FTC Warns Two Trade Associations and 12 Online Influencers to Better Disclose Financial Connections
On November 13, 2023, the Federal Trade Commission (FTC or Commission) sent warning letters to the American Beverage Association (AmeriBev), The Canadian Sugar Institute, and a dozen dietitians and influencers promoting the safety of artificial sweetener aspartame or the consumption of sugar-containing products on TikTok and Instagram. The letters allege that the dieticians and influencers did not adequately disclose that the associations paid for the endorsements. The FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising (the Endorsement Guides) state that “paid endorsements should clearly and conspicuously disclose any unexpected material connections to ensure that consumers have the information they need to make informed purchasing decisions.” The warning letters put the trade groups and influencers on notice that further violations of the Endorsement Guides could result in fines of up to $50,120 per violation.
The warning letters indicate that material connection disclosures were either missing or inadequately prominent and pointed to the Endorsement Guides as well as staff guidance and prior enforcement actions. Specifically, the FTC pointed out that none of the TikTok or Instagram videos the agency viewed included a disclosure in the video itself. The Commission reminded the associations and influencers that disclosures must be made in all of the same means in which the representation is made (e.g., if a video makes both a visual and an audible representation, it must also include both a visual and an audible disclosure). In the FTC’s view, even express disclosures in social media posts, such as “Paid partnership,” “#sponsored,” and “#ad” were not compliant because they required a user to scroll down to see them, so were insufficiently conspicuous. Further, they did not identify the sponsors of the posts, or they identified the sponsor as “ameribev,” which the FTC claimed many viewers may not understand. The warning letters are structured in the form of a Notice of Penalty Offense (NOPA) per Section 5(m)(1)(B) of the FTC Act (45 U.S.C. § 45(m)(1)(B). In 2021, the FTC sent similar warning letters to more than 700 businesses regarding fake reviews and misleading endorsements.
The FTC actively enforces the Guides under its Section 5 of the FTC Act authority, and as we previously discussed here and here, the recent update to the Endorsement Guides makes clear that disclosures about the relationship between an advertiser and an endorser must be “clear and conspicuous” (i.e., “unavoidable” and “easily understandable”), and that even tags in social media posts and certain other types of communications can be endorsements. Businesses should be aware that the FTC is also proposing a new trade regulation rule to crack down on deceptive online reviews, including endorsements that lack proper disclosures of a material connection between endorser and business.
The recent warning letters make clear that words and tags alone—even wording and hashtags that the FTC has indicated are appropriate—may not adequately disclose a material connection between an advertiser and influencer if they are buried in social media posts or otherwise easy for consumers to miss. The warning letters illustrate the FTC’s focus on endorsement disclosures as well as the Commission’s ever-expanding use of its NOPA authority to potentially bolster a future civil penalty action for violations. Companies using influencers or other endorsers should be sure that they are up to date on the FTC’s guidance and have a compliance program in place.