This SportTechie Legal article was written by Brittany Berckes, a lawyer in the Entertainment, Music & Sports practice of Loeb & Loeb LLP.
Brands have known for more than a century that sports and celebrities sell. In the 1880s, for example, tobacco company, Allen & Ginter, featured famous baseball players on trading cards included in the company’s cigarette packages. Nowadays, social media provides everyone with a public platform, and brands are not only using celebrities as endorsers, but also non-celebrity “influencers” who have their own sizeable social media followings.
One sports brand tapping into non-celebrity influencers is the sports fashion company Adidas. Since 2015, Adidas has leveraged the enthusiasm and hyper-connectivity of young street soccer players across the world through its Tango League soccer program. Adidas hosts Tango League tournaments in different cities. Players and others involved with the program have become influencers in the soccer community via the brand’s Tango application, which connects Adidas-sponsored soccer influencers who create and post content with soccer fans. Tens of thousands of participants have signed up on Tango and generated hundreds of thousands of views on social media.
Esports is another area of the sports industry uniquely suited for social media influencers—a popular esport influencer can help determine the fate of a new video game release. Courted by a variety of sponsors, esports influencers engage fans across social media platforms, and their video game commentaries and follower engagements are an integral part of the esports experience. In June, Luminosity Gaming launched “LG Fortnite House,” a residence and content hub for the company’s esports professionals. Luminosity signed four popular influencers to live in a house in Florida, play games, and create compelling content for viewers. Between them, according to Luminosity, the four influencers have collected 900,000 Twitter followers, seven million YouTube followers, and attracted nearly one billion video views.
But the pervasiveness of social media makes the relationships between these sports-related brands and influencers (celebrity and non-celebrity alike) ripe for legal attention from the Federal Trade Commission, among others. The term “influencer” comes from the concept that by posting on their respective social media accounts about particular products or services, these individuals can influence consumers’ purchasing decisions. This influence and the speed of evolution of social media has led the FTC to update its “Guidelines for the Use of Endorsements and Testimonials” several times in an effort to keep current. Brand and influencer compliance with these guidelines is now a major focus of the FTC’s investigative and enforcement activities.
The core premise of the FTC’s endorsement guidelines is truth in advertising. Sponsored social media posts by influencers are considered advertising, a form of commercial speech, and so misleading or deceptive influencer posts can violate the Federal Trade Commission Act. Under the FTCA, influencers’ statements must be honest and must reflect their actual experiences. Brands also have a responsibility to substantiate the claims made about their products or services, even those made by influencers.
Brands and influencers must also disclose any material connection that they have, even if they don’t have a paid endorsement relationship and even if a brand doesn’t expressly direct an influencer to endorse a product. A material connection is anything that might impact the weight or credibility that consumers give an influencer’s endorsement, including any monetary compensation, employment, or affiliate relationship. Even free or discounted products from the brand count.
While the FTC doesn’t require specific disclosure language, it requires that disclosures be clear and conspicuous, using hashtags such as #ad, #sponsored, or #promotion in a post or tweet, for example. Disclosures should also be prominently placed so that viewers can easily spot them, and in close proximity to the claims or statements to which they relate. Every post that features a product, service, or brand must have a disclosure.
Influencers and brands have run afoul of the endorsement disclosure rules. In 2017, the agency sent more than 90 letters reminding influencers and advertisers that social media posts promoting or endorsing products must clearly and conspicuously disclose relationships between influencers and brands. The letters were the result of complaints by the nonprofit consumer advocacy group Public Citizen, which brought to the FTC’s attention more than 150 instances of Instagram posts it claimed violated the FTC’s disclosure policy.
Six months later, the FTC sent follow-up warning letters to 21 influencers they had previously contacted. The FTC identified specific social media posts, asked the influencers to advise of any material connections they had to the related brands, and requested information on the actions the influencers were taking to ensure clear and conspicuous disclosure of those relationships.
The FTC has brought a number of enforcement actions against brands and at least one against online influencers. In a 2017 complaint against gaming site CSGO Lotto and two of the site’s owners, the FTC alleged that the company paid gamers thousands of dollars to post about their experiences using the site, and that contracts not only failed to require gamers to disclose these deals, but also prohibited them from making negative statements. The owners and officers of the company— Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell—were also themselves social media influencers with large followings in the online gaming community. Both Martin and Cassell produced YouTube videos and tweeted to promote the site without disclosing their status as owners and officers of the company.
Earlier this year, the FTC also settled an enforcement action with a marketing firm alleging that the company developed a campaign tied to the Summer Olympics in Brazil during the 2016 Zika virus outbreak, paying gymnasts to promote an all-natural mosquito repellant. The marketing company drafted, reviewed, and monitored social media posts that the athletes, who each received several thousand dollars for their endorsements, posted on social media without disclosing their relationship.
Though compliance with the FTC’s guidance is voluntary, brands and influencers that don’t include proper disclosures can find themselves under investigation. And not knowing the rules is no excuse. If the FTC finds that conduct constitutes false or deceptive advertising, the agency can bring an enforcement action. The result of that could cost much more than the benefits reaped from the brand-influencer relationship in the first place.