FTC Settles its First Complaint Against Social Media Influencers

As previously reported, the Federal Trade Commission (FTC) has begun to take notice of advertising activities involving social media influencers. In April 2017, the FTC reminded influencers and brands to clearly and conspicuously disclose their relationship in accordance with the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising (also known as the Endorsement Guides).

On Sept. 7, 2017, the FTC announced  its settlement with Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell, two social media influencers who endorsed the online service, CSGO Lotto, without disclosing that they owned a substantial portion of CSGOLotto, Inc., the operator of CSGO Lotto. In fact, some of Martin and Cassell’s videos and social media posts described in the FTC’s complaint could imply that CSGO Lotto was operated by an unaffiliated third party.  For example, Cassell tweeted, “Bruh.. i've won like $8,000 worth of CS:GO Skins today on @CSGOLotto I cannot even believe it!” The FTC found that the lack of disclosures regarding the material connection between Martin and Cassell and CSGO Lotto was deceptive.

In addition to their own posts, Martin and Cassell had an “Influencer Program” through which they paid other influencers amounts ranging from $2,500 to $55,000 to endorse CSGO Lotto on social media. Influencers who were paid as part of the “Influencer Program” were not required to disclose the payment or their relationship with CSGO Lotto.  As with Martin and Cassell’s posts, the FTC found that the lack of disclosures in the influencers’ posts was deceptive.

Pursuant to the Settlement Order (which is subject to public comment until Oct. 10, 2017), Martin, Cassell, and CSGOLotto, Inc. must submit a compliance report one year from the settlement date, report within fourteen days any changes in business activity (such as a title change, merger, sale, or dissolution), and follow certain disclosure requirements. While the Settlement Order is not binding on other influencers and brands, the following requirements from the Settlement Order are instructive as to the FTC’s expectations:

  • Do not misrepresent – or allow any of your employees or representatives to misrepresent – expressly or implicitly, that an influencer is an independent user or ordinary consumer.
  • Provide influencers with a statement of their responsibility to clearly and conspicuously (in close proximity to any representation) disclose any material connection with a brand, its affiliates, and/or a product or service.
  • Create and implement an ongoing monitoring plan to confirm influencers are making proper disclosures in connection with endorsements of a brand, its affiliates, and/or a product or service.
  • Terminate and cease payment to any influencer who is misrepresenting or failing to disclose any material connection with the brand, its affiliates, and/or a product or service if such misrepresentation or failure cannot be cured.

In addition to this settlement, the FTC sent warning letters to 21 influencers regarding the necessity of disclosing in social media posts a material connection with a brand, product, or service. These actions illustrate the FTC’s continued attention toward social media and influencer marketing. Accordingly, brands and influencers should consult with legal counsel and review the Endorsement Guides, the Settlement Order (especially the above requirements), and the FTC’s updated version of its guidance document, The FTC's Endorsement Guides: What People are Asking, to evaluate whether their social media policies and practices comply with the FTC requirements.