#TheFTCisWatchingYou: Influencers, Hashtags and Disclosures 2017 Year End Review

#TheFTCisWatchingYou: Influencers, Hashtags and Disclosures 2017 Year End Review

Influencer marketing, hashtags and proper disclosures were the hot button topic for the Federal Trade Commission (the “FTC”) in 2017, so let’s take a look at just how the FTC has influenced Social Media Influencer Marketing in 2017.

First, following up on the more than 90 educational letters FTC staff sent to social media influencers and brands in April, the staff then sent warning letters to 21 of the influencers previously contacted. The earlier educational letters informed the influencers that if they are endorsing a brand and have a “material connection” to the marketer, this connection must be clearly and conspicuously disclosed, unless the connection is already clear from the context of the endorsement.

The warning letters cited specific social media posts of concern to FTC staff and provided details on why the influencers may not be in compliance with the FTC Act as explained in the FTC’s Endorsement Guides. For example, some of the letters noted that tagging a brand in an Instagram picture is an endorsement of the brand and does actually require an appropriate disclosure.

Second, the FTC then issued an updated version of The FTC’s Endorsement Guides (the “Guides”): “What People are Asking”, a staff guidance document that answers frequently asked questions. Previously revised in 2015, the newly updated Guides includes more than 20 additional questions and answers addressing specific questions social media influencers and marketers may have about whether and how to disclose material connections in their posts. For example, the Guides includes additional information depicting Instagram tags and how to meet FTC standards for disclosure on Snapchat or Instagram Stories.

The FTC suggests:

(1) #ambassador is not likely to be acceptable, while #[BRAND]Ambassador may be, assuming the brand name is one consumers would recognize; and

(2) #consultant is not permissible, while #[BRAND]Consultant may very well be allowable. While the FTC Staff seems to like the brand name in the disclosure, and we know they like #ad, they do not appear to support #[brand]ad using all lowercase letters, as readers’ might not discern that the disclosure clearly indicates the post is an ad for a brand.

In conjunction with the with 21 warning letters sent and the updated Guides, on September 7, 2017, the FTC announced its complaint against social media influencers, Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell.  According to FTC Acting Chairman Maureen Ohlhausen, “Consumers need to know when social media influencers are being paid or have any other material connection to the brands endorsed in their posts…this action, the FTC’s first against individual influencers, should send a message that such connections must be clearly disclosed so consumers can make informed purchasing decisions.”

The complaint alleged that in late 2015, CSGOLotto, Inc., Martin, the company’s president and Cassell, the company’s vice-president, operated and advertised the csglotto.com website, which enabled consumers to gamble virtually. As further alleged in the complaint, Martin and Cassell each posted YouTube videos of themselves gambling on their website and encouraging others to use the service. Martin’s videos had titles such as, “HOW TO WIN $13,000 IN 5 MINUTES (CS-GO Betting)” and “$24,000 COIN FLIP (HUGE CSGO BETTING!) + Giveaway.”

Cassell posted videos with titles such as “INSANE KNIFE BETS! (CS:GO Betting),” and “ALL OR NOTHING! (CS:GO Betting).” In all, Cassell’s videos promoting the CSGO Lotto website were viewed more than 5.7 million times. Martin and Cassell also allegedly promoted the site on Twitter without adequately disclosing their connection to CSGO Lotto.

According to the FTC’s complaint, Martin, Cassell, and CSGO Lotto also had an “influencer program” and paid other gaming influencers between $2,500 and $55,000 to promote the CSGO Lotto website to their social media circles, while prohibiting them from saying anything negative about the site.  Specifically, the complaint stated that Martin, Cassell, and CSGO Lotto misrepresented that videos of themselves and other influencers gambling on the CSGO Lotto website and their social media posts about the website reflected the independent opinions of impartial users of the service. The complaint charged that, in truth, Martin and Cassell are owners and officers of the company operating the CSGO Lotto website and the other influencers were paid to promote the website and were prohibited from challenging its reputation.

The FTC ultimately approved the final consent order On November 28, 2017, settling its first ever case against individual social media influencers, and the order prohibits Martin, Cassell, and CSGOLotto, Inc. 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.

It is important to point out that the FTC, in this case, charged two specific social media influencers and their company but has yet to charge an independent social media influencer for failing to disclose a material connection to a separate company.  However, social media platforms have already responded to the FTC’s scrutiny this year.  For example, earlier this year, Instagram unveiled a new disclosure tool to a select group of influencers.  The tool was designed to streamline compliance with FTC disclosure requirements and bring more transparency to the platform.  Previously, influencers were responsible for how and where to disclose the sponsored nature of their posts.  Instagram’s new tool, however, removes this discretion by providing one clear, conspicuous and standardized form of disclosure.  Instagram described its new tool as a “first step” and promised to take additional actions in the area of sponsored posts.

Clearly, the FTC’s view of how to avoid consumer deception will continue to evolve in 2018 just as the forms of advertising and digital media advance; however, regardless of this evolution the FTC is likely to continue to reinforce tried and true advertising principles while leaning on the updated Guides.  Consequently, educating influencers and brands will be paramount, along with providing the technology and practical tools that enable these stakeholders to achieve their goals, while still protecting consumers.

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PMI – An Insider’s Guide – Part 2: What to do When You’re Asked to Assist in a Potential Acquisition – Between Signed and Closed Phase

PMI – An Insider’s Guide – Part 2: What to do When You’re Asked to Assist in a Potential Acquisition – Between Signed and Closed Phase

Your day starts with headlines screaming across the Internet – your company has acquired a particular entity (“Target”).  The office is buzzing with the news and potential impacts – what does this mean for my role now and in the future, and how much more work am I going to have to take on?  More often than not, the acquirer’s legal team will be tapped to coordinate the planning for post-merger integration and implementation.  So, what do you do when the first email of the day is from your boss informing you that you’ve been asked to manage the legal needs of the Target?  Here are three points to bear in mind to begin the process of that most nebulous of goals:  a successful integration after a headline grabbing acquisition.

Even if you weren’t tapped to assist at the due diligence phase (see my first article here: http://www.jdsupra.com/legalnews/pmi-an-insider-s-guide-what-to-do-when-28869), you can still make an impact and create the foundation for a successful transition, here’s how:

  1. Data Gather: Learn as much as you can, as fast as you can, about this transaction.  This will mean getting a copy of the final due diligence memo and any related or collateral materials that were prepared by the working team to help you better understand the acquisition purpose, the proposed business plan, critical milestones, and where the legal function fits in.  Take the time to reach out to the points of contact from the various functional areas involved in the deal, especially your Tax, HR, Finance, Facilities, Marketing, and IT teams to learn their perspective on the deal and what are their central issues.  Bear in mind that in an acquisition, legal issues are only one facet, and often not the most important facet, of the deal.  You will need to understand the challenges each of these areas are dealing with.  Those challenges and issues will often cross-over into Legal.  Forging strong internal relationships across functional teams will enable you to issue spot sooner and work with a team of subject matter experts to remediate issues quickly.  These cross-function colleagues can become your lifeline to making the deal an ultimate success as everyone is incented to want a deal they have been working on for months to work out.
  1. Plan for Day One and Execute on that Plan:  If you have been given the task to plan for legal support for the Target, start with the basics and work your way out to the more complex.  Don’t forget that one of the biggest pressure points you will face is ensuring that legal support (often measured in how quickly legal requests are responded to by the appointed legal team) flows as seamlessly the day after closing (when you and your company are now fully legally in charge of the Target) as it did the day before closing (when you weren’t in charge yet of the Target).  Some of these suggestions may appear obvious points but in the chaos of integration planning, even the obvious can get lost in the dust up, so keep a checklist with the following questions:
  • What contracting entities will be used after close?
  • Who has signature authority for those entities?
  • If there are to be changes to entities, make sure you are liaising with your tax and finance teams so entity changes are coordinated and you act in lock step with your SME colleagues in the other functional areas,
  • Are there any existing Target legal resources who will remain and assist and if so, try to spend time with them understanding their roles today, how the work flows, expectations about turn-around times;
  • Make sure there is a plan, even for the short term, to ensure legal support requests are responded to quickly after close.
  • Overall evincing a sense of calm and a good faith effort to control the chaos will help those around you be less afraid of what the future may hold and focus on the work at hand on a day-to-day basis, while the larger strategy gets sorted out.
  1. Be Nimble:  The best laid plans can be turned on their head as new information comes to light between sign and close.  What appeared to be a manageable number of client and vendor contracts is now several times larger, or the service that was thought to be unregulated is actually regulated and the required license or approval was never obtained, or the business leaders told the Target “nothing will change after you’re acquired” when the exact opposite is actually what’s happening.  The largest challenge in planning for and ultimately implementing a post-merger acquisition strategy is the general day-to-day chaos that everyone must learn to be comfortable with.   If you can become comfortable with lightly controlled chaos, you will have a better chance of succeeding and not pulling all of your hair out in the process.  If you continue to stay connected to your SME contacts in each functional area (having regular conference calls or in person meetings is the best way to do that), most likely a challenge you have in Legal is also one trickling into the other areas as well (Finance can’t recognize revenue they don’t know exists, Tax can’t move to wind down entities that still have people or contracts tied to them, etc.).  Leverage these relationships to quickly identify and respond to the changing landscape and help each other creatively problem solve in a way that helps everyone.  There is usually not just one way to solve a problem or address a crisis, so learning to be flexible and open in your approach will help you more easily and sanely shift course as needed during the planning and implementation phase of the integration.

Despite reports that most acquisitions fail, you can make a big difference in setting a foundation for success by following a few pointers.  Make sure you take affirmative steps to understand as much as you can about the acquisition process and rationale for acquiring the Target, devise a realistic plan to ensure continuity of legal support during the initial transition, and go outside of your comfort zone to be as nimble as possible to adjust plans and address issues as they emerge when facts on the ground change.

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PLG 2017 Back to School Event

Yesterday, the Patrick Law Group (PLG) Team, along with your assistance, had the privilege of hosting a Back to School Celebration for 16 Children and their terrific Foster Parents with whom we have been matched through the Children’s Restoration Network.

The festive afternoon included a Three-legged Race, Hula Hoops,  “Simon Says”, Water Balloons, and other games and crafts.  And of course, there was yummy Barbecue!

Thank you to those of you who joined us for this terrific day.  We greatly appreciate your energy and the time you devoted in helping us guide this group of terrific kids on their life journey of success.  And for those who could not join, please know that you were with us and the family in spirit.

We look forward to continuing our support of this wonderful family, and look forward to seeing you at our next gathering!

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