Antitrust Law Daily FTC continues to crack down on social media influencers that fail to disclose connection to brands
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Thursday, September 7, 2017

FTC continues to crack down on social media influencers that fail to disclose connection to brands

By Jody Coultas, J.D.

In the first FTC action against individual social media influencers, two such influencers popular in the online gaming community have agreed to settle charges that they endorsed the online gambling service CSGO Lotto without disclosing that they jointly owned the company. The FTC today also announced that it has sent warning letters to 21 other social media influencers regarding their Instagram posts, and updated staff guidance for social media influencers.

CSGOLotto. Trevor "TmarTn" Martin and Thomas "Syndicate" Cassell and their company, CSGOLotto, Inc., operated and advertised the csglotto.com website. Martin and Cassell posted YouTube videos of themselves gambling on their website and encouraging others to use the service. Cassell’s videos promoting the CSGO Lotto website were viewed more than 5.7 million times. Martin and Cassell allegedly promoted the site on Twitter without adequately disclosing their connection to CSGO Lotto. They also allegedly paid other well-known influencers between $2,500 and $55,000 to promote the site on YouTube, Twitch, Twitter, and Facebook, without requiring them to disclose the payments in their social media posts and prohibiting them from saying anything negative about the site (In the Matter of CSGOLotto, Inc., FTC File No. 162-3184).

The complaint alleged that Martin, Cassell, and their company misrepresented that the videos and social media posts were the independent opinions of impartial users. Also, the FTC alleged that the videos and social media posts deceptively failed to adequately disclose that Martin and Cassell owned CSGOLotto, or that the influencers received compensation to promote it.

The proposed order settling the charges prohibits Martin, Cassell, and CSGOLotto from misrepresenting that any endorser is an independent user or ordinary consumer of a product or service. The order also requires clear and conspicuous disclosures of any unexpected material connections with endorsers.

Warning letters. In April, the FTC staff sent more than 90 educational letters to social media influencers and brands informing the influencers that if they endorse a brand and have a "material connection" to the marketer, this must be clearly and conspicuously disclosed, unless the connection is clear from the context of the endorsement.

Today, the staff sent warning letters to 21 of the influencers previously contacted citing specific social media posts of concern to staff and providing details on why they may not be in compliance with the FTC’s Endorsement Guides. Also, the FTC asked the recipients to advise FTC staff as to whether they have material connections to the brands in the identified posts, and what actions they will take to ensure that all of their social media posts endorsing brands clearly and conspicuously disclose their material relationships with those brands.

Updated guidance to influencers. The FTC issued an updated a staff guidance document, entitled "The FTC’s Endorsement Guides: What People are Asking," that answers frequently asked questions. Previously revised in 2015, the update includes more than 20 additional questions and answers covering a range of topics, 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 various disclosures like "#ambassador."

Companies: CSGOLotto, Inc.

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