FTC Announces New Review of Influencer Marketing Disclosures, and Potential Penalties

Influencer marketing could be in for a shake-up, with the FTC calling for public comments on the need for improved disclosure in influencer arrangements and paid product endorsements on social media platforms.

As explained by the FTC:

“Facebook’s Instagram and Google’s YouTube are major vehicles for influencer marketing campaigns, with China-based TikTok also growing rapidly. Social media platforms promote and profit from influencer marketing in many ways. […] According to one estimate, companies spent $8 billion on advertising through social media influencers in 2019. Due to its perceived effectiveness, spending on influencer marketing is projected to increase to $15 billion by 2022. But, there is a harmful, dark side of this approach. Fake accounts, fake likes, fake followers, and fake reviews are now polluting the digital economy, making it difficult for families and small businesses looking for truthful information.”

With influencer endorsements on the rise, the FTC has suggested that there’s a need not only for more clear labeling on paid-for posts, but also harsher penalties to disincentivize ignorance or avoidance.

The FTC has used the cases of Lord & Taylor and Sunday Riley as examples.

In 2016, Lord & Taylor was found to have paid 50 fashion influencers to post images wearing a particular dress on Instagram, which resulted in the dress subsequently selling out. The influencer posts did not include any disclosure in regards to them being paid posts – but while the company was found to be in breach of the existing regulations, the FTC eventually settled the matter with no penalty.

The Sunday Riley case was a more high-profile example – Riley had been ordering her employees to write fake reviews on Sephora.com in order to boost sales, while also disliking negative reviews to lessen their impact. 

The FTC charged Sunday Riley and her company with deceiving the public about the material connections between the company and the reviewers […] but the FTC proposed another no-money, no-fault order.​”

Going forward, the FTC says, it will need to “seek tougher remedies” for companies which are violating the rules around paid endorsements.

The review could lead to a range of new restrictions and regulations in influencer marketing, which could impact both the companies undertaking campaigns and the influencers themselves. It’ll take some time for the FTC to make the next move in this respect, but with influencer marketing on the rise, it’s only logical that enforcement action will need to be ramped up in order to ensure that clear lines are drawn on what’s acceptable practice and what’s deception.

The limitation here is that laws implemented by the FTC in America won’t necessarily apply in other regions, which is why the FTC is seeking to impose specific regulations on the platforms themselves, as well as the companies involved. That, still, remains a murky area from a legal perspective, but definitely, most would agree that a clearer level of disclosure is needed, and meaningful penalties should be instituted for those found to be in violation.


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