Making Regulations on Influencer Advertising Click

Rapper Cardi B promoted “weight loss” detox teas to millions of followers, but the weight loss claims allegedly turned out to be a sham. In the world of social media influencer advertising, deceptive marketing has grown commonplace.

Social media influencing is a fast-growing and powerful industry. In the United States alone, brands are expected to invest 15 billion dollars into influencer marketing this year. The shopping behemoth Amazon has even launched its own influencer recruiting initiative.

But as the industry has grown, so has the problem of deceptive influencer marketing, which includes nondisclosure of sponsored content and product misrepresentation. Younger and potentially more impressionable users consume the majority of this marketing, as over 72 percent of teenagers report following influencers on social media sites. Youth consumer trends are largely determined by social media, and so marketing misinformation—such as false health and wellness claims—can be dangerous.

Regulatory agencies have taken steps to protect consumers, but the non-uniform, informal nature of social media influencing makes it more difficult to track and regulate this form of marketing than traditional ones.

The U.S. Federal Trade Commission (FTC) has sought to address the dangers of informal influencing with a series of endorsement guidelines to remind companies, marketing partners, endorsers, and influencers of their legal obligation to advertise honestly to consumers. The FTC has released further guidance on advertising to children, proper ad disclosure, review solicitation, deceptive marketing, and misbranding.

The U.S. Food and Drug Administration (FDA) has also released guidance for platforms, as drug and device manufacturers increasingly use promotional media and engage consumers on social media.

Although regulatory agencies have released extensive guidance and warned parties of their legal obligation to consumers, some experts argue that enforcement efforts have trailed behind.

When agencies have taken enforcement action, for example, they have apparently tended to target companies or brands rather than individual influencers who post content. The FTC has issued guidance clarifying that companies, brands, and advertising agencies are responsible for their social media influencers’ compliance with the law.

In this week’s Saturday Seminar, we feature the work of scholars who discuss the difficulties of regulating the growing influencer marketing industry.

• In a recent research paper, Catalina Goanta of Maastricht European Private Law Institute and Sofia Ranchordás of the University of Groningen discuss the emergence of the influencer profession and the complex legal and ethical issues posed in regulating this profession. Although social media influencing offers accessible and flexible alternative employment, Goanta and Ranchordas argue it usually requires a steady audience to monetize content, which may foster unethical practices. They claim that influencers tend to disregard regulatory policy and that regulatory agencies have difficulty in ensuring compliance. Goanta and Ranchordas explain that, although regulation is necessary, regulators must consider certain questions, such as whether agencies should treat influencers as individuals or professionals, as well as the role of free speech limitations in the regulation of monetized content.
• In a recent article published in The Wake Forest Law Review, Nancy K. Carr of California State University, Northridge explores the challenges that the FTC faces in implementing and enforcing its endorsement regulations. She breaks down the FTC’s endorsement guidelines into a series of key points and provides examples of brand, advertiser, and influencer Carr explains that the FTC’s enforcement approach comprises warning letters, callouts on Twitter, and even the settlement of enforcement charges. Carr questions the need for greater enforcement mechanisms due to the impracticality of policing the high volume of social media posts online. She further questions what damages would look like in legal actions and who should ultimately be pursued: the influencer, the advertiser, or both. Ultimately, Carr suggests that U.S. consumers can recognize sponsored content and are not as easily confused and misled as some people assume.
• In an article published in The Georgetown Law Journal, Alexandra J. Roberts of the University of New Hampshire Franklin Pierce School of Law addresses the ways in which influencer marketing can deceive and harm consumers. She explains how consumers place trust in influencers, which renders them vulnerable to deception. But she says that the FTC lacks the authority and resources to hold influencers accountable. The Lanham Act, however, allows private parties to hold them accountable, Roberts explains. Roberts contends that business owners are best positioned to litigate against influencers because of their resources and industry knowledge. Therefore, rather than relying solely on the FTC to regulate deceptive marketing, Roberts argues that companies should use the private right of action provided by the Lanham Act to combat false influencing.
• In an article published in the Food and Drug Law Journal, Tamany Vinson Bentz of DLA Piper and Carolina Veltri of Amazon analyze how regulatory authorities hold marketers accountable for deceptive advertising. Bentz and Veltri discuss how the rise in social media use has rendered social media marketing increasingly powerful and can lead to dangerous consequences. They explain how the FTC focuses its efforts primarily on marketers, rather than individual influencers, and seeks to ensure that “material connections” between the marketer and influencer are disclosed in social media posts. Bentz and Veltri suggest that targeting marketers may be more efficient for regulatory authorities and that it is unlikely that this focus will be redirected toward social media influencers.
• In a recent paper, Christopher Terry of The Hubbard School of Journalism and Mass Communications and Lee Silberberg and Stephen Schmitz of University of Minnesota Law School explain that the FTC has struggled to regulate influencer speech as the influencing industry has grown. Although the FTC has mainly targeted the businesses sponsoring influencers, they argue that this approach has effectuated minimal systemic change. Terry, Silberberg, and Schmitz contend that the FTC’s asserted tendency not to enforce regulations harms consumers by allowing widespread deception in popular online marketplaces. They say that many consumers do not understand the influencer process and are tricked into buying products based on “impartial” endorsements. To increase consumer protection, Terry, Silberberg, and Schmitz recommend that the FTC take a hardline approach to enforcement by targeting influencers themselves.
• In an article in the Vanderbilt Journal of Entertainment & Technology Law, Craig C. Carpenter and Mark Bonin II posit that the FTC should be flexible in enforcing provisions against influencers. They argue that rigid laws with harsh penalties would prove ineffective in a rapidly evolving industry and that the dynamic nature of social media requires regulators to be adaptive. Carpenter and Bonin II contend that self-regulation already exists in the social media marketing context because influencers are held accountable, and sometimes even punished, by followers who speak out against deceptive branding.