Influencers and undisclosed sponsored activities: where do we stand?

Suppose that you met someone who tells you about a great product. That person tells you that the product has fantastic new features that no other product has. Could that recommendation influence your decision to buy the product? Possibly yes, especially if you trust and admire that person. Now suppose the person works for the company that sells the product – or has been paid by the company to praise the product. Would you want to know that when you’re evaluating the endorser’s glowing recommendation? You bet.

The latter seems to be the issue underlying the increasingly extensive debate and concerns around those ‘influencers’ who fail to declare the existence of a commercial relationship with companies whose products they wear and sponsor, including via social media.

It seems that a situation of this kind has now arisen with regard to Kanye West’s latest promotional campaign that launched on Instagram last week. You can read more about the story here but the matter can be summarised as follows.

Kanye-gate

Ahead of the New York Fashion Week which is taking place these days (8-16 February), Kanye West has chosen to disclose his new line of clothes on Instagram, a week before its start.

As part of the campaign, social networks have been flooded with photos of various celebrities (eg, Paris Hilton, Jordyn Woods and Amina Blue) - all dressed in Kanye West’s “Yeezy” label. The casual nature of the Instagram photos is innovative to say the least – a commercial advertisement without a sales pitch – but just a hashtag stating: #YeezySeason6.

#YeezySeason6

The New York Times labelled West's creations “the most successful thing Kanye West has ever done in fashion” [not in absolute terms, as Mr West’s celebrity stunt in the music video “Famous” was way more impressive].

Nonetheless, Kanye West’s actions may not only prompt admiration from the crowds and/or envy from competitors, but also raise concerns of certain authorities, including the Federal Trade Commission (FTC) in the US.

Quite recently, in fact, the FTC adopted a set of guidelines: the Endorsement Guides.

The FTC’s mission and Endorsement Guides

Among other things, Section 5 in the FTC Act states that the FTC conducts investigations and brings cases involving deceptive advertising made on behalf of an advertiser.

In this regard, the Guides are intended to give an insight into what the FTC thinks about influencers’ undisclosed marketing activities and how Section 5 might apply to the resulting endorsements. The Guides themselves are not legally binding. However, practices inconsistent with the Guides may result in law enforcement actions alleging violations of the FTC Act. Law enforcement actions may prompt a defendant in a case to return any money received as a result of the violation in question and to abide by various requirements in the future.

Importantly, in its aim to prevent false or misleading advertisement, the FTC requires influencers to disclose any “material connection” between the influencer and the advertisement in a “clear and conspicuous” manner. A “material connection” entails disclosure of business or family relationships, monetary payments and also gifts of free products.

Unlike the counterpart in the EU – Directive 2005/29 concerning unfair business-to-consumer commercial practices in the internal market (the Unfair Commercial Practices Directive) – the FTC does not prescribe what words or terms provide consumers sufficient notice of a material connection [you can take a look at this article co-authored by Katfriend Senne Mennes].

The FTC instead recommends the usage of unambiguous language and that the disclosure in question stands out. This requirement may prove challenging on social media platforms that place limits on character use (such as Twitter) or text formatting.

Nevertheless, disclosures are possible: for instance, in the context of Kanye West’s promotional campaign – ”#YeezySeason6” could be replaced with a clearer hashtag, eg ”#adYeezySeason6”?

US not an isolated case

Growing concerns with influencers and undisclosed sponsored posts can be found also in Europe. For instance, a case of this kind was recently decided in Sweden [disclaimer: my current employer represented one of the parties to the litigation].

Kissie

In late January 2018 the Patent and Market Court in Konsumentombudsmannen v Alexandra Media Sweden & Tourn Media (PMT 11949-16), ruled that famous Swedish blogger and influencer Kissie was responsible for misleading marketing on social media. The case was brought by the Consumer Ombudsman (KO) that directed claims against both the company belonging to the influencer in question and Tourn (a third party actor and advertising network).

The Court held that expressions like ‘sponsored post’ and ‘collaboration’ are sufficiently clear in communicating that a post is to be regarded as an advertisement. Crucially, such expressions must either be given a particularly clear design or placed in a prominent position in relation to the post. In this particular case, two posts by Kissie were found to have failed to provide a sufficiently clear indication that they were in fact advertisements. Tourn was freed on all claims regarding co-liability for the unlawful advertisements.

The position of the Swedish court is in line with what the Unfair Commercial Practices Directive states. In particular Annex I thereof clarifies that the use of editorial content – whether offline or online – to promote a product without clarifying that the promotion is paid for is prohibited. Moreover, points 4 – 7 specify that hidden advertising may also constitute a misleading omission where material information is disregarded and therefore prompts the consumer to take a transactional decision that the consumer would not otherwise have made.