Influencer marketing is now a $1 billion industry. Alongside that market growth, however, full disclosure of #sponcon remains persistently elusive.
While the use of tags like #ad, #sponsored and #paid are growing — projected to be used in 14.5 million posts in 2017, up from 9.8 million in 2016 — the FTC has been slow to enforce its disclosure guidelines, which include making sure disclosure is “clear” and “conspicuous” when a post or product has been paid for. Other best-practices bar some hashtags from counting as disclosure, like #thanks and #spon, and prohibit approved hashtags from being nestled at the end of a long series of hashtags.
Fashion and beauty, particularly, are guilty of evading disclosure. Influencers in the space have said that #ad tags take away from engagement and don’t fit into an overriding aesthetic.
“Instagram has become a Wild West of disguised advertising, targeting young people and especially young women,” said Robert Weissman, president of Public Citizen, a non-profit consumer rights advocacy group that recently sent a petition to the FTC calling out stricter enforcement on social media disclosures. “That’s not going to change unless the FTC makes clear that it aims to enforce the core principles of fair advertising law.”
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As the influencer marketing industries mature, disclosure of these paid partnerships hasn’t quite caught up. Here’s how the guidelines — and enforcement of them — have evolved.
The FTC is crystallizing guidelines to limit confusion
The FTC’s original guidelines around product endorsements date back to the 1980s. In 2009, they finally updated the language of these disclosure practices to account for social media marketing. Since then, there have been a series of steps taken to make sure both parties — the brands and the social media stars — are not lost on the rules.
“The FTC’s guidelines have abided by a ‘there’s no one-size-fits-all’ rule for disclosure, so compliance has been fuzzy,” said Jason Merkoski, head of data at technology copmany TapInfluence. “There’s also been a lenient approach on enforcement, at least on the influencer side, because it was so new. People could make the case that they were in the dark.”
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That’s finally changing, after a few notable cases: In 2014, Cole Haan dodged a penalty fine after running a contest on Pinterest that asked participants to pin Cole Haan products in order to win. The FTC ruled that, while there was a violation of disclosure laws, no action was taken since rules around Pinterest endorsements had not been clearly defined. Last year, Lord & Taylor settled FTC charges that claimed the retailer failed to disclose paid promotions after 50 fashion bloggers posted Instagram shots of them wearing the same dress.
“Fashion has been particularly elusive — it’s not very ‘authentic’ to get that ad hashtag slapped on there, and the FTC has been generous around claims of confusion in the past,” said Ted Max, a fashion, apparel and brands lawyer at Sheppard and Mullin. “But looking at the progression of these cases, it’s clear that the FTC is paying attention. You don’t have an excuse anymore.”
Responsibility is finally shifting to influencers.
In its guidelines, the FTC says that responsibility errs on the side of the brand or agency that facilitates partnerships, rather than individual influencers. That grace period could be over.
Last week, the FTC made an unprecedented move by sending out more than 90 notices to influencers and marketers who weren’t abiding by the disclosure guidelines. The action was in response to a petition sent by the organization Public Citizen, and the notices called out specific undisclosed Instagram posts where a paid relationship was apparent. While just a warning — and a reminder of the rules — the FTC plans to continue to monitor the flagrant accounts.
This is the first time the FTC has pinned responsibility for disclosure directly on influencers, rather than the marketers, which have previously had the onus of disclosure compliance practices on their shoulders. As influencer marketing becomes an increasingly present strategy for fashion marketing, the people involved in posting on behalf of brands are being looked at as owners of functioning.
“Particularly in fashion, influencers are becoming such an important component of a marketing strategy, they’ve risen to a place where they are regularly influencing decisions for customers,” said Vejay Lalla, a partner at the law firm Davis & Gilbert. “Some of these people are getting paid seven figures, and they can’t play dumb.”
Social media’s shifting landscape raises stakes
Fashion’s recent obsession with micro-influencers, or social media personalities with a smaller but engaged community of followers, could guide disclosure clarity in the future. Stars, like the ever-present Kardashians, won’t blink at an FTC fine when a single paid post can earn them up to $75,000. Smaller influencers, on the other hand, will feel lasting effects of a crackdown. According to the FTC, a disclosure violation could result in a fine of up to $16,000.
“Influencers we work with today are more concerned about that disclosure, because they see it as their jobs and personal businesses on the line,” said Merkoski. In response, TapInfluence built an artificial intelligence–powered auditor that can programmatically determine whether or not a social media post is FTC-compliant.
As Instagram builds out more features, like Instagram Stories ripe for influencer takeovers and shoppable tags, brands just have more opportunities to slip up.
“More features just add more ways for brands and influencers to get themselves into trouble,” said Danielle Garno, a fashion lawyer at Greenberg Traurig. “The FTC doesn’t care about what things are being sponsored, only that it’s clear it’s being sponsored.”
