Insights

On March 6, the Federal Trade Commission (FTC) announced that it had settled claims against an online marketer of tea and skincare products, with a $15 million consent judgment based on total sales of the products. As detailed in the Complaint and proposed Consent Order filed in the U.S. District Court for the Middle District of Florida, the FTC alleged that Teami LLC made false claims about the potential health benefits of its "detox tea," while failing to ensure that its paid endorsers adequately disclosed the commercial nature of their relationships with the brand. The case is an important reminder of the increased scrutiny toward online endorsements in the "influencer" age.

Central to Teami's marketing were paid endorsements by celebrities and other influencers, including Demi Lovato and Kylie Jenner, as well as lesser-known social media mavens. Nearly two years ago, the FTC wrote to Teami, informing it that material connections with its influencers had to be disclosed in a manner that was both clear and conspicuous, with disclosures in Instagram posts appearing above the "more" link. In response, Teami instituted a social media policy advising its influencers of these requirements.

Teami apparently failed to enforce the policy, as illustrated by a video post from Cardi B to her more than 50 million Instagram followers, which failed to mention her connection to Teami above the "more" link. Other Teami influencers made posts without a disclosure in the first two or three lines of text or other readily visible content, such as photos. The only way followers viewing on mobile devices would see the disclosures was if they clicked to see more.

In addition to a count based on deceptive claims about the tea's health properties — including its ingredients' ability to treat cancer and "unclog arteries" — the FTC took issue with Teami's failure to disclose material connections with paid influencers. In a proposed Consent Order, the FTC, Teami and its two principals agreed on terms to resolve the matter, which include a disgorgement of $1 million and a permanent injunction against future violations.

Finally, the FTC took this opportunity to remind brands and social media influencers of their disclosure obligations. Any company that engages staff or third parties to post on social media should adhere to the FTC Endorsement Guides (link below), which include the following:

• The FTC requires clear and conspicuous disclosure of any material connection between a brand and its endorsers (unless the connection is apparent).
• Material connections include any financial, employment, personal, or family relationship with the brand, including the receipt of free or discounted goods.
• Clear means the disclosure is easy for ordinary consumers to understand.
• Conspicuous means the disclosure is "difficult to miss" or "easily noticeable."
• Consumers must be able to see the disclosure without having to click to expand the text.
• Disclosures should also appear in any content (photos, videos) that can be viewed on its own.
• Wording such as "Brand X sponsored this" or "I'm partnering with Brand X" is acceptable.
• Companies using endorsers have an obligation to monitor their compliance with the rules.

Social media influencers and others who endorse products in violation of the Endorsement Guides may also be subject to legal liability. See FTC warning letters re: Teami.

For further information, please consult the following resources or any of the contacts shown in the sidebar.

FTC Endorsement Guides

Business Guidance About the Endorsement Guides

Legal extern Adam Weisman, University of New Hampshire School of Law 2020, contributed to this alert.