Big Sean asked in a recent song, “Do you like getting paid or getting paid attention?”
With social media, athletes and celebrities can get both: money and publicity. As a result, social media’s popularity has never been higher and its benefits have never been more prevalent. Over recent years, social media has emerged as a major revenue stream for business-savvy celebrities. Those in the public eye who have amassed large followings are now routinely sought out and paid by major corporations to endorse or review their products.
Selena Gomez and Kim Kardashian are thought to be the highest paid, both rumored to earn over $500,000 for each endorsed post. Likewise, social media endorsements have exploded within the sports world. Today, it’s never been easier for agents to sign advertising deals for athletes and secure hefty payouts. Real Madrid soccer star Cristiano Ronaldo is said to pull in $400,000 per post and an endorsement from LeBron James will likely cost around $120,000.
As social media endorsements grow in popularity, the Federal Trade Commission has elevated its efforts to ensure transparency in product placements. As a result, the FTC has developed “Endorsement Guides” to regulate these posts. Under these guidelines, celebrities must state if they received compensation for their endorsements of a product.
Here are a few of the major take-aways from the FTC guidelines:
- You must disclose an endorsement within the first three lines of an Instagram post. One should not have to click “more” to see that it is an endorsement.
- Disclosures can be as simple as “#ad” but must be easily identifiable.
- Examples of wording that are not easily identifiable and cannot be used to identify a sponsorship include “#sp,” “#spon,” “Thanks [Brand],” or “#partner.” Likewise, if you are combining other words with the hashtag, this is likely insufficient because it may not be easily identified by a consumer.
- You must disclose if you received a product from an advertiser.
- You must disclose even if you only posted a picture. You do not need to have accompanying words expressing your love for the product.
- You must disclose even if the advertiser only wants you to post that you “want the product.” An endorsement can be aspirational.
- You must disclose even if you live in another country if it is reasonably foreseeable that the endorsement will be seen in the US.
- If you routinely endorse a product, you do not need to disclose the relationship with every post if a significant portion of your followers are aware of the endorsement deal.
According to the FTC, “The Guides, at their core, reflect the basic truth-in-advertising principle that endorsements must be honest and not misleading. An endorsement must reflect the honest opinion of the endorser and can’t be used to make a claim that the product’s marketer couldn’t legally make.” The FTC has stated that it is important for social media influencers to outright state any material connection to brands they endorse in their posts. By clearly disclosing these relationships, the FTC believes consumers can make more informed purchasing decisions by factoring in potential biases into their buying habits.
In 2016, the nonprofit organization Truth in Advertising sent a letter to the Kardashian-Jenner family, claiming to have found over 100 Instagram posts that were paid product placements without being marked as advertising which were clear violations of these guidelines. Truth in Advertising threatened to send information regarding these posts to the FTC if they were not taken down. While there is no record of the FTC taking any sort of action against the Kardashian-Jenner family posts mentioned, it is clear that this year they have begun to take social media posts more seriously.
Earlier this spring, the FTC sent letters to several celebrities encouraging them to disclose endorsements and partnerships. Recently, the FTC once again sent out a more strongly worded letter to those who are still not complying with the initial “educational” letter. Social media tastemakers who received at least one of these letters are believed to include: Mark King (President of Adidas Group North America), Allen Iverson, Sophia Bush, Naomi Campbell, Victoria Beckham, Emily Ratajkowski, Amber Rose, Sofia Vergara, and Scott Disick.
Many thought that these letters were toothless threats and that the FTC was merely going through the motions without any intent to enforce the guidelines. However, the FTC has shown a greater interest than anticipated. In fact, the FTC recently pursued its first-ever action under the guidelines against two YouTube influencers.
The FTC brought a formal action against Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell for violating Section 5 provisions of the Federal Trade Commission Act by conducting “unfair or deceptive acts or practices in or affecting commerce.” The specific charges were False Claim Of Independent Reviews, Deceptive Failure To Disclose Endorsers Were Owners And Officers, and Deceptive Failure To Disclose Endorsers Were Paid.
The FTC action began when it was discovered that Martin and Cassell were joint owners of the gambling website CSGO Lotto. Martin and Cassell had endorsed the gambling website in various YouTube videos without disclosing that they had ownership in the company. Martin and Cassell then paid other influencers thousands of dollars to promote the website on multiple social media platforms without requiring them to disclose the sponsored nature of their endorsements.
Martin and Cassell recently settled out of court. Under the settlement, Cassell and Martin must “clearly and conspicuously disclose any material connections with an endorser or between an endorser and any promoted product or service” going forward. Similarly, they must maintain accounting and business records for 10 years and must respond promptly to any monitoring requests from the FTC. However, it does not appear that there was a financial component or penalty to the settlement.
While social media was once revered as a refreshing and innovative clean slate for business opportunity, it now appears that FTC monitoring is here to stay. Furthermore, with Martin and Cassell, the FTC has shown they are willing to enforce these guidelines and take action against violators. Athletes and celebrities will now have to be cognizant of these guidelines and be more meticulous about the wording of their social media posts. Luckily, avoiding the ire of the FTC can be as simple as a hashtag.