The Federal Trade Commission (FTC) announced on March 6 it has settled a lawsuit with the Florida-based company Teami LLC (Teami) over its claims that drinking its teas has positive health effects, including rapid weight loss, and over its use of influencers for marketing purposes without adequately disclosing the connection.
According to the March 5, 2020 complaint, Teami paid hundreds of influencers between June and late-October 2018 to endorse Teami products on Instagram, by a post or a video.
The influencers who allegedly had not made adequate disclosures were not named as defendants, but each received a warning letter from the FTC asking them to describe the actions they are or will be taking “to ensure that [their] social media posts endorsing brands and businesses with which [they] have a material connection clearly and conspicuously disclose [their] relationships.”
According to the complaint, the FTC had first contacted the defendants, Teami’s co-founders, in April 2018 to inform them that any material connections to any endorsers had to be disclosed clearly and conspicuously by using unambiguous language in a way that consumers can easily notice the disclosure without having to look for it.
Teami then implemented a social media endorsement policy, informed influencers about it, and provided guidance on how to disclose their relationship with Teami in their sponsored posts.
However, some of the video endorsements did not disclose the connection between Teami and the endorser within the video itself (see the Cardi B video here) while others did not include a disclosure in the first two or three lines of the accompanying text without having to click on “more.” Similarly, some Instagram posts only displayed the connection, when viewed in a follower’s feed, if the followers clicked on “more.”
As such, the FTC claimed that these sponsored social media posts were misrepresentations or deceptive omissions of material fact which are deceptive acts or practices prohibited by Section 5(a) of the FTC Act.
Under the proposed court order settling the FTC’s complaint Defendants and their agents are permanently restrained and enjoined “from making, or assisting others in making, any misrepresentation, expressly or by implication, about the status of any endorser or person providing a review of the product, including a misrepresentation that the endorser or reviewer is an independent or ordinary user of a product.”
Takeaway: Disclosures about the material connection must be clear and conspicuous
As explained in the FTC Guides Concerning the Use to Endorsements and Testimonials in Advertising, a “material connection” between the endorser and the marketer of a product must be clearly and conspicuously disclosed, unless the connection is already clear from the context of the communication containing the endorsement.
A material connection may be a business, family, or personal relationship. The proposed court order defines a clear and conspicuous disclosure as one “difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers.”
If the communication is solely aural (say, a podcast) or solely visual (such as an Instagram post), then “the disclosure must be made through the same means through which the communication is presented.”
If the communication is both aural and visual, such as a video, then “the disclosure must be presented simultaneously in both the visual and audible portions of the communication even if the representation requiring the disclosure is made in only one means.”
This means that if the influencer endorses product X only by wearing or showing it in his video, the disclosure must also be spoken, and if the influencer only endorses product or service Y in her video, without showing it, the endorsement must also be written.
A visual disclosure “must stand out from any accompanying text or other visual elements so that it is easily noticed, read, and understood.”
An audible disclosure “must be delivered in a volume, speed, and cadence sufficient for ordinary consumers to easily hear and understand it.”
Any disclosure “must be unavoidable.” It “must use diction and syntax understandable to ordinary consumers and must appear in each language in which the representation that requires the disclosure appears.” So if the influencer makes her endorsement in several languages, the disclosure must be in all of these languages.
Takeaway: Have a social media endorsement policy AND enforce it
The FTC complaint alleged that several social media posts sponsored by Teami did not follow Teami’s social media policy.
This shows that having a social media endorsement policy, but not enforcing it, is like having no policy at all. Marketers should train their employees and direct several employees to monitor social media postings to ensure that they are compliant.
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