New FTC Guidelines Proposes to Address Deceptive Endorsement Advertising on Social Media
Lack of enforcement has led to gray area surrounding endorsement advertising, especially from ‘microcelebrities.’
WASHINGTON, December 12, 2022 — The rapidly changing social media landscape has led to significant gray area surrounding endorsement advertising from both well-known household names and internet “microcelebrities,” with widespread deceptive practices being facilitated by vague rules and a lack of enforcement, according to experts on a Center for Data Innovation panel Thursday.
The Federal Trade Commission in July proposed changes to its endorsement guidelines for the first time since 2009, and is currently soliciting public comment on the proposal.
These changes are long overdue, said Christopher Terry, professor at the University of Minnesota’s Hubbard School of Journalism and Mass Communication. The government would not tolerate the deceptive endorsement practices by influencers “from an endorser in any other medium,” he said.
He said one of the primary challenges with endorsement advertising on social media is disclosing the financial relationship between brands and influencers in a way that will be understood by consumers. Recent research has demonstrated that many people cannot correctly identify sponsored content on social media, Terry said.
Children are particularly susceptible to endorsement advertising, added Irene Ly, policy counsel for Common Sense Media. Although the proposed guidelines’ inclusion of a new section about child-specific advertising is a positive step, she said, there is still a lack of specificity that might cause confusion for advertisers.
Existing legal standard for endorsement disclosure
There are different ways to provide disclosures on various platforms, and it can be difficult for influencers to figure out the best method for each, said Po Yi, a partner at Mannatt, Phelps & Phillips. However, it is broadly understood that paid posts need some form of disclosure, and most influencers are attempting to comply.
According to the FTC’s “Guides Concerning the Use of Endorsements and Testimonials in Advertising,” Section 255.1, “Endorsements must reflect the honest opinions, findings, beliefs, or experience of the endorser.”
Screenshot of panelists from the Center for Data Innovation event
The bigger challenge is that many influencers, especially those with smaller followings and less access to legal resources, don’t realize that their endorsements must be based on personal experience with the product, Yi said.
In November, Google and iHeartMedia had to pay millions after being sued by the FTC for deceptive endorsement advertising. Google provided iHeartMedia with scripts for on-air personalities and celebrities to endorse the Pixel 4 in ads that aired over 11,000 times, despite the fact that none of the endorsers had ever owned the phone.
So far, enforcement agencies have focused on going after companies rather than individual influencers.
Companies should educate influencers on the disclosure and personal experience requirements, but they also need to consistently monitor influencers to ensure continued compliance, Terry said.
There is often confusion about who is ultimately responsible for compliance, Yi said.
“If something goes wrong, the FTC will probably tell you right away, everyone in that chain is responsible, from the influencers to the media company to the agency to the advertiser,” she said.
Another question of liability arises with fake reviews: Should online platforms be responsible for verifying users’ identity, or does that fall to the brands?
Section 230 currently protects social media platforms from liability for fake reviews, Terry said. However, with new content moderation laws on the horizon, this responsibility could soon shift.
