FTC Wants Tougher Penalties For Companies Illegally Disguising Advertisements As Influencer Reviews

Many social media influencers earn from the sponsored posts they make. These posts, designed to inform viewers about certain products with the intention to motivate them to want and buy it, mention that it is but a sponsored post paid for by the company that owns the products.

The Federal Trade Commission, in a statement, revealed that it is going after companies that pay influencers to advertise their products but do not disclose that they were paid to do so. This kind of practice, FTC Commissioner Rohit Chopra says, is illegal and should be punished.

Not after influencers

The FTC's move does not target influencers looking for added income. It targets companies that pay influencers to post seemingly authentic posts to sway public opinion.

“When individual influencers are able to post about their interests to earn extra money on the side, this is not a cause for major concern. But when companies launder advertising by paying an influencer to pretend that their endorsement or review is untainted by a financial relationship, this is illegal payola,” Chopra wrote.

The FTC commissioner also emphasized that companies pressuring influencers to hide the fact that what they have posted is paid advertising must be held to account for the deceptive action.

Tougher action

Chopra calls for a “close and careful review” of the FTC's non-binding Endorsement Guides (which have yet to be updated since 2009, The Verge reported), and for the Commission to take bolder steps in enforcing the guidelines.

Part of these steps include developing requirements for platforms that may or may not earn from influencers, such as YouTube, TikTok and Instagram; and specifying the requirements that companies working with influencers should include in their contracts and adhere to.

Chopra also noted that in the review, they will be codifying elements of the existing Endorsement Guides into formal rules so that those who will violate them will become liable for civil penalties under Section 5(m)(1)(A) as well as for damages under Section 19.

The FTC's move aims to penalize deceitful companies so that honest businesses will be given a fair chance against the competition.