The Year in Undisclosed Fashion Advertising and the FTC

image: Le21eme.com

2017 was a significant year for truth in advertising efforts. After targeting social media stars and celebrities with “educational” letters outlining the its sponsored post disclosure requirements, the Federal Trade Commission (“FTC”) – the government agency tasked with promoting consumer protection, and eliminating and preventing anticompetitive business practices –issued additional guidelines regarding disclosures, and settled a formal investigation that it commenced against two YouTube influencers.

Here is a look at some of the top developments of the year within this space, as well as some of journalistic efforts that TFL undertook to shed light on this important area that pertains not only to federal law requirements but consumer rights, as well ….

1. FTC Takes Action Against Influencers, Marketers Over Sponsored Posts. In a landmark bout of activity, the FTC has announced that it is, in fact, watching celebrities, athletes, and other influencers on Instagram. According to a statement from the government agency, after reviewing Instagram posts by celebrities and influencers, its staff has sent out more than 90 letters reminding influencers and marketers that they must clearly and conspicuously disclose their relationships when promoting or endorsing products through social media.

1a. FTC Clarifies Rules, Sends Stronger Letters to Influencers and Celebrities. The FTC has settled its first ever case against individual social media influencers and sent a new batch of letters to nearly two dozen others. 

2. The Federal Trade Commission Answers Common Influencer-Specific Questions. On the heels of such increased actions involving social media influencers, the FTC held an influencer-specific session on Twitter to answer questions pertaining to how brands and influencers can ensure that they are abiding by U.S. laws. The questions and the FTC’s answers – including guidance on whether Instagram’s new “paid partnership” feature is a valid disclosure (hint: it’s probably not) – are as follows.

3. In Light of Continued Violations, How Effective Were the FTC’s Letters Really? Who is afraid of the FTC? Not many celebrities, influencers or fashion brands. With that in mind, the ramifications – or lack thereof – of the letters that FTC sent to brands and individuals taking issue with allegedly undisclosed sponsored posts on Instagram are certainly proving interesting.

4. Revolve Has Built a Nearly $1 Billion Business Based on Undisclosed Influencer Marketing. For Revolve – which was founded in 2003 by Michael Karanikolas and Michael Mente, both of whom have tech, not fashion, backgrounds – influencer marketing is big business. Up to 70 percent of Revolve’s revenues – $400 million as of 2015 – come directly from influencer endorsements, according to Mente. And yet, you will not be able to gauge this simply from looking at photos that bear Revolve hashtags. This lack of clear and conspicuous disclosure is problematic when considered against federal truth in advertising laws in the U.S., and internationally. 

5. The Annual Brand and Influencer Report: The Good, Bad, and Highly Problematic. The following list takes into account 19 of the industry’s most celebrated influencers – from the biggest names, such as Chiara Ferragni and Julie Sariñana, to somewhat lesser-followed but still very noteworthy ones, like Marianna Hewitt and Gala Gonzalez, as well as the brands with which they are associated.

6. Brands and Influencers Are Split When it Comes to Sponsorship Disclosures. It has been several months since the FTC sent influencers, celebrities, and brands a strong message by sending 90 or so letters centering on the required usage of disclosures in connection with sponsored content, and garnering extensive press coverage in the process. Regardless of whether a company or individual was on the receiving end of a warning letter, the FTC’s move signifies that the government organization is paying attention to sponsored content, particularly on Instagram, and advertising/endorsing entities should take note. 

7. What is Really Driving Instagram’s Push for Advertising Disclosures? Calling it “a step toward transparency,” Instagram’s new disclosure option is likely a calculated legal move to help the platform escape liability if – or when – the FTC decides to crack down not only on influencers flouting the truth in advertising standards, but on secondarily liable platforms, as well.

8. Not Just a U.S. Issue, British Brands, Influencers & Publications Need to Disclose, As Well. Social media influencers, publications, and the brands with which they are associated are finallybeing called out on a larger scale for non-disclosure of material connections, with both the FTC in the U.S. and the Advertising Standards Authority in the UK slowly beginning to clamp down on ethically questionable and oftentimes misleading practices.

9. Why Isn’t the FTC Doing More to Fight Undisclosed Ads in Fashion? With increasingly frequent warning messages and a lack of actual enforcement action, the question remains: Why isn’t the FTC really taking action? (Chances are: It is understaffed and busy with other more “pressing” matters, such as allegedly anticompetitive mergers of multi-billion dollar companies and endorsements involving pharmaceuticals). 

10. Advertisement or Editorial: It is all the Same in Fashion. Vogue Arabia’s September cover was essentially an undisclosed advertisement. Publishers’ preference for favoring advertisers is certainly not new practice within the fashion industry, but nonetheless, feels, for lack of a better word, icky, due to the lack of transparency that comes along with it. Read: The average consumer – the ones that both advertising laws and journalistic ethics standards aim to protect – would otherwise have no idea about it.

11. Fashion’s Full Disclosure — or Not. Although much has been written about how the agency’s recent efforts may affect influencers and celebrities who are paid to promote specific products or brands in subtle ways, the FTC has made it clear that it has all areas of the fashion industry in its sights. In other words, some day soon the show coverage you read — in a glossy magazine, on a website, in an app — may be a little different.

12.  Why Does the Fashion Industry Treat Truth-in-Advertising as Optional? For an industry that talks a lot about transparency, fashion routinely falls short. This is demonstrated every time a publication features a product that has been gifted to them in exchange, of course, for preferential placement. The same can be said when brands pick up the tab for editors to attend lavish events and far-flung pre-season or couture runway shows, or when influencers endorse the gifts they receive from brands without indicating the true nature of those items.

13. Red Carpet Pay-for-Play and the Legality of Designer Endorsements. An interesting aspect of the red carpet that is often lost on the industry outsider is the secret, paid-for deals between celebrities and their stylists, and fashion brands that occur and enable certain dresses to make it onto these highly-visible red carpets in lieu of others. Such deals, while otherwise perfectly legal, may venture into the territory of legally problematic as a result of the federal truth in advertising laws.