Social media sites are transforming not only the daily lives of consumers, but also how companies interact with consumers. Here at Morrison Foerster, across all of our practice groups, we are seeing complex, cutting-edge legal issues arising out of social media. As with the Internet boom during the mid-to-late 1990s, social media is generating new legal questions at a far faster pace than the law’s ability to provide answers to such questions. In an effort to stay on top of these emerging issues, and to keep our clients and friends informed of new developments, Morrison Foerster publishes this blog devoted to the law and business of social media.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Aaron is the chair of the firm’s Technology Transactions Group and co-chair of the Interactive + Digital Media Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals.Aaron’s practice focuses on advising both established and emerging companies in a variety of data- and technology-intensive sectors, including software, SaaS, cloud-based technology, digital media (social media, AR/VR, gaming, streaming media, AdTech), AI, healthcare, consumer electronics, e-commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on branding and marketing, trademark licensing, and content-related transactions, as well as the intellectual property aspects of mergers, acquisitions, asset spin-offs, and private equity investments.He has represented clients such as Autodesk, Meta, OpenAI, Splunk, Konami, Kaiser Permanente, SoftBank, Visa, and Yahoo, among others.Aaron has been recognized by numerous publications for his work on market-defining technology transactions. He is currently ranked by Chambers USA for “Technology Transactions.”Aaron also serves as co-editor of Socially Aware, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics. Aaron is also a sought-after speaker on new and emerging areas of law, and is a frequent presenter and panelist at conferences and legal services programs. In addition to his active practice, Aaron regularly provides pro bono assistance to various nonprofit and charitable organizations such as Common Sense Media and the Starlight Children’s Foundation. He is a member of the board of directors of California Lawyers for the Arts.While in law school at the University of California, Berkeley, Boalt Hall School of Law, Aaron served as executive editor of the California Law Review and was elected to the Order of the Coif. Following law school, Aaron served as law clerk to the Honorable William H. Orrick and the Honorable Martin J. Jenkins, both United States District Judges for the Northern District of California.

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Aaron is the chair of our Technology Transactions Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals. Aaron’s practice focuses on advising both established and emerging companies in a variety of data– and technology–intensive sectors, including software, SaaS, cloud computing, AR/VR, AI, gaming, healthcare, consumer electronics, social media, e–commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on the intellectual property aspects of mergers, acquisitions, asset spin–offs, and private equity investments.

Aaron P. Rubin

Lawrence Gallick is of counsel in the firm’s Austin office and a member of the Technology Transactions Group.Lawrence focuses his practice on technology transactions and licensing matters. His diverse experience includes advising on SaaS agreements, cross-licensing agreements, research and collaboration agreements, development agreements, and distribution agreements. He counsels a broad range of companies across the software, hardware, life sciences, biotech and FinTech spaces, as well as other entities including universities.He advises clients in connection with general corporate matters including contract negotiations, and leasing and technology placement agreements.Lawrence also serves as co-editor of <a href="https://www.sociallyawareblog.com/" target="_blank">Socially Aware</a>, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics.Prior to joining the firm, Lawrence was counsel at another major law firm. Before earning his law degree, Lawrence was a web consultant, project manager, and web developer in Portland, Oregon, where he managed and consulted on projects using industry methodologies and performed custom development and integration of content management systems.Lawrence was named a Super Lawyers “Rising Star” in 2015 and 2018–2022, and is licensed in both California and New York. Lawrence earned his J.D. from the University at Buffalo School of Law, where he was the electronic systems editor for the Buffalo Law Review and awarded the ABA-BNA Award for Excellence in the Study of Intellectual Property Law.

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Lawrence Gallick

Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster.Anthony advises clients on general commercial and transactional matters. He regularly advises companies on the IP aspects of their M&A transactions. His clients include technology, digital media and content for television and music, financial services, and communications companies with diverse intellectual property assets and issues.His practice focuses on the legal aspects of developing, licensing, and commercializing technology and intellectual property, as well as negotiating general commercial contracts, including outsourcing transactions, as well as content and data licenses. He regularly assists clients with legal issues relating to licensing and commercialization of digital media and content, digital content that is distributed over the Internet or streamed, mobile applications and social media, as well as the licensing of recorded music for distribution via digital platforms. Anthony is also experienced with issues relating to open-source software, software development, artificial intelligence and machine learning, cloud-based technology, and protection of proprietary information.Anthony has extensive experience working on matters involving disruptive technologies, such as blockchain. He has helped fintech clients with general intellectual property issues in connection with terms of service for online financial products and services.Anthony is an integral part of the outside pro bono legal team for nonprofit organizations based in New York, including advising clients on legal issues regarding entertainment, social media, privacy rights, and the negotiation of outsourcing and service agreements. Anthony received his J.D. from the University of Michigan Law School in 2009. He received his B.S. from Cornell University in 2004.

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Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster. He advises clients on general commercial and transactional matters. His clients include technology, media, and communications companies with considerable intellectual property assets. His practice focuses on the legal aspects of licensing and commercializing technology and intellectual property, as well as negotiating general commercial contracts. He also regularly assists clients with legal issues relating to mobile applications and social media.

Anthony M. Ramirez

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Socially Aware is devoted to the law and business of social media, proactively addressing emerging issues and keeping our clients informed of new developments. We cover fields such as artificial intelligence, privacy and data security, Section 230, intellectual property, and much more.

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In the last few years, as advertising has followed consumers from legacy media such as television to online video and social media platforms, the Federal Trade 

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The FTC’s Quest for Better Influencer Disclosures

The FTC’s Quest for Better Influencer Disclosures | Socially Aware

Julie O'Neill

In the last few years, as advertising has followed consumers from legacy media such as television to online video and social media platforms, the <a href="https://www.law360.com/agencies/federal-trade-commission" target="_blank" rel="noopener">Federal Trade Commission</a> has been attempting to ensure that participants in this new advertising ecosystem understand the importance of complying with the FTC’s “<a href="https://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-publishes-final-guides-governing-endorsements-testimonials/091005revisedendorsementguides.pdf" target="_blank" rel="noopener">Guides Concerning the Use of Endorsements and Testimonials in Advertising</a>,” or the endorsement guides. The endorsement guides require advertisers and endorsers (also referred to as influencers) to, among other things, clearly and conspicuously disclose when the advertiser has provided an endorser with any type of compensation in exchange for an endorsement.A failure to make appropriate disclosures may be a violation of <a href="https://www.federalreserve.gov/boarddocs/supmanual/cch/ftca.pdf" target="_blank" rel="noopener">Section 5 of the Federal Trade Commission Act</a>, which prohibits unfair or deceptive acts or practices. In recent enforcement actions, press releases, guidance, closing letters and letters sent directly to endorsers (including prominent public figures), the FTC has made clear its belief that: (1) appropriate disclosures by influencers are essential to protecting consumers; and (2) in too many instances, such disclosures are absent from celebrity or other influencer endorsements.Given the repetition of this message, it is apparent that the FTC believes it is still not being heard. With influencer marketing campaigns showing no signs of losing popularity, it would not be surprising if the next step the FTC takes is to bring an enforcement action against a major celebrity, as well as the brand or brands with which the celebrity is associated. So, with the FTC on the prowl, brands, advertisers and marketing companies should all be making sure they have a compliance program in place to increase the likelihood that the FTC makes its splash elsewhere. In this post, we recount how the FTC has gotten to where it is today and, thus, why it might be heading for a celebrity enforcement action next.In the BeginningThe FTC’s activity in the endorsement and influencer space is grounded in its endorsement guides, which outline how the FTC believes a business may lawfully use consumer and other endorsements in its advertising. The endorsement guides provide, in relevant part, that any “material connection” between an endorser and an advertiser—in other words, a connection that might affect the weight or credibility that consumers give the endorsement—must be clearly and conspicuously disclosed. The FTC’s thinking is typified by this example from its endorsement guide FAQs:Say you’re planning a vacation. You do some research and find a glowing review on someone’s blog that a particular resort is the most luxurious place he has ever stayed. If you knew the hotel had paid the blogger hundreds of dollars to say great things about it or that the blogger had stayed there for several days for free, it could affect how much weight you’d give the blogger’s endorsement. The blogger should, therefore, let his readers know about that relationship.The scope of a material connection, as stated in the endorsement guides and as interpreted by the FTC, including in the FAQs, is quite broad. It includes, for example, a business relationship, a payment, a gift or a sweepstakes entry. The scope of actors subject to the rules is also quite broad: it includes advertising and marketing companies that facilitate campaigns on behalf of advertisers (i.e., brands), those advertisers/brands themselves, and the endorsers or influencers acting on behalf of the marketing companies or brands. As discussed below, the FTC’s enforcement actions have involved each of these types of participants in influencer marketing activities.First, the Marketing FirmsThe FTC’s efforts to regulate this ecosystem began in late 2014 when the FTC brought its first enforcement action specifically related to social media activity (though this case also included straightforward allegations of deceptively made statements). The FTC alleged that the advertising firm Deutsch LA Inc. engaged in deceptive activities relating to the promotion, through <a href="https://www.law360.com/companies/twitter-inc" target="_blank" rel="noopener">Twitter</a>, on behalf of its client Sony, of the PlayStation Vita handheld gaming console.In a story that would become familiar over the next few years, the <a href="https://www.ftc.gov/system/files/documents/cases/1503deutschcmpt.pdf" target="_blank" rel="noopener">FTC’s complaint</a> alleged that company employees responded to a request from an assistant account executive at the company to use their personal Twitter accounts to post positive comments about the Sony console, each using the “#gamechanger” hashtag. The complaint includes examples of the employees’ tweets, such as, “One thing can be said about PlayStation Vita…it’s a #gamechanger.” The FTC alleged that the employees’ tweets were deceptive because they falsely purported to be endorsements from actual users of the Sony gaming console. Moreover, the fact that the tweets were written by employees of Sony’s ad agency would have been material to consumers in making decisions about whether to purchase the console. For this reason, the tweeters’ failure to disclose their connection to Deutsch LA (and, in turn, to Sony) was allegedly deceptive.In September 2015, the FTC brought a very similar case against Machinima Inc., an online entertainment network. Machinima allegedly paid video bloggers to promote the <a href="https://www.law360.com/companies/microsoft-corporation" target="_blank" rel="noopener">Microsoft Xbox One</a> system by producing and uploading to <a href="https://www.law360.com/companies/youtube-inc">YouTube</a> videos of themselves playing Xbox One games. The FTC alleged that Machinima did not require any disclosure of the compensation the influencers received and that many videos lacked any such disclosure. Because the payments would not be reasonably expected by YouTube viewers, the failure to disclose them was deceptive in violation of Section 5.Then, the BrandsIn connection with the Machinima matter, the <a href="https://www.ftc.gov/system/files/documents/closing_letters/nid/150902machinima_letter.pdf" target="_blank" rel="noopener">FTC also issued a closing letter</a> reflecting that it had also investigated Microsoft and its advertising agency Starcom in relation to the influencers’ videos. (Starcom managed the relationship with Machinima.) Even though the FTC did not ultimately take action against Microsoft (or Starcom), the closing letter made clear the FTC’s position that a company whose products are promoted bears responsibility for the actions of its ad agencies — as well as the actions of those engaged by its ad agencies. In particular, Microsoft avoided an enforcement action because it had a “robust” compliance program in place that included specific guidance relating to the FTC’s endorsement guides and because Microsoft made training relating to the endorsement guides available to employees, vendors and personnel at Starcom. (The FTC also subsequently updated its endorsement guides FAQs to formalize the expectations that were foreshadowed in the closing letter, including the statement that “[a]dvertisers need to have reasonable programs in place to train and monitor members of their network.”)Consistent with its incremental approach, the FTC followed these actions with its first complaint against a brand for its use of social media influencers. In early 2016, the FTC alleged that <a href="https://www.law360.com/companies/lord-taylor-llc" target="_blank" rel="noopener">Lord & Taylor</a> gifted a dress to 50 “fashion influencers” and paid them to post photos of themselves wearing the dress on their <a href="https://www.law360.com/companies/instagram-inc" target="_blank" rel="noopener">Instagram</a> accounts. According to the FTC, Lord & Taylor’s role in the promotional effort was not appropriately disclosed. The FTC thus alleged that the company violated Section 5’s prohibition on deceptive practices by, among other things, failing to disclose that the influencers’ Instagram posts did not reflect their independent and impartial statements, but rather were specifically created as part of an advertising campaign in which they were paid to participate.The FTC followed the Lord & Taylor action with <a href="https://www.ftc.gov/news-events/press-releases/2016/07/warner-bros-settles-ftc-charges-it-failed-adequately-disclose-it" target="_blank" rel="noopener">a similar settlement</a> relating to a company’s alleged failure to disclose that it had paid online influencers to post positive reviews in YouTube videos and on social media. Here, while the company allegedly instructed influencers to provide a written disclosure that videos were sponsored, they did not “require that the YouTube influencers be instructed to place a sponsorship disclosure clearly and conspicuously in the video itself.”Taken together, these actions show how the FTC has moved incrementally, starting with matters involving standard-fare alleged deceptive practices by marketing companies that also involved social media endorsements, and then escalating to enforcement actions against brands based on specific failures to include disclosures in a specific manner.To Individual Endorsers (Sort Of)Having covered two of the major parts of the social media advertising ecosystem, the logical next step for the FTC is individuals who are paid to make endorsements. Here, as with previous actions, the FTC has started (relatively) conservatively with an enforcement action announced in September 2017 against a company—and two of its officers—in connection with endorsements made by the officers in YouTube videos and social media. The company, CSGO Lotto Inc., runs an online virtual currency gambling website. The <a href="https://www.ftc.gov/system/files/documents/cases/1623184_csgolotto_complaint.pdf">FTC alleged</a> that the company provided two individuals (who were also owners and officers of the company) with free virtual currency to gamble on the site and that the two did not disclose their material connections to the company when they promoted it online. For example, both of the individuals created YouTube videos promoting CSGO Lotto and disseminated tweets linking to their videos and directly promoting the site (e.g., “Bruh … I’ve won like $8,000 worth of CS:GO Skins today on @CSGOLotto I cannot even believe it!”).The FTC’s allegations in this case are similar to those of the previous influencer cases, such as that the company failed to include appropriate disclosures of sponsorship in YouTube videos. But, the FTC also alleged that the officers of the company—who were named individually in the complaint — engaged in violation of Section 5 as influencers by, among other things, failing to disclose that they were owners/officers of the company, which “would be material to consumers in their decisions regarding using CSGO Lotto.”What’s Next?The CSGO Lotto case sets the stage for an enforcement action against an influencer alone. Perhaps to drive home the point, the FTC accompanied its announcement of its settlement of that case with<a href="https://www.ftc.gov/news-events/blogs/business-blog/2017/09/three-ftc-actions-interest-influencers" target="_blank" rel="noopener"> the disclosure that it had sent follow-up letters to 21 influencers</a> who, in April 2017, had received letters from the FTC regarding brand endorsements. The FTC noted that it asked the recipients to tell the FTC whether “they have material connections to the brands” in social media posts the FTC flagged and, if so, “to spell out the steps they will be taking to make sure they clearly disclose their material connections to brands and businesses.”Given the FTC’s activity in this space, the parameters for running an influencer campaign that complies with Section 5 are becoming well established. To help mitigate the risk of being the FTC’s next example, some practical considerations include:<ul><li>Implementation of a process for obtaining signed and dated acknowledgements of disclosure and related obligations from each influencer with a material connection (which may include, for example, a paid relationship, a professional relationship, or free goods or services);</li><li>An explicit requirement that the endorser make clear and prominent disclosures of the material connections between the endorser and the advertiser;</li><li>A process for monitoring and reviewing social media influencers for compliance; and</li><li>Maintaining the right to immediately terminate the arrangement in light of noncompliance.</li></ul>Influencers should also understand that they must clearly and conspicuously disclose their affiliations with the brands that they promote, above the jump in the post or video. And all companies that use social media influencers should consider the policies and procedures they have in place or need to develop to ensure that they, their influencers and any other parties they work with in this space are meeting the FTC’s expectations. If they don’t, they risk falling victim to the FTC’s next efforts to promote itself as the top cop on the endorsement beat.*    *    *Editor’s note: This piece originally appeared in <a href="https://www.law360.com/articles/1014039/the-ftc-s-quest-for-better-influencer-disclosures">Law360</a>.