It can be wonderful and fun to be a social media influencer. But, the bottom line is that social media influencers are engaged in advertising and, as such, must comply with federal and State laws with respect to disclosure. Failure to disclose that you are being paid to endorse a product or service is considered false/misleading advertising and/or to be engaged in unfair/deceptive business practices. This can result in enforcement actions being brought by regulators. This, in turn, can result in expensive civil fines.

The best practice to avoid enforcement actions is to disclose even if your social media influencer contract does not explicitly require disclosure. (Your contract should require that, but some contracts don’t.)

Payment, of course, can come in many forms including cash, discounts, early access to products, free short-term access to (or the “borrowing”) of products/services, free products or services (even if unrelated to the product/service being endorsed), discounts, paid trips, eligibility for prizes, donations or payments made on your behalf, the promise/expectation of media/television appearances, and more.

But, disclosure is ALSO required if there is a “material connection” between you and the provider of the product/service. Payments — in the forms described above — are “material connections.” But there are other examples of a “material connections” such as employment, offers of employment, business, family, or personal relationships/connections, and more.

The Federal Trade Commission (“FTC”) is one of the main agencies that regulates false advertising at the federal level. The FTC has promulgated regulations on what constitutes a “material connection” (along with many examples). The definition is this:

“When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement, and that connection is not reasonably expected by the audience, such connection must be disclosed clearly and conspicuously.”

As can be seen, there are two aspects here. First, a material connection — like the payment or money or a family relationship — is one that could impact the credibility of the endorsement. Second, the connection is one that is “not reasonably expected by the audience.” This second aspect is particularly important for social media influencers. This is because, generally speaking, your audience will “not reasonably expect” a connection that is not disclosed. This is different from a world-famous Hollywood star or a famous sports athlete. Consumers generally expect a product/service endorsement from a Hollywood star or famous athlete IS paid for. So, for such individuals, disclosure of the “material connection” is not always required.

Again, disclosure is the best practice. Further, there is really no reason not to disclose. Your influence is based on the strength of you and your brand. If strong enough, your influence is not diminished by any sort of disclosure.

FTC Enforcement Against Influencers: Recent Actions

The FTC has stepped up enforcement against both brands and individual influencers for disclosure violations. In 2022, the FTC sent warning letters to more than 700 companies and celebrities — including athletes, musicians, and social media personalities — instructing them to clearly disclose material connections when promoting products. In 2023, the FTC followed up with updated warning letters for influencers who continued to post inadequate disclosures after receiving initial warnings. The next step after warning letters is a formal complaint, which can result in civil monetary penalties of up to $51,744 per violation.

The FTC has also brought enforcement actions against brands and marketing agencies — not just the individual influencers — recognizing that the brands directing the campaigns share responsibility for ensuring disclosures are made. FTC v. Csathy, No. 2:23-cv-05764 (C.D. Cal. 2023) (alleging that a talent agency orchestrated undisclosed influencer campaigns on behalf of clients). Influencers who receive instructions from brands or agencies that discourage or fail to require disclosure should be particularly cautious — the influencer bears personal responsibility for the disclosure obligation regardless of what the brand prefers.

The “Not Reasonably Expected” Standard in Practice

The FTC’s material connection standard turns, in part, on whether the connection is “not reasonably expected by the audience.” This question is audience-specific and context-specific. A television commercial is understood by virtually all viewers to be paid advertising — no additional disclosure is needed beyond the commercial format itself. But an Instagram post by an influencer who appears to be sharing a personal recommendation is not automatically understood to be paid advertising — the connection must be affirmatively disclosed.

There is a narrow exception for certain mega-celebrities where the paid nature of endorsements is so widely understood as to be presumed. But this exception is far narrower than many influencers assume. Having hundreds of thousands of followers does not make you a celebrity in the legal sense for purposes of this standard. The audience expectation analysis depends on whether the specific audience following you would reasonably assume that you are being compensated for the specific content you are posting. When in doubt, disclose.

Beyond the FTC: State Law Disclosure Requirements

The FTC endorsement guides are not the only disclosure obligation facing social media influencers. Several states have enacted their own unfair and deceptive practices statutes that can be applied to inadequate advertising disclosures. California Business and Professions Code § 17500 prohibits any “untrue or misleading” advertising statement, which California courts and the AG’s office have applied to inadequately disclosed influencer content. New York General Business Law § 349 prohibits deceptive acts and practices and grants consumers a private right of action with a minimum recovery of $50 — a provision that class action plaintiffs’ firms have begun applying in the influencer disclosure context.

Internationally, influencers who target EU consumers must also comply with the EU’s Digital Services Act (DSA) and the Unfair Commercial Practices Directive, which impose disclosure obligations on commercial communications that are broadly similar to, but not identical with, FTC requirements. Influencers with significant international audiences should obtain legal advice on their cross-border disclosure obligations.

Building a Compliant Influencer Practice: Best Practices

Influencers who treat disclosure as an integral part of their brand rather than an afterthought are both more legally compliant and, in many cases, more trusted by their audiences. A compliant influencer practice includes: (1) using clear disclosure language in every sponsored post — “#ad” or “Paid partnership with [Brand]” at the beginning of the caption or in the first line of text; (2) making verbal disclosures at the opening of any sponsored video content before viewers might click away; (3) never delegating the disclosure decision to the brand; (4) maintaining records of all material connections, compensation received, and disclosures made; and (5) reviewing contracts with brands to ensure that the brand’s compliance expectations are set out in writing, including confirmation that disclosure is required, not discouraged. Revision Legal represents influencers in contract negotiations and provides compliance counseling to reduce regulatory exposure.

Contact the Social Media Influencer Attorneys at Revision Legal

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