Policy

If you're paying influencers, the FTC has a warning for you

The agency said it reminded more than 700 companies including Apple, Amazon and Tesla that they can face fines for certain deceptions about endorsements.

Envelope with red warning exclamation point coming out

The FTC under Chair Lina Khan has been coming down on corporate practices.

Photo: CalypsoArt/Getty Images

The U.S. Federal Trade Commission on Wednesday said it put hundreds of the world's most prominent companies "on notice" that being dishonest about endorsements comes with consequences.

The use of so-called influencer marketing, other sponsored content and even the use of positive customer reviews on services such as Instagram drove the warnings, the commission cautioned.

"The rise of social media has blurred the line between authentic content and advertising, leading to an explosion in deceptive endorsements across the marketplace," the FTC said in a statement about the letters.

A wide array of recipients received one of the warnings, including drugmakers like Pfizer, apparel companies such as Nike, video game publishers like Activision Blizzard, carmakers including Tesla, restaurant franchises such as Burger King as well as beer and liquor companies, home décor brands, broadband providers, hotels and more.

Amazon, Apple, Facebook, Google, Microsoft and Yelp all received the letters, according to the FTC, which said the list included more than 700 "large companies, top advertisers, leading retailers, top consumer product companies, and major advertising agencies."

The notices are not indications of wrongdoing, the agency stressed. Should a company be found in violation of the law, however, it could result in fines of nearly $44,000 per instance.

The commission, which has been taking an increasingly tough line on corporate practices and flexing little-used procedural powers under Chair Lina Khan, released a sample letter, which alerted firms to a long list of practices that the FTC has previously found illegal in other cases.

These practices include "falsely claiming an endorsement by a third party" as well as "misrepresenting that an endorser is an actual user" and "failing to disclose an unexpected material connection with an endorser."

While both the existence and use of social media "influencers" are a relatively recent phenomenon, the FTC said it found previously that such actions violate the prohibition on "unfair or deceptive acts or practices." A company that knows about these determinations and flouts them can face fines under the Federal Trade Commission Act — hence the notices warning these firms.

The true size of the influencer industry is difficult to measure, but data firm Statista estimates the global market was worth nearly $10 billion last year.

Users of Instagram or YouTube regularly come across prominent accounts and channels hawking clothes, cosmetics, gadgets, toys, investment products and more. Some of the accounts belong to celebrities; others have a strong online-only following in a particular niche. And while some of the posts make clear that they were sponsored or that the reviewers got the products for free before a recommendation, others are less transparent.

The FTC has weighed in on the issue before, but has largely focused its attention on influencers themselves rather than the companies that might partner with them. In 2019, for instance, the commission released "Disclosures 101 for Social Media Influencers," an eight-page pamphlet heavy on icons and illustrations for those who are trying to monetize their feeds.

The guide urges influencers to disclose "any financial, employment, personal, or family relationship with a brand," to view even tags and likes as endorsements, and to avoid making "claims about a product that would require proof the advertiser doesn't have — such as scientific proof that a product can treat a health condition."

Even before that, in 2017, the FTC released answers to questions it was receiving about endorsements pertaining to paid video game streaming, travel blogging, book reviews and even the operator of "a YouTube channel that focuses on hunting, camping, and the outdoors" who occasionally discussed specific knives.

Wednesday's letters, though, went to prominent international brands that might be hiring influencers, placing sponsored content in publications or republishing consumer reviews.

Earlier in October, the commission issued similar warning letters to for-profit colleges. The FTC said then it was "resurrecting" its authority to issue the notices and seek fines.

Khan, a tech skeptic who took over the commission earlier this year, spent much of her first few months leading the commission's Democratic majority to enact changes to streamline investigations, ready rules to govern certain industries and broaden the types of conduct that the FTC can look into.

Republicans have dismissed her actions as lacking in transparency and procedural fairness, and suggested the changes will confuse honest businesses.

Democratic Commissioner Rohit Chopra left the commission earlier this month, however, to take over the Consumer Financial Protection Bureau, meaning the FTC is now split 2-2 along partisan lines and Khan, for the time being, likely won't be able to advance major changes.

President Joe Biden has nominated privacy hawk Alvaro Bedoya to take over the final slot.

Fintech

Affirm CEO: 'Buy now, pay later' becomes more attractive in a slump

With consumers grappling with rising rates and prices, the question of whether they’ll still buy now and pay later is open. Max Levchin thinks Affirm knows the answer.

Affirm CEO Max Levchin spoke with Protocol about "buy now, pay later."

Photo: John Lamparski/Getty Images

Shortly after Affirm went public last year, CEO Max Levchin told Protocol that he saw “an ocean of opportunities” for the “buy now, pay later” pioneer. Wall Street agreed.

Affirm’s stock soared in its trading debut as the company blazed a trail for a fast-growing alternative to the credit cards that Levchin says consumers are increasingly rejecting.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Google Voice at (925) 307-9342.

Businesses are evolving, with current events and competition serving as the catalysts for technology adoption. Events from the pandemic to the ongoing war in Ukraine have exposed the fragility of global supply chains. The topic of sustainability is now on every board room agenda. Industries from manufacturing to retail and everything in between are exploring the latest innovations like process automation, machine learning and AI to identify potential safeguards against future disruption. But according to a recent survey from Boston Consulting Group, while 80% of companies are adopting digital solutions to navigate existing business challenges or opportunities like the ones mentioned, only about 30% successfully digitally transform their business.

For the last 50 years, SAP has worked closely with our customers to solve some of the world’s most intricate problems. We have also seen, and have been a part of, rapid accelerations in technology in response. Across industries, certain paths have emerged to help businesses manage the unexpected challenges over the last few years.

Keep Reading Show less
DJ Paoni

DJ Paoni is the President of SAP North America and is responsible for the strategy, day-to-day operations, and overall customer success in the United States and Canada. Dedicated to helping customers become best-run businesses, DJ has established himself as a trusted advisor who places a high priority on their success. He works with many of SAP North America's 155,000 customers and helps them adopt business and technology best practices across 25 different industries.

Workplace

The post-layoff playbook: How to avoid 'survivor's guilt'

Taking care of your laid-off employees is important. But how can you restore trust with the employees who make it through?

Employees who survive layoffs are charged with holding the company together. Whether or not managers listen to their concerns can make or break a company’s culture.

Photo: Justin Pumfrey/The Image Bank/Getty Images

Jennifer Burke was on her way to Hawaii for her daughter’s wedding when Zillow followed through on its long-anticipated layoff. She asked her manager to break the news to her by message in the car. You’re one of the safe ones, her manager responded.

“I felt relieved, of course,” Burke said. “I felt apprehensive. I felt sympathy for my co-workers that I knew were going to be laid off.”

Keep Reading Show less
Lizzy Lawrence

Lizzy Lawrence ( @LizzyLaw_) is a reporter at Protocol, covering tools and productivity in the workplace. She's a recent graduate of the University of Michigan, where she studied sociology and international studies. She served as editor in chief of The Michigan Daily, her school's independent newspaper. She's based in D.C., and can be reached at llawrence@protocol.com.

Enterprise

Why chip companies need the college students dazzled by software jobs

New chip fabricating plants will need tens of thousands of skilled workers who don’t currently exist. Training them means persuading students to look away from jobs at big tech companies.

Intel employees in clean room "bunny suits" work at Intel's D1X factory in Hillsboro, Oregon.

Photo: Intel Corporation

Every morning, Isaiah Morris drives his white Nissan Altima eight miles down Arizona state Route 101 to a sprawling, low-level office park in South Tempe. Inside one of the unassuming buildings adjacent to GoDaddy’s headquarters and a couple of Amazon offices, the Arizona State University student dons a lab coat, safety shoes and prescription goggles as he helps engineer chemicals for a chip manufacturing process called planarization.

Morris is an unusual 21-year-old. When they graduate college, many of his tech-minded peers will opt to work for the likes of Apple, Google and other household names that have enjoyed meteoric growth over the last decade. Jobs at those tech companies symbolize prestige for graduates and their parents in a way that careers with chipmakers like Intel do not.

Keep Reading Show less
Anna Kramer

Anna Kramer is a reporter at Protocol (Twitter: @ anna_c_kramer, email: akramer@protocol.com), where she writes about labor and workplace issues. Prior to joining the team, she covered tech and small business for the San Francisco Chronicle and privacy for Bloomberg Law. She is a recent graduate of Brown University, where she studied International Relations and Arabic and wrote her senior thesis about surveillance tools and technological development in the Middle East.

Policy

A new UK visa could steal your top tech talent

Without meaningful immigration reform, U.S.-trained foreign graduates could head across the pond.

The U.S. immigration system turns away hundreds of thousands of highly skilled tech workers every year.

Photo: Ben Fathers/AFP via Getty Images

Almost as soon as he took office, President Biden began the work of undoing a lot of the damage the Trump administration did to the U.S. H-1B visa program. He allowed a Trump-era ban on entry by H-1B holders to expire and withdrew a Trump proposal to prohibit H-1B visa holders’ spouses from working in the U.S. More recently, his administration has expanded the number of degrees considered eligible for special STEM OPT visas.

But the U.S. immigration system still turns away hundreds of thousands of highly skilled — and in many cases U.S.-educated — tech workers every year. Now the U.K. is trying to capitalize on the United States’ failure to reform its policy regarding high-skilled immigrants with a new visa that could poach American-trained tech talent across the pond. And there’s good reason to believe it could work.

Keep Reading Show less
Kwasi Gyamfi Asiedu

Kwasi (kway-see) is a fellow at Protocol with an interest in tech policy and climate. Previously, he covered global religion news at the Associated Press in New York. Before that, he was a freelance journalist based out of Accra, Ghana, covering social justice, health, and environment stories. His reporting has been published in The New York Times, Quartz, CNN, The Guardian, and Public Radio International. He can be reached at kasiedu@protocol.com.

Latest Stories
Bulletins