FTC Rules for Paid Endorsements and Sponsorships

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Written By Brian T. Edmondson, Esq.

Hi, I'm Brian. I'm an internet entrepreneur & lawyer. I write about all things internet business & law.

Hey, it’s Brian. This article is for informational purposes and is NOT legal advice, cool? Onto the article…

Back in October 2022, Kim Kardashian was fined $1 million for failing to disclose that an Instagram post she had made for crypto asset EthereumMax was actually a paid endorsement.

In March 2020, detox tea company Teami was compelled to return $1 million to consumers for misleading claims, as well as the failure of celebrities and influencers to properly disclose their relationships with the company.

In other words, these folks had been paid to endorse the teas… but did not say so clearly on those social media posts.

What’s the deal?

As an influencer, content creator, blogger, vlogger, TikTok famous celebrity… you might think that, even if you have thousands of followers, you’re somewhat flying under the radar of the mainstream… including the government. 

While it’s true that the Feds are more focused on the operations of larger and more traditional companies – and traditional media, they are becoming increasingly savvy in the online world and social media. This goes for regulations and their enforcement of those laws. 

And you don’t have to be a Kardashian to get on their radar. 

Plus, even if you live overseas, but your content is seen by U.S.-based consumers, these rules also apply. (And with the way the Internet works, of course, this is very often the case.)

What Disclosures Must You Make as a Content Creator or Influencer

One of the major areas of concentration for the Federal Trade Commission today is the proper disclosure by content creators of paid sponsorships, endorsements, and affiliate relationships. 

If you work with any brands or endorse products – if you get anything of value (not only money) to mention a product or company – this applies to you.

If you get free or discounted products or other perks (say a theme park YouTuber was invited to a special press event and party)… that must be disclosed.

And it’s not just written, photo, or video content that falls under these rules…

Things like tags, likes, pins, or other ways to highlight a brand or product could also require a disclosure. And even live streams require such disclosures.

The FTC is tasked with protecting consumers in all sorts of ways, including deceptive or misleading advertising. And it’s not as if the agency is targeting online ventures specifically.

Rather, the agency is simply applying the same laws to influencers and the like as they do to more traditional businesses. 

Basically, as the FTC puts it:

“If you endorse a product through social media, your endorsement message should make it obvious when you have a relationship (“material connection”) with the brand. A ‘material connection’ to the brand includes a personal, family, or employment relationship or a financial relationship – such as the brand paying you or giving you free or discounted products or services.

Of course, not only are such disclosures required by law. But they are ethical as well.

Think about it… as an influencer, you have influence with your audience. You don’t want to betray that trust.

Plus, your followers and/or customers will appreciate your honesty and transparency. 

I want to stress that even if you consider your reviews or evaluations of a brand, product, or service to be honest and unbiased, you must disclose any relationship you have with that product or brand.

How to Be in Compliance with the FTC and the Law

The rules for disclosing financial relationships with brands are pretty straightforward. 

Above all, the FTC wants disclosures to be crystal clear and hard to miss.

This means that the disclosure should be within the endorsement message. You can’t hide it in your About page or at the end of a post or video or in 1-point type.

It must be prominent. The terms and conditions of your website or of a social media platform are not enough.

As far as the language of the disclosure, the FTC likes it to be, “simple and clear.” Even something like “Thanks to [brand] for sending me [product]” or “Thanks to [brand] for sponsoring this post. 

You can use terms like ad, paid ad, advertisement, or sponsored. You could also call yourself a [brand] ambassador or [brand] partner, especially on platforms where posts are shorter.

But don’t think you can get away with burying something like #ad inside 10 or 20 other hashtags.

More Details on Endorsements

It’s important to note that there are more rules set down by the FTC regarding endorsements and sponsorships.

  1. You can’t endorse, review, or recommend a product you haven’t tried.
  2. If you think the product is actually terrible, you can’t say you like it.
  3. You can’t make up claims about a product without proof. (This is especially important in the health and wellness space.)

Where to Go From Here

As you can see, being in step with the FTC and the law regarding paid endorsements, sponsorships, and the like is fairly easy. 

You can benefit financially from these relationships all day long… if you do it the right way. And by following these simple rules you can avoid fines and other penalties.

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