response to the letters and put them on notice that they could be subject to civil penalties o up to $50,000 per violation .. if the FTC is not satisied that the’'re bringing their influencer marketing practices into compliance with the law,” Brett said.

The potential penalties could be devastating for companies if they don’t come into compliance. For example, in 2020, FTC imposed a whopping $15.2 million judgement against tea and skincare brand Teami for deceptive influencer practices. This was equal to the total sales of the challenged products. Ultimately, FTC suspended most of this upon payment of $1m based on the defendants’ inability to pay – but that amount could still be devastating to a food and beverage brand.

NAD offers competitors a way to level the playing field​

Brett argues that the point of the penalties isn’t to squeeze as much as possible out of the defendants, but rather to send a clear message to all businesses about the importance of following the law. She also notes that as companies bring their own houses in order they can also help level the playing field by challenging competitors that they believe are misleading consumers through the BBB National Programs’ National Advertising Division.

“With regard to influencer marketing specifically, and the need for clear and conspicuous disclosures, we created a new … Fast-Track SWIFT ​process that resolves any competitor challenges to advertising issues, as long as it is a single issue, in 20 business days,” Brett said.

In the end, the current FTC action is a work in progress as the recipients have 15 days from receiving the letters to respond, which could either resolve the matter or lead to actual enforcement. But either way, Brett says the message to the industry is clear, which is the long-used #ad or #sponsorship is not a silver bullet and companies need to clearly disclose material connections including both the sponsorship and the sponsor.