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Why Isn't the FTC Doing More to Fight Undisclosed Ads in Fashion?

The Federal Trade Commission (“FTC”) has been issuing messages for several years now that it will, in fact, start cracking down on undisclosed sponsored posts. Most recently, it sent over 90 letters to brands, celebrities, and influencers from J.Lo., Scott Disick, Emily Ratajkowski, Chiara Ferragni, and Victoria Beckham to Chanel, adidas, Yves Saint Laurent, and Puma to educate them as to the labeling requirements for sponsored posts.

But with increasingly frequent warning messages coming from the FTC and a lack of actual enforcement action, the question remains: Why isn’t the FTC really taking action?

For the uninitiated, the Federal Trade Commission (“FTC”) is the government agency that that is tasked with promoting consumer protection, and eliminating and preventing anticompetitive business practices. In this role, the FTC issues guidelines (which are legally binding) that govern “Endorsements and Testimonials in Advertising,” among other things. According to the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising both advertisers and endorsers must disclose material connections (think: payments or free products or trips, etc. in exchange for representation of the brand) that they share.

The FTC’s Guidelines

The Guidelines also make it clear that celebrities and influencers have a duty to disclose their relationships with advertisers when making endorsements outside the context of traditional ad campaigns. If these Guidelines are not met, the FTC may file suit in accordance with Section 5 of the Federal Trade Commission Act (15 USC 45), which prohibits ''unfair or deceptive acts or practices in or affecting commerce.”

Hardly a novel requirement, the FTC has long required advertisers and endorsers to disclose their material connections so consumers can be made aware of them. Thus, when a celebrity has been paid to endorse a product or service and they fail to disclose that fact, both the advertiser and endorser may be liable. The most novel aspect of all of this is how the requirement applies to social media.

The FTC has adapted certain rules to keep up with development of social media advertising: In March 2013, the FTC updated its “DotCom Disclosures” Guidelines, in which the FTC emphasized that consumer protection laws apply to both traditional media and social media. The FTC’s enforcement of these rules leaves something to be desired, however.

As far as what the new guidelines require, in order to avoid violating the Guidelines, the FTC suggests using “#Ad”, “Ad:” or “Sponsored” in tweets or Instagram photos to indicate that a post or link within a post includes compensated content, and placing clear disclosures near the beginning of blog posts or videos, in this case, as well. It really is that easy! And yet, most publications, brands, influencers, and celebrities consistently evade the Guidelines.

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