Good news: your brand has finally signed a contract with a coveted celebrity endorser. Now all of her millions of online fans will be lining up to buy your product. There’s nothing for you to do now but sit back and cash checks, right? Of course, it’s not quite that easy. Let’s go over a few things you need to know about social media law and celebrity endorsements.
I wrote about endorsements in a 2015 blog post about podcast law: https://lizerbramlaw.com/2015/07/21/podcast-legal-tips-endorsements/.
A lot of the same points apply here, so this is a bit of a rerun, but there are some issues that pertain specifically to social media & celebrities that I’ll address throughout this post.
To keep it simple, in this post I’m going to use the word “endorsement” to include any type of endorsement, testimonial, or affiliate arrangement. And when I say “celebrity,” that doesn’t have to mean Kim Kardashian. These rules apply to anyone, particularly to those with significant online presences. Even someone whose audience is in the hundreds or thousands, rather than the millions, has to follow these rules. Nonetheless, I’m using the word “celebrity.”
Let’s start here: the Federal Trade Commission, or FTC, is a U.S. government agency. The FTC has the power to investigate and prevent deceptive trade practices. The FTC regulates advertising, so if you work with a celebrity who helps promote your brand, products, or services – including through testimonials, endorsements, or affiliate deals – these rules apply to you.
What if you don’t have a formal written contract with the celebrity? If a celebrity receives something for free – or at a discount – in exchange for a review or endorsement, they need to disclose that information. Even if it’s not a straight up quid pro quo, these rules apply.
For example, let’s say you reach out to someone with a prominent social media presence and say: “Here’s a coupon for 50% off our nutritional supplement.” Nothing is said about an endorsement or testimonial. They buy the discounted supplement, try it out, like it, and post a picture on their social media channels of themselves enjoying the supplement. Based on these rules, they must disclose that they received the goods at a discount.
The FTC Guides
What kinds of “Products” do these guides apply to? The Guides define the word “product” as referring to “any product, service, company or industry.” So if a celebrity is endorsing just about anything, these rules apply.
In the 2015 blog post I linked to above (heck, I’ll make it easy for you and link it again here), I broke it down into 5 simple rules. You can refer back to that post for more detail, but, as a reminder, the 5 rules are:
- Be Honest
- If You Claim to Be an Expert, Actually Be an Expert
- It’s About the Relationship (Between the Celebrity Endorser and the Company)
- You Can’t Hide or Bury the Disclosure
- Fancy Legal Jargon is Not Your Friend
The bottom line is that someone who’s endorsing a product, whether they received it for free, at a discount, or via some other sort of contract, must disclose the nature of that relationship.
What are the consequences of not disclosing?
Once the Commission has promulgated a trade regulation rule, anyone who violates the rule “with actual knowledge or knowledge fairly implied on the basis of objective circumstances that such act is unfair or deceptive and is prohibited by such rule” is liable for civil penalties of up to $11,000 per violation.
So Who’s Responsible, the Company or the Celebrity Endorser?
The simplest answer is that they’re both responsible for following the rules. Thus far, the FTC has been lax about going after online celebrity endorsers, but this might be changing. They’ve announced an event to be held next month called “Putting Disclosures to the Test,” the intent of which is “to examine the testing and evaluation of disclosures that companies make to consumers about advertising claims, privacy practices, and other information.”
Edgar Alvarez at Engadget recently examined this issue at length and came up with quite a few Kardashian-related examples of online endorsements that failed to include an appropriate disclosure. He also noted:
Earlier this year, the department store Lord & Taylor settled charges with the FTC after it was found to have deceived consumers by paying 50 “influencers” to advertise a clothing collection on Instagram without disclosing that these posts were paid promotions. Although the Lord & Taylor case was a win for the FTC, the brand was the only party held liable — not the bloggers who played a major role in it.
So if you’re on the side of the company that’s paying for the endorsement (or otherwise compensating the endorser), it’s up to you to take affirmative steps to ensure that the social media posts are in compliance with FTC guidelines. If the social media posts don’t contain the right disclosures, the FTC may opt not go after the endorser, but you, the company behind the product, are likely to be the one who’s the subject of an FTC investigation. That’s not a situation you want to find yourself in.
What to Do
Make sure that your celebrity endorsers or brand ambassadors always include words like “#Ad,” “Sponsored,” “Promotion,” or “Paid ad” in the post. Every time. On every platform. Don’t rely on the endorser to know about or understand the rules. This is on you, so learn the rules and follow them.