First FTC Complaint Against Individual Social Media Influencers

The Federal Trade Commission has announced that social media influencers that are widely followed in the online gaming community have settled charges that they deceptively endorsed the online gambling service, CSGO Lotto, while failing to disclose they jointly owned the company.

According to the FTC, beginning in late 2015, the respondents operated and advertised the csglotto.com website. The CSGO Lotto name was based on Counter-Strike: Global Offensive, also known as “CS: GO,” an online multi-player, first-person shooter game. The game uses collectible virtual items called “skins” that can be used to cover weapons in distinctive patterns. Skins can be bought, sold, and traded for real money. CSGO Lotto enabled consumers to gamble, using skins as virtual currency.

One respondent is the company’s president and another, its vice president. As alleged in the complaint, each posted YouTube videos of themselves gambling on their website and encouraging others to use the service. One of the respondent’s videos had titles such as, “HOW TO WIN $13,000 IN 5 MINUTES (CS-GO Betting)” and “$24,000 COIN FLIP (HUGE CSGO BETTING!) + Giveaway.”

One of the respondents, according to the FTC, posted videos with titles such as “INSANE KNIFE BETS! (CS:GO Betting),” and “ALL OR NOTHING! (CD:GO Betting).” The FTC alleges that, in all, the videos promoting the CSGO Lotto website were viewed more than 5.7 million times.

The Respondents also allegedly promoted the site on Twitter without adequately disclosing their connection to CSGO Lotto.

The FTC alleges that as part of an “influencer campaign,” respondents paid other well-known gaming influencers thousands of dollars to promote the website on YouTube, Twitch, Twitter and Facebook, without requiring the disclosure of payments in social media posts.

The Commission’s complaint alleges that the respondents misrepresented that videos of themselves and other influencers gambling on the CSGO Lotto website and their social media posts about the website reflected the independent opinions of impartial users of the service. The complaint charges that, in truth, the respondents are owners and officers of the company operating the CSGO Lotto website and the other influencers were paid to promote the website and were prohibited from impugning its reputation.

Finally, the complaint alleges that the respondents’, and the gaming influencers’ CSGO Lotto videos and social media posts deceptively failed to adequately disclose that the respondents are owners and officers of the company operating the gambling service, or that the influencers received compensation to promote it.

The FTC has been signaling a crackdown on influencer marketing for quite some time.

Material connection (e.g., familial relationship, financial relationship, etc.) must be clearly and conspicuously disclosed. Never assume that followers know about all brand relationships or that disclosures built into social media platforms are sufficient. Sponsored tags, including tags in pictures, should be treated just like any other endorsement. On image only platforms like Snapchat, superimpose disclosures over the images.

Sponsorship disclosures must be difficult to miss. Do not use ambiguous disclosures like “thanks,” #collab, #sp, #spon, or #ambassador. Do not rely on disclosures that people will see only if they CLICK “MORE.”

“Consumers need to know when social media influencers are being paid or have any other material connection to the brands endorsed in their posts,” said FTC Acting Chairman Maureen Ohlhausen. “This action, the FTC’s first against individual influencers, should send a message that such connections must be clearly disclosed so consumers can make informed purchasing decisions.”

The Commission order settling the charges requires the respondents to clearly and conspicuously disclose any material connections with an endorser or between an endorser and any promoted product or service. The proposed order prohibits the respondents from misrepresenting that any endorser is an independent user or ordinary consumer of a product or service.

New Instagram Influencer Warning Letters

The FTC has also announced that staff has both sent warning letters to 21 social media influencers it contacted earlier this year regarding their Instagram posts. The previously issued educational letters informed the influencers that if they are endorsing a brand and have a “material connection” to the marketer, this must be clearly and conspicuously disclosed, unless the connection is already clear from the context of the endorsement.

The warning letters cite specific social media posts of concern to staff and provide details on why they may not be in compliance with the FTC Act as explained in the Commission’s Endorsement Guides. For example, some of the letters point out that tagging a brand in an Instagram picture is an endorsement of the brand and requires an appropriate disclosure.

The letters ask that the recipients advise FTC staff as to whether they have material connections to the brands in the identified posts, and if so, what actions they will be taking to ensure that all of their social media posts endorsing brands and businesses with which they have material connections clearly and conspicuously disclose their relationships. The Commission is not disclosing the names of the 21 influencers who received the warning letters.

Updated Guidance to Influencers and Marketers

The FTC has also announced that it has issued an updated version of the FTC’s Endorsement Guides: What People are Asking, a staff guidance document that answers frequently asked questions. Previously revised in 2015, the newly updated version includes more than 20 additional questions and answers addressing specific questions social media influencers and marketers may have about whether and how to disclose material connections in their posts.

The new information covers a range of topics, including tags in pictures, Instagram disclosures, Snapchat disclosures, obligations of foreign influencers, disclosure of free travel, whether a disclosure must be at the beginning of a post, and the adequacy of various disclosures like “#ambassador.”

Contact an FTC advertising compliance and defense lawyer if you utilize sponsored blog and social media posts as a way to build brand visibility, or if your company is the subject of a regulatory investigation or enforcement action.

 

ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35thFloor, New York, NY 10005 | (212) 756-8777.

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