FTC Approves Final Settlement with Social Media Influencers Following September Warning Letters and Updated Endorsement Guidance

On November 29, the Federal Trade Commission announced approval of a final consent order settling its first-ever case against individual social media influencers. The FTC complaint alleged that well-known online gamers Trevor Martin and Thomas Cassell endorsed an online gambling service known as CSGO Lotto without informing their followers that they owned the online gambling company. The complaint also alleged that Martin and Cassell paid other popular influencers up to $55,000 to promote the gambling site on their social media platforms, contractually barred these influencers from making negative comments about the gambling site, and failed to disclose that these influencers received payment.

The settlement demonstrates that influencer advertising remains a focus of FTC enforcement and that any party within the influencer marketing ecosystem may be responsible for ensuring that any material connections are adequately disclosed.

The CSGO Lotto Case

Trevor Martin, known as TmarTn, and Thomas Cassell, known as Syndicate, each have YouTube channels as well as Twitter and Instagram accounts with millions of followers. In late 2015, Martin and Cassell began operating and advertising a website, that allowed gambling using virtual currency in the form of “skins” obtained in an online multiplayer first-person shooter game called Counter-Strike: Global Offensive, marketed by Valve Corporation. Martin and Cassell earned revenue from their CSGO Lotto site by charging an eight percent service fee.

The FTC alleged that Martin and Cassell each posted YouTube videos of themselves gambling on the CSGO Lotto website and encouraging others to do the same, without disclosing that they owned the CSGO Lotto website and without disclosing that they were receiving free skins with which to bet. According to the FTC complaint, Martin posted at least thirteen promotional videos to his “TmarTn2” YouTube channel with titles including:

• HOW TO WIN $13,000 IN 5 MINUTES (CS-GO Betting)
• $24,000 COIN FLIP (HUGE CSGO BETTING!) + Giveaway
• HUGE WINS (And Losses) - CounterStrike Betting Challenge #2 (CSGO Skins)
• CS-GO Betting - Part 3 - HUGE $1000+ COIN FLIP BET! (Duel Arena Skin Gambling).

The FTC also alleged that Martin created Instagram posts and disseminated tweets that promoted CSGO Lotto and linked to his promotional videos. One such tweet read, “Made $13k in about 5 minutes on CSGO betting. Absolutely insane.” An Instagram post by Martin showed screen shots of TmarTn winning two betting pools on CSGO Lotto with the caption “Unreal!! Won two back to back CSGOLotto games today on stream – $13,000 in total winnings.” Nowhere in his social media posts promoting CSGO Lotto did Martin disclose any connection between himself and CSGO Lotto.

The FTC claimed that Cassell engaged in similar behavior. Cassell posted at least seven promotional videos showing himself gambling on CSGO Lotto and these videos garnered more than 5.7 million views. The FTC complaint asserted that Cassell failed to disclose in any of his videos that he was an owner of CSGO Lotto. The FTC complaint noted there was a disclosure “This video is sponsored by CSGO Lotto!” accompanying five of the seven videos; however, the FTC stated that this disclosure appeared in the video description box “below the fold,” where it would not be visible without consumers having to click on a link and perhaps scroll down.

The FTC alleged that Cassell and Martin also paid other gaming influencers between $2,500 and $55,000 to promote the CSGO Lotto website on YouTube, Twitch, Twitter and Facebook. Cassell and Martin contractually barred these influencers from saying anything negative about the CSGO Lotto site. According to the FTC complaint, there was no disclosure in the videos and, if there was a disclosure in the description box below the video, such disclosures appeared below the fold. In addition, social media posts by these influencers did not include any sponsorship disclosures. 

The FTC’s complaint included counts of False Claim of Independent Reviews, Deceptive Failure to Disclose Endorsers Were Owners and Officers, and Deceptive Failure to Disclose Endorsers Were Paid.

Settlement Terms

Although the final settlement does not require Martin or Cassell to pay a fine, it does contain very specific requirements about misrepresenting endorsements as independent reviews, disclosing material connections and monitoring endorsers. The settlement will remain in effect for 20 years.

The final order addresses product reviews and prohibits Martin, Cassell and their agents and employees from making any misrepresentation, expressly or by implication, that an endorser of any product or service is an independent user or an ordinary consumer of the product or service.

The final order also prohibits the respondents and their employees and agents from making any representation about an endorser without disclosing, clearly and conspicuously, and in close proximity to that representation, any unexpected material connection between such endorser and (1) Martin or Cassell; (2) any other individual or entity affiliated with the product or service; or (3) the product or service.

The final order contains specific requirements about making such disclosures.

1. In any communication that is solely visual or solely audible, the disclosure must be made through the same means through which the communication is presented. In any communication made through both visual and audible means, such as a television advertisement, the disclosure must be presented simultaneously in both the visual and audible portions of the communication even if the representation requiring the disclosure (“triggering representation”) is made through only one means.
2. A visual disclosure, by its size, contrast, location, the length of time it appears, and other characteristics, must stand out from any accompanying text or other visual elements so that it is easily noticed, read, and understood.
3. An audible disclosure, including by telephone or streaming video, must be delivered in a volume, speed, and cadence sufficient for ordinary consumers to easily hear and understand it.
4. In any communication using an interactive electronic medium, such as the Internet or software, the disclosure must be unavoidable.
5. The disclosure must use diction and syntax understandable to ordinary consumers and must appear in each language in which the triggering representation appears.
6. The disclosure must comply with these requirements in each medium through which it is received, including all electronic devices and face-to-face communications.
7. The disclosure must not be contradicted or mitigated by, or inconsistent with, anything else in the communication.
8. When the representation or sales practice targets a specific audience, such as children, the elderly, or the terminally ill, “ordinary consumers” includes reasonable members of that group.

B. “Close proximity” means that the disclosure is very near the triggering representation. For example, a disclosure made through a hyperlink, pop-up, interstitial, or other similar technique is not in close proximity to the triggering representation.

The final order also requires Martin and Cassell to ensure endorsers comply with the order by taking specific steps including providing an endorser with a clear statement of his or her responsibilities to provide clear and conspicuous disclosure of the material connection and establishing a system to monitor and review representations and disclosures.

The final consent order also requires Martin and Cassell to maintain detailed records about their business and compliance activities for ten years.

Influencer Advertising Remains a Priority

In September, when the FTC announced the proposed consent order with CSGO Lotto, it also announced that it had issued warning letters to twenty-one celebrity influencers inquiring whether they had paid endorsement deals to promote products on photo-sharing app Instagram. Although the FTC did not name the recipients of the these letters, Reuters filed a Freedom of Information Act request and said the recipients included models Naomi Campbell and Amber Rose, actresses Lindsay Lohan, Sofia Vergara and Vanessa Hudgens, and reality star Nicole “Snooki” Polizzi. The warning letters, which followed previous “educational” letters to these celebrities and others, cited specific posts and asked the recipients to advise the agency, by September 30, about any material connections they have to the brands in the identified posts and what actions they will take to ensure those relationships are clearly and conspicuously disclosed in future posts. 

In 2016, three consumer rights groups – Public Citizen, Campaign for a Commercial-Free Childhood, and the Center for Digital Democracy – alerted the FTC to more than 100 examples of Instagram posts that it asserted violated the Commission’s endorsement guidelines and they urged the agency to investigate. The FTC subsequently sent out more than 90 letters in April 2017 following its review of social media posts by celebrities, athletes and other influencers.

When the FTC announced the proposed settlement against CSGO Lotto and the warning letters in September, it also offered some “Do’s and Don’ts for Social Media Influencers” including:

• Clearly disclose when you have a financial or family relationship with a brand.
• Don’t assume followers know all of your brand relationships. 
• Ensure your sponsorship disclosure is hard to miss.
• Don’t assume that disclosures built into social media platforms are sufficient.
• Treat sponsored tags, like tags in pictures, as any other endorsement.
• Don’t use ambiguous disclosures like “thanks,” #collab, #sp, #spon or #ambassador.
• On image-only platforms like Snapchat, superimpose disclosures over images.
• Don’t rely on disclosures that people will see only if they “click more.”

The agency also issued an updated version of “The FTC’s Endorsement Guides: What People Are Asking” which was first published in 2015. The update adds more than twenty frequently asked questions and answers addressing social media influencer and marketing disclosure requirements.

Echoing some of the “Do’s and Don’ts,” the new guidance addresses emerging social media issues 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 disclosures like “#ambassador.”

For example, the new guidelines point out that when people view Instagram streams on most smartphones, only the first three lines of the description are displayed, and the viewer has to click on the “more” button to see the rest. Therefore, “[i]f an Instagram post makes an endorsement through the picture or the first three lines of the description, any required disclosure should be presented without having to click ‘more,’” according to the guidance.

Disclosures made on Snapchat, on the other hand, can be superimposed over the images posted. Disclosures “should be easy to notice and read in the time that your followers have to look at the image,” the guidance notes. Factors to consider include how much time followers have to look at the image, how much competing text there is to read, how large the disclosure is, and how well it contrasts with the image.

The updated “What People Are Asking” guidance also addresses the adequacy of disclosures like “#ambassador.” Using just “#ambassador” is “ambiguous and confusing,” according to the guidance. A better hashtag disclosure, as long as it is prominently displayed, would be “#XYZ-Ambassador” (where XYZ is a brand name) because it is more easily understood.