The Feds Issues Stern Warning to Brand Ambassadors, Influencers, and Endorsers
Today on LegalPOP we're discussing, the Feds, brand ambassadors, and your business.
Most people are familiar with the idea of brand ambassadors, influencers, and endorsers but have you seen #ad or #sponsor and wondered, what’s up with that? If you are in business then you know that the number one rule in running a successful business is not to be the world’s best-kept secret. People need to know what you do and or what you have so they can spend their money with you. Traditional avenues such as radio, television, and billboards are great way to get the word out but can be expensive and often require lengthy contracts. While traditional methods of advertising are still relevant, social media has made it possible for brands big and small to expeditiously overcome the know, like, trust hurdle in ways that weren’t possible before.
Social media makes it possible for people like you and me to make connections all over the world. To amass a large and ever growing list of “friends” and followers. To become virtual aunties and uncles to children we have watch grow up but have never physically met. Savvy businesses are taking note and reaching out to not only celebrities but also social media celebrities (those who have a huge amount of followers on social media) to promote their products and services. By putting their goods in the hands of someone their ideal client already knows, likes, and trust these companies have struck gold.
Consumers see the celebrity's use as a stamp of approval. In addition to "likes", followers race to be the first spend their money and follow suit, which is why brand ambassadors are often compensated. Compensation may be monetary or take on some other form such as free products, services or other gifts.
Sidebar: This is just one of the reasons you can’t use someone’s likeness without their permission. People, especially celebrities, typically get paid to promote other people’s business. Keep this in mind before advertising your product.
These endorsements are like personal referrals. Referrals are powerful. Think about it. If you are looking for an attorney, a plumber, even somewhere to eat, what’s the first thing you do?
You ask someone. Referrals are so powerful that even Facebook created a feature to make seeking recommendations simpler.
This is great but what does it have to do with the Feds? Glad you asked…
Last month the Federal Trade Commission, or FTC as they are so fondly known, sent a letter to almost 90 influencers, including approximately 45 celebrities, warning their endorsement practices may be breaking the law.
What is the FTC?
The FTC is a bipartisan agency of the federal government created to both protect consumers and promote competition. It recognizes that consumers are influenced by what they hear and see. You can’t deny the number of people ordering cosmopolitans went up after millions caught Carrie fever, or the increase of little brown boys and girls across the United States wanting to attended HBCUs to get the Hillman experience, or the number of misguided souls aspiring to be gangsters, dope dealers, and womanizers to be more like their favorite rapper. Just as with most everything else in life there are rules to advertising. Although using brand ambassadors is not a traditional for of advertising, it is still advertising.
Advertising is defined by businessdictionary.com as
“the activity or profession of producing information for promoting the sale of commercial products or services.”
If you are a brand ambassador, thinking about becoming one, or even using one you MUST play by the rules. Not doing so could cost you. Literally. The penalty, which was increased in June of last year to account for inflation, is between $16,000- $40,000.
Interpreting and applying law can be a bit cumbersome for non-lawyers. To assist businesses, ambassadors, and influencers with the law, the FTC published a guide governing endorsements and testimonials. Essentially as a brand ambassador or a business working with brand ambassadors you have a responsibility to do these 4 things:
1. Be honest. Your endorsement MUST reflect your honest opinion, findings, beliefs or experience with the product or service.
2. If using a statement from an ambassador, influencer, or endorser do NOT use the statement out of context. You don’t have to use the statement verbatim but you cannot make it suggest something it was not intended to state. i.e... influencer says "OMG I love tacos" you can't say "Influencer loves our tacos"
3. DON’T say you used a product if you haven’t. OTM can’t have the best tacos you ever had if you never had their tacos.
Sidebar: The difference between an advertisement and endorsement is that on commercials consumers recognize that actors are being paid to promote a product. It’s a lot more difficult to discern from an Instagram post whether Khloe really loves OTM tacos or if she is being compensated to say she does.
4. Which brings us to our last point, both influencer and business have a responsibility to DISCLOSE the relationship. If you post a review of a product you received in exchange for your testimonial disclose that ‘ish. If a company is paying you to put their products in front of your followers, disclose that ‘ish. If you are paying an ambassador to promote your product or service….. You guessed it, disclose that ‘ish.
Sidebar: The disclosure MUST be plain. The relationship between endorser and business should be clear. Consumers shouldn't have to wonder if you are being compensated for your endorsement.
Although the guide is not law and there are no penalties attached to failure to adhere to the guide, failure to adhere to the guide could put you at risk for a FTC investigation to determine whether you have violated the FTC Act.
What is the FTC Act?
The FTC Act are the laws the guide was created to explain. Remember, one of the FTC's responsibilities is to protect consumers from being manipulated or duped, the FTC enacted the FTC Act, which gives the, among other things, the power to prevent deceptive acts or practices in or affecting commerce and seek monetary redress (hence the 40k) and other relief for conduct injurious to consumers.
So what are deceptive acts or practices? A practice is deceptive where
• a representation, omission, or practice misleads or is likely to mislead the consumer;
• a consumer’s interpretation of the representation, omission, or practice is considered reasonable under the circumstances; and
• the misleading representation, omission, or practice is material.
Now you know what’s poppin. Influencers are big business both for businesses and the influencer but as with all things if you are going to play the game you have to know the rules.
P.S. You can also view our video on this subject here
If want to know how the FTC regulations affect your specific situation, schedule a consultation for a time that is convenient for you.