The FTC Influencer-Advertiser Crackdown

Introduction for "The FTC Influencer-Advertiser Crackdown" article on the Musicfox Slightly-Sharpe blog.
Jason R. Stevens, CFA
Jason R. Stevens, CFA

Do you get paid via product, brand, or affiliate endorsement? The Federal Trade Commission sent letters to more than seven hundred major companies, warning them and their influencer marketing partners to either disclose relationships or risk seriously breaking US law.

It’s time to wise up and make sure you rock your disclosure game in your next YouTube, Twitch, or Facebook posting. Here’s how to do it.

Shameless plug

Musicfox doesn’t engage in any influence or endorsement marketing, however, many of our clients are, by the nature of their role in society, influencers. And it’s important to us that we provide tools and information, like our https://b00st.com software and this write-up, to help do things right.

But first, a little background.

Why is the FTC involved in relationships between influencers and brands, and what are disclosure rules, generally? Upon creation of the agency in 1914 (on September 26th, to be precise) in response to the Rockefeller-Morgan “monopoly”, or rather, trust, the FTC was charged with promoting industrial competitiveness and protecting consumers from the harms of anti-competitiveness. Read the Title 15 US Code § 41 act.

The FTC has since enforced a number of antitrust and anti-competitive behaviors in media, technology, marketing, finance, video gaming, and even the funeral home industries. Its Bureau of Consumer Protection operates the well-known Do Not Call Registry.

A few general areas of commerce within the FTC's enforcement bounds are:

- the circulation or promotion of advertisements with false or misleading statements,

- deceptive or misleading sales practices

- general monopoly/antitrust, and

- predatory sales and business schemes.

In antitrust, an example is the FTC suing the American Medical Association in 1976 for disallowing advertisements in their code of ethics (effectively stifling competition). In 1932, the FTC began its fight against the Warner-Lambert company, the makers of Listerine, for falsely advertising that Listerine could cure things like the common cold. More recently, the FTC concluded that Sears Holdings misrepresented the use and nature of a Sears application that tracked users without telling them. And a more prominent example: the FTC recently settled with Facebook for $5 billion for their “work” with Cambridge Analytica, where detailed, personal user data was sold on the open market to illicit groups, totalitarian governments, and nation-state digital predators. Get the FTC press release here.

These are just a few of the types of cases the FTC pursues throughout the economy. And this very much matters to Musicfox’s part of the world -- music, entertainment, and digital creators, now.

Nothing’s changed: The web makes it easy to pull the trigger.

We’re certainly not lawyers at Musicfox, but it is our opinion that many influencers today do “pull the trigger,” unintentionally violating FTC guidelines. And in music, where exactly do the lines blur between influencer and artist, at some point in the artist’s career?

Whether it’s a whiskey brand, sneaker, or product endorsement, look hard enough, and nearly all successful artist businesses have participated in the “influence” space. We’d even argue that those endorsements and products an artist brand makes or aligns with, if done right, lead to a better product for consumers of that artist’s music. Can you actually imagine a Grateful Dead show without tie-dye t-shirts?

Let’s cut to the chase: artist brands, entertainers, and digital content creators need to include endorsements as a line of business, not just for the spreadsheet, but for the content consumer, too. And there are right ways, along with wrong ways, to engage with other brands, products, and services as an influencing endorser.

Tips to do it right

Thankfully, the FTC mostly enforces items on major brands and businesses that purchase advertisement services from the influence marketing industry. That said, high-profile cases against popular artists, actresses, actors, and other public persons will continue to be had.

One great aspect of modern times is that if you actually take the time to do something right, you have the means to freely learn how.

Here are a few tips we’ve compiled:

- Agree what will be said, stated, and done by the influencing endorser about the product, good, or service, with the potential advertiser.

- Do contractually require objectivity from the influencer’s point of view, prior to endorsement or accepting payment for such endorsement. This goes hand-in-hand with the potential keyword, above. For the influencing endorser this is also self-brand protection, as the Fyre Festivals of the world will likely avoid conspicuously objective influencers.

- Get written, specific brand guidelines from the product, good, or service business. This should include behavioral aspects with regard to the background and history of the influencer.

- Disclose and discuss up-front any conflicts of interest, such as a family member who works with the potential advertiser or financial interest in the potential advertiser. As an example of the latter, if an immediate family member happened to be a portfolio manager at a mutual fund company with a known, large equity (stock) position in the potential advertiser, the influencer should disclose the relationship up-front.

- Write down who owns data from the agreement of what will be said, stated, and/or done from the influencer’s perspective.

- Whenever available, utilize software that helps navigate branded content, e.g. Facebook’s Brand Collabs Manager, YouTube’s BrandConnect, etc.

For influencers:

- Put an “I’m being paid by xyz” disclosure in writing, somewhere that doesn’t require scrolling or clicking. In a video? Say the disclosure up-front, similar to any radio or sports show (“brought to you by xyz company/brand “).

For brands:

- You must monitor your influencers. If FTC enforcement history hasn’t made it clear, you will be targeted for top-dollar settlements.

- You must understand the imbalance between your wallets and your influencers’ wallets, acting as true partners. Though imbalanced, your influencer relationships are very public and very scalable, if something were to go wrong. This is a future “black swan” for brand value. Play it safe by treating your influencing endorsers as internal brand ambassadors.

For both:

- Important relationships need lawyers and written agreements. Don’t skimp on this.

Resources you have

You’ve read this far, so here are some resources we find helpful:

- FTC’s online disclosure guidelines: https://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-staff-revises-online-advertising-disclosure-guidelines/130312dotcomdisclosures.pdf

- ISBA’s influencer marketing site: https://www.isba.org.uk/knowledge/influencer-marketing

- Major law firms’ media and writings, such as this fantastic podcast interview between Sarah Bruno and Jason Gordon, partners at our law firm, Reed Smith: https://viewpoints.reedsmith.com/post/102gzb7/data-and-advertising-considerations-in-influencer-marketing

- Reed Smith influencer transparency in UK, US, and Germany: https://communications.reedsmith.com/23/4031/july-2020/update-on-transparency-requirements-for-influencers-in-germany--the-united-kingdom-and-the-united-states.asp

To review

The FTC and other regulatory bodies around the world have the influencer marketing industry on heightened alert for undisclosed and otherwise shady sales tactics.

Though the FTC tends to focus on major corporations and organizations, artists, creators, and entertainers should align their practices with this heightened period of enforcement. Ways to do that include written up-front agreements between brands and influencers; verbal and written disclosure with content consumers from brands and influencers, and clearly defined branding, use, and review objectivity guidelines, prior to consummation of an influencer-advertiser relationship.

And if the moral of the story wasn’t clear: you can do it! It’s 2021, so literally, and figuratively, anything is possible. So go forth, create away, and we’ll be here to assist you along the way.

Stay classy 😎


Marketing? Checkout https://b00st.com. But you’re a developer? Join our Developer Platform alpha: contact@musicfox.io.


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