Influencers, Alcohol Brands & Deceptive Advertising Regulations

Hospitality, Alcohol & Leisure Blog May 14, 2024 New York, NY

By: Jaci Flug, Esq., and Louis J. Terminello, Esq.

Today, every beverage alcohol brand has a marketing plan, and every plan includes an “influencer” or content creator – a person who uses their large social media following to endorse or support a product. Large social media followings come with large responsibilities and that includes compliance with the Federal Trade Commission’s (“FTC”) guidance regarding endorsements.

The FTC protects consumers from deceptive advertising and when it comes to endorsements, the FTC is clear that consumers must know if an endorsement is the result of compensation. So, what is an endorsement? The FTC defines an endorsement as “an advertising message that consumers are likely to believe reflects the opinions or beliefs of someone other than the sponsoring advertiser.”

What is compensation? The FTC’s view of compensation is very broad. FTC Guidance tells influencers: If a brand gives you free or discounted products or other perks and then you mention one of its products, make a disclosure even if you weren’t asked to mention that product.

This leaves a vast number of items or experiences that can be deemed compensation. Admission to an event, discounts, and free products, among various other things, are deemed compensation that must be disclosed if they result in an endorsement. The brand’s intention in giving the admission, product, or discount is irrelevant, as is the influencer’s intention in taking it. If an item was given, received, and resulted in an endorsement, it must be disclosed. Such standards require constant monitoring by marketing teams to ensure compliance.

Per the FTC Guidance, disclosures must be “hard to miss” and can include simple words like “ad,” “sponsored,” or “advertisement.” The FTC made it clear that both the influencer and the product/ brand can be held accountable for violations when it prosecuted artists Cardi B and Jordan Sparks, along with tea maker Teami, for failure to disclose the compensated endorsement. Major social media platforms like Instagram, Facebook, TikTok, and X (formerly Twitter) make disclosures easy and are built into the platform. Other forms of digital endorsement require self-made disclosure notifications.

Brands must also provide guidance to their own employees who may take to social media to proclaim their love/endorsement of company products. If the employee fails to clearly identify their relationship to the company or brand, the posting/endorsement is deceptive, and the brand can be held responsible. It is best to advise employees who want to post about brand products to use language such as “I’m so proud of my team at ‘XX’ Company for creating…” They must use language that shows their company employment/ connection. Any omission of it will be viewed as deceptive.

As the role of social media, influencers, and celebrities grows in beverage alcohol, compliance with FTC Guidance is critical. DISCUS addresses these issues in their Code of Responsible Practices, reminding brands that compensated endorsements are ads and, therefore, should comply with the entire Distilled Spirts Council of the United States (DISCUS) Code of Responsible Practices. As marketing and advertising continue to take on new or non-traditional forms, brands are best guided by these basic principles: be truthful, disclose compensation in any form, and comply with industry standards.

To familiarize yourself with when-to or not-to disclose endorsements on social media, view the latest FTC Guidance.

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