2021: FTC Regulations and Influencer Marketing

Alessandro Bogliari, Co-Founder & CEO of The Influencer Marketing Factory, shares the latest FTC regulation updates every marketer should have on their radar.

---

The success of influencer marketing in the last decade creates a new challenge for the 21^st century. The prevalence of campaigns in a growing industry means that there need to be more stringent controls that protect consumers from unfair practices. The US Federal Trade Commission (FTC) is leading the way in reviewing the content and marketing initiatives of brands, with a renewed focus on influencers.

When discussing influencer marketing, it is any social media campaign that offers product or service endorsements. The influencer is often a celebrity or an expert within a specific niche that can add social proof to a product idea, helping brands develop equity. In a survey by Sprout Social, three-quarters of consumers will rely on social media when making purchasing decisions. A reliable influencer can reach thousands or millions of people.

Looking at some macro-influencers in 2020, Desi Perkins offers make-up tutorials to 3.9 million Instagram followers, fashion influencer Jette gets an 18% engagement rate per social post, and Eugene Lee Yang has over 6.5 million subscribers on YouTube. A product endorsement by any of these influencers is almost certain to get a strong response from their loyal following.

What does the FTC do?

For influencers, the FTC rules state that they must be transparent regarding any brand endorsements they present to followers. If a follower engages with an influencer, it is essential that they are aware they are being targeted by brand marketing. According to the FTC, any influencer that violates the rules may be subject to penalties and fines. 

It is often the case that in return for brand promotion, the influencer is given free products or services. While most will be upfront about this, it is challenging to tell whether they are being genuine or faking the endorsement to maintain a partnership with the brand. An FTC review at the start of 2020 discovered that the existing rules do not always have the desired effect. 

In a statement by Commissioner Rohit Chopra:

“When individual influencers are able to post about their interests to earn extra money on the side, this is not a cause for major concern. But when companies launder advertising by paying an influencer to pretend that their endorsement or review is untainted by a financial relationship, this is illegal payola”

Rohit Chopra

There are already cases where brands have faced fines for a breach of the regulations, which we will talk about later in this post. For much of the time, those involved did not receive monetary penalties, and there wasn’t enough of a punishment to deter others. The FTC is now calling for more formal rules, which means violators could face civil penalties. 

FTC Communication Guidelines

Brands and influencers must adhere to set rules from the FTC with marketing campaigns, covering several key areas of social media. 

Hashtags

With hashtags, any advertising should be disclosed at the start of advertising. Specific phrases like #sponsored, #paid, or #ad will show followers a partnership with a brand in place that may involve fees. 

Language

An influencer should be explicit in stating that they are being sponsored by a brand or that the product they represent was given to them for free. For example, they should say that “Brand X gave me this product for free” and not something ambiguous or not completely clear and transparent. 

Different social media platforms provide their own tools that help influencers’ campaigns adhere to the FTC guidelines. 

Instagram

In March 2017, Instagram added a “Paid Partnership With” tag. The tag aims to help influencers display content as sponsored advertising. The use of #sponsored, #paid, and #ad will disclose any partnerships as long as they are visible in the main text and not in small print via the “more” button. 

YouTube

When using YouTube, video creators can add disclosure text to campaigns. Influencers have video manager settings that let them select those requiring a disclosure statement, declaring that a product is paid or endorsed. 

The FTC advises that videos should also have overlay messages to make the advertising incredibly clear for consumers. Statements should be added to the first 30 seconds of a video, allowing viewers enough time to see what it says.  

TikTok

In 2020, installations of TikTok have boomed during the Covid-19 pandemic as consumers seek entertaining video content. To alleviate any security concerns, the TikTok Transparency Center moderates data practices. By nature, TikTok content is fast-paced and growing, making ads that don’t meet the guidelines tough to spot, but the FTC guidelines still need to apply. As a rule, TikTok experts will look into:

1. Ways that users and creators can raise concerns about advertising and how those are handled
2. The way that content is allowed on the platform and how it can align to the FTC guidelines
3. Methods to review the technology and why possible FTC violators are missed

FTC Fines

The FTC regulations are not new, and high-profile companies have faced fines in the last decade. For example, a settlement was reached requiring a maker of detox teas to return $1 million to consumers after the rapper Cardi B did not disclose paid endorsements. 

While influencer marketing is an excellent way to gain loyalty and revenue for a brand, they must do so compliantly. The FTC guidelines add security to a social ecosystem rife with fake news and media. Brands should note the regulations to maintain their credibility, avoid fines and legal proceedings, and mitigate online misrepresentation. 

Run an FTC Compliant Influencer Campaign

Schedule a time to speak with one of our Influencer Marketing experts, and learn the important steps you need to take to run a successful influencer campaign.