09/03/2020
Technology & Regulation in the Spotlight

The Federal Trade Commission (“FTC“) has settled a case against Teami – a company that sells teas and skin care products – and its owners, for promoting their products by using deceptive health claims and endorsement by influencers, who failed to clearly disclose that they had been paid for their promotional posts. In addition to taking enforcement measures against the advertiser itself, the FTC sent warning letters to ten influencers, alleged to have made inadequate disclosures.

The FTC’s complaint alleges that Teami and its owners misled consumers by claiming that their various products can help consumers lose weight, fight cancer, clear clogged arteries, reduce the frequency of migraines and prevent influenza, without having any reliable scientific evidence to support their claims. Under the terms of the settlement, the company was restrained from making any future misleading representations regarding the health benefits of their products, without relying on competent and reliable scientific evidence.

In addition, the complaint highlights promotional Instagram posts by well-known influencers, who failed to properly disclose their material connections with Teami, and the fact that they were paid for promoting Teami’s products. The complaint states that the disclosures provided by the influencers, were not sufficiently clear and conspicuous, since they were only provided when the consumers clicked the “more” option.

According to the FTC, Teami’s deceptive influencer practices continued despite the company having received a warning letter from FTC staff in April 2018 stating, among other things, that all disclosures on Instagram needed to be viewable and without consumers being required to click a “more” link.

The letters sent by the FTC to the influencers highlight specific posts that failed to comply with the FTC guidelines for social media influencers, as well as explaining what actions the influencers should have taken. For example, the FTC requires that the disclosure will be posted in close proximity to the endorsement, specifically naming hyperlinks, pop-ups and interstitials as incompliant methods for disclosure. The FTC also reminded the influencers that they could be held personally liable for non-compliance of the FTC’s requirements.

The proposed settlement imposes endorser monitoring obligations on Teami, requiring the company to provide influencers with a clear statement of their responsibilities to provide disclosures. Such a statement should be signed by each influencer, acknowledging receipt and agreement to comply. In addition, Teami is required to establish and implement a system to monitor the representations and disclosures of influencers with which it has material connections. In cases where influencers obtain free or discounted products, or payments that do not exceed USD 20 per month, the monitoring requirements are more relaxed. The company is also required to create reports showing the results of its monitoring efforts.

The FTC also required Teami to immediately terminate and cease payments to any influencer having a material connection to the company and who misrepresented his or her independence or impartiality, or failed to clearly disclose his connection with the products or company. However, the company may provide influencers with notice of failure to comply and an opportunity to cure non-compliance prior to termination, if it reasonably concludes that the failure to adequately disclose was inadvertent.

On the same matter, we recently reported that the FTC published its Disclosure Manual for Social Media Influencers, which provides guidance for both advertisers and influencers. You are also welcome to review our Influencer Marketing Rules of Engagement guide.

We encourage companies engaged in influencer marketing to ensure its practices are aligned with the evolving FTC enforcement policy and guidelines, and to contact us with any further questions.

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Feel free to contact us with any further question or comments regarding the update and subjects detailed above.

Kind regards,

Ariel Yosefi, Partner

Head of Technology & eCommerce Regulation

Herzog Fox & Neeman