I talk a lot (A LOT) about FTC disclosure guidelines and affiliate marketing. In fact, I keep a running post of the biggest news when it comes to guidelines updates and FTC actions around them. There’s no important distinction in the rules when it comes to affiliates and influencers, so for purposes of this post, I’m going to talk mainly about influencers. Understand that all of this applies to essentially anyone who is making money by endorsing products online or through social media.
tl;dr
Brands and influencers don’t just have to worry about the FTC coming after them. Consumers are filing lawsuits based on state laws that are almost identical to the FTC Disclosure Guidelines. If consumers start winning these class action suits, it will encourage even more consumers to file them when they buy products based upon the endorsements of influencers or affiliate marketers who do not properly disclose that they are being compensated in some way.
The Case Details
A case is currently making its way through the courts involving Blue Ice Vodka (Sava v. 21st Century Spirits, LLC). It’s a convoluted case because it alleges many different things, including breaches of warranty and other things unrelated to influencer marketing. You can view the entire complaint here yourself to see examples of the influencer endorsements.
The pertinent facts as alleged by the plaintiffs are a basic influencer campaign:
- Blue Ice Vodka pays several influencers to promote their products
- The influencers “tag or recommend” the Blue Ice products without disclosing they are being paid
- Viewers buy the recommended products based on the representations made by the influencers
- Viewers claim the product was not as reviewed by the influencers and that they would not have bought them if they had known the influencers were being paid
There are several important points/issues for us as affiliate marketers:
- The suit was filed by plaintiffs who were consumers (not the government)
- The claims were brought under Florida, Illinois, and California consumer protection statutes (part of the “Little-FTC Acts”)
- Some of the claims were based on an influencer campaign
What Are the Little FTC Acts?
There is a body of state laws that are modeled on the federal statutes that we refer to in industry shorthand as “FTC disclosure rules.” The FTC Act (and subsequent interpretive guidelines) are the U.S. Government’s enforcement provisions for consumer protection. The “Little FTC Acts” are state laws that provide for similar consumer protections but allow for individual consumers (or even competitors) to file lawsuits when they believe a brand has engaged in deceptive marketing tactics, which includes a lack of disclosure.
The court in the Blue Ice Vodka case said the Little FTC Acts “incorporate by reference the FTC Act and its implementing rules and regulations, as well as interpretations of the same set forth by the FTC and the federal courts.” This means that these state civil cases may end up coming down to interpretations of the FTC disclosure rules.
What Does This Mean for Affiliate Marketing?
Brands and influencers worry that they might have the FTC come after them for not requiring their affiliates/influencers to properly disclose. But I don’t think many of them are considering the class action lawsuits that might be filed against them by consumers who feel they were duped into buying the brand’s products by relying on undisclosed endorsements.
Although this case is far from being completely decided, a little footnote says something BIG that we talk about frequently when it comes to FTC disclosure:
“Judge Lefkow expresses her gratitude to her law clerk, Peter Douglas, who prepared the original draft of this opinion. Because the opinion carefully addresses each claim and each theory of recovery, the parties should seriously consider settlement before the cost of litigation overwhelms the value of the case.”
No matter how this case comes out, it’s going to be expensive for both sides. Even if the brand and influencers were to somehow prevail at trial or through appeals, disclosure suits are expensive. Whether filed by plaintiffs or the FTC, you don’t want to end up in the middle of one of these. Always err on the side of proper disclosure!
(Standard disclaimer that I am an attorney but not YOUR attorney! None of this is legal advice–but fair warning!)
