The FTC Endorsement Guides and Fake Personas

The Federal Trade Commission’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, 16 C.F.R. Part 255, are the primary federal regulatory framework governing affiliate and influencer marketing. The 2023 updated Guides — the first major revision since 2009 — significantly expanded the disclosure obligations and explicitly address AI-generated endorsers and fake personas.

Under the Guides, a ‘material connection’ between an endorser and a marketer must be clearly and conspicuously disclosed. A material connection includes any financial relationship — including affiliate commissions — as well as any employment, family, or close personal relationship. When the ‘endorser’ is a fictional persona created and operated by the brand itself, the entire endorsement relationship is a material connection, and the audience has no way to evaluate the independence (or lack thereof) of the recommendation.

FTC Enforcement: What the Cases Tell Us

The FTC has brought numerous enforcement actions against deceptive endorsement schemes. In FTC v. Devumi, LLC (S.D.N.Y. 2019), the FTC settled with a company that sold fake social media followers and engagement — finding that creating the false impression of social proof violated Section 5 of the FTC Act. In In re Sunday Riley Modern Skincare, LLC (FTC 2020), the agency sanctioned a cosmetics company for instructing employees to post fake reviews.

Fake-persona affiliate marketing sits squarely within the same enforcement framework. The FTC’s position is clear: the agency will treat as deceptive any advertisement that creates a false impression of independent endorsement. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), prohibits ‘unfair or deceptive acts or practices in or affecting commerce.’ Penalties under the FTC Act can reach $51,744 per violation per day (as adjusted for inflation). Civil investigative demands, consent orders, and structural injunctions are also common remedies.

State-Law Deceptive Trade Practice Claims

Beyond federal FTC enforcement, fake-persona affiliate marketing exposes businesses to liability under state consumer protection statutes. Nearly every state has enacted a Little FTC Act or a Uniform Deceptive Trade Practices Act (UDTPA) equivalent. Many of these statutes — unlike the FTC Act — create a private right of action for injured consumers and competitors, including statutory damages and attorney’s fees.

• California: The California Consumer Legal Remedies Act (CLRA), Civil Code § 1770, and the Unfair Competition Law (UCL), Bus. & Prof. Code § 17200, both prohibit deceptive representations about the nature or sponsorship of goods or services. Violations can result in class actions.
• New York: General Business Law § 349 prohibits deceptive acts or practices and allows consumers to recover actual damages or $50, whichever is greater, plus attorney’s fees. No proof of reliance is required.
• Michigan: The Michigan Consumer Protection Act, MCL § 445.901 et seq., similarly prohibits deceptive trade practices and provides for actual or statutory damages.

Platform Terms of Service Liability

Fake-persona affiliate marketing also runs afoul of the terms of service of virtually every major digital platform — including Amazon, Meta, Google, TikTok, and YouTube. Platform bans, account terminations, and clawback of affiliate commissions are common consequences. Some platforms have filed civil suits against fake-persona operators under the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030, alleging that creating fake accounts violates the platform’s terms of service in a manner that constitutes unauthorized access to a computer system.

Structuring a Compliant Affiliate Program

A compliant affiliate or influencer program requires clear disclosure at every touchpoint. Key elements include:

• A written affiliate agreement that obligates affiliates to disclose the material connection clearly and conspicuously in every post, review, or advertisement.
• Specific disclosure language that the FTC will accept — ‘#ad,’ ‘#sponsored,’ or ‘I received compensation for this post’ are acceptable; ‘#partner’ buried in a list of hashtags is not.
• A monitoring program to audit affiliate content and terminate affiliates who violate disclosure requirements.
• A prohibition on fake-persona operations in the affiliate agreement, including representations that all affiliate accounts represent real persons or entities.
• Training for any employees or contractors who manage the affiliate program on FTC Endorsement Guide compliance.

If your business has run or is considering a persona-based marketing campaign, speak with an attorney before you launch. Revision Legal’s internet law attorneys advise brands on FTC compliance, affiliate program structuring, and defense of FTC investigations. Contact us at revisionlegal.com/contact or visit our Internet Law practice page.

The answer is: probably. The specific facts will determine if it is illegal and/or unethical to use fake personas and non-existent influencers to engage in affiliate marketing. It also depends on which party has created the fake persona/false influencer.

The general legal principles are as follows:

• Deceptive business practices are illegal
• False advertising is illegal
• The use of frauds and deceits to deprive people of their money — or other things of value — is a form of theft under the laws of every State

With affiliate marketing, a provider of goods and/or services contracts with an “affiliate” — who could be a person or a company — to promote the goods/services. Often, the arrangement is a pay-per-sale or pay-per-lead. Let’s look at a hypothetical example involving a person — let’s call her Patty — who operates a gardening website. A company that sells garden tools and accessories contracts with Patty — the owner of the website — to promote certain garden tools. Let’s call the company “GardenCo.” Patty might use the tools in a video or discuss the tools in an article. Let’s assume that Patty has a link on her webpage that allows a reader/viewer to go to GardenCo’s website to buy the tools. Generally, Patty will be paid a commission on that sale. So far, so good.

However, there is a legal issue if Patty does not disclose to her viewers/readers that she gets a commission from GardenCo for any sales that result from using her link. The Federal Trade Commission has explicitly said that it is false advertising to fail to disclose that one is promoting a product/service in exchange for money or other consideration.

Putting that aside, let’s consider the circumstances where Patty and her website are completely fake. “Patty” is not real; all images and video of “Patty” are computer generated, and, likewise, the content of the website is entirely generated by an AI computer program. There are two possibilities here. First, some third party created and now controls “Patty” and her website and contracted with GardenCo without disclosing the fake persona and CGI-created website content. Second, GardenCo created and controls “Patty” and her website. In the first case, that third party has committed fraud and deception against GardenCo and viewers/readers. In the second case, GardenCo has committed fraud and deception.

Let’s focus on the second case, where GardenCo created and controls “Patty’s” website. The fraud and deception lie in the fact that consumers perceive “Patty” as independent and separate from GardenCo. As such, if “Patty” praises and recommends the garden tools, that praise and those recommendations are seen as personal and are more persuasive. By contrast, if GardenCo praises its own tools, that is to be expected because, of course, any business will praise its own products and services. The fraud in this example is also well-planned, pervasive, and long-running. This is precisely what would be called a “scheme to deceive.”

Of course, the legal and ethical issues mostly vanish if GardenCo is up-front about “Patty” and her website. Most issues are resolved by a simple notice at the top of “Patty’s” website saying: “This site is owned and operated by GardenCo.” Moreover, the fact that “Patty” is fake could be turned into a marketing opportunity with the phrase: “Patty is our wonderful state-of-the-art CGI spokesperson. Enjoy the show.”

Contact the False Advertising and Deceptive Business Practices Attorneys at Revision Legal

For more information, contact the experienced FTC Compliance Lawyers at Revision Legal. You can contact us through the form on this page or call (855) 473-8474.