The head of the Federal Trade Commission has called for tougher penalties on businesses that seek to disguise advertising as authentic reviews on online platforms, including Instagram, YouTube and TikTok.
In a statement released this week, the FTC claimed that “American families and small businesses are rightfully skeptical of traditional advertising, which is clearly designed to persuade or manipulate us ... Facebook’s Instagram and Google’s YouTube are major vehicles for influencer marketing campaigns, with China’s TikTok also growing rapidly.”
The FTC’s targeting of current social media giants TikTok, Instagram and Facebook comes just after the Commission voted 5-0 to open Endorsement Guides for advertising to public comments. The existing Endorsement Guides haven’t been updated since 2009.
In the meantime, the growth of the influencer marketing industry has exploded, with brands set to spend up to $15 billion on influencer marketing by 2022. This growth hasn’t been driven only by fashion and beauty brands putting money behind the Kardashians, either; brands from a range of industries are coming to realize the value of partnering with influencers from all kinds of niches and sub-sectors. From micro- and nano-influencers, kidfluencers, computer-generated and gaming influencers, products and services are enjoying a whole new marketing platform in the world of social media. While some influencers use the online world to post about their interests and earn extra cash on the side, other companies are using this channel to pretend endorsements are untainted by financial ties.
“When companies launder advertising by paying an influencer to pretend that their endorsement [is not paid for],” said Commissioner Rohit Chopra, “this is illegal payola.”
The FTC has long required influencers to disclose sponsored posts, but the existing guidelines appear to have had little effect: in a recent campaign cited by the FTC, U.S. retail brand Lord & Taylor paid 50 social media influencers to post about a product on Instagram, without explicitly requiring influencers to disclose the facts of the paid partnership. As a result, the FTC charged Lord & Taylor with leading the public astray, ultimately settling the case after prohibiting the company from “misrepresenting that paid ads are from an independent source.”
Moreover, the FTC is cracking down on companies accused of pressuring influencers to hide the reality of any paid endorsements. Video network Machinima has already settled a deceptive advertising complaint with the FTC after failing to disclose that it paid YouTubers to endorse the Xbox One while requiring them to frame their opinions as independent reviews.
The implications of this crackdown for brands planning to work with influencers can’t be understated: the statement released this week explicitly refers to the rise of influencer marketing on Instagram, YouTube and TikTok, and cites the difficulty of ensuring authentic marketing at a time when “fake accounts, fake likes, fake followers, and fake reviews are now polluting the digital economy.”
While the FTC has yet to impose a monetary penalty on offenders in this new market, the message is clear: companies that violate its policies online are now well and truly in the FTC’s crosshairs.
Ronn Torossian is the founder and CEO of 5W Public Relations.