FTC Goes After Paid Endorsements Presented as Commentary

As smartphone users turn increasingly to ad blockers, marketers are getting their messages out by paying Internet influencers under the table to promote their products as personal reviews and commentary. For some time, the practice was beyond the reach of the Federal Trade Commission, which made sure paid endorsements were advertised as such in television, newspapers and magazines. With new guideline changes initiated in 2015, however, the FTC is now going after violators, just reaching a settlement with video network Machinima.

The Verge says as far back as January 2014 there were reports that Machinima paid YouTubers to include Xbox footage in their seemingly independent reviews — and told to keep the payments secret. The company just settled with the FTC, prohibiting it from “misrepresenting that paid endorsers in influencer campaigns are independent reviewers.”

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More recently, the FTC went after Lord & Taylor, filing a complaint with three separate violations: that the merchandiser “falsely represented 50 Instagram images and captions” as independent statements from fashion influencers when they were part of an ad campaign to promote a new line; that Lord & Taylor did not disclose the influencers were the company’s paid endorsers; and that the company “falsely represented that the Nylon article and Instagram post reflected Nylon’s independent opinion about the Design Lab line,” when in fact they were paid ads.

The FTC’s 2015 rule changes are clearly trying to bring some order to a Wild West in which brands have been testing the boundaries of advertising — and going beyond — to entice “teenagers with little business experience and millions of passionate followers on platforms like YouTube, Instagram, and Snapchat.”

That’s the recipe for “unscrupulous advertising” and the FTC is now actively trying to put an end to it.