The U.S. Federal Trade Commission warned hundreds of Fortune 500 companies that they’ll pay steep fines if they engage in dishonest influencer marketing or reviews.
While the warning was sent to large advertisers, retailers, and multinational firms, the fines will apply to any business that’s leveraging influencers to hawk products or services.
The news: The FTC notified more than 700 companies — ranging from Facebook and Yelp to Aeropostale and Dunkin’ Donuts — that it’ll be issuing fines of up to $43,792 per violation for fake reviews and sketchy influencer marketing tactics.
“The rise of social media has blurred the line between authentic content and advertising, leading to an explosion in deceptive endorsements across the marketplace. Fake online reviews and other deceptive endorsements often tout products throughout the online world." —FTC
The context: Consumers are increasingly being persuaded by influencers’ and celebrities’ endorsements on social media. As a result, businesses are spending billions on influencer marketing. Companies are expected to spend about $13.8 billion on influencer marketing in 2021 — up from $9.7 billion in 2020.
Fake reviews: Amazon and other marketplaces have a history fraught with fake reviews. In a recent investigation, Safety Detectives discovered a well-organized scheme involving more than 200,000 people making fake 5-star reviews on Amazon in exchange for free products. In 2020, a Fakespot analysis reported that about 42% of 720 million Amazon reviews were "unreliable."
Compelling: About 46% of consumers say they trust online reviews, while only 15% trust companies’ posts on social media, according to Forrester Research.
Deceptive practices: If you’re using influencer marketing, the FTC says endorsers must be actual users, give an honest account of their experience, be truthful about the product’s abilities, and disclose they’re being paid or received a product as a gift. Businesses also:
Following the rules: If you want to make sure your influencer marketing is in line with the law, the FTC crafted endorsement guides for advertisers.
Enforcement nightmare: We all know how nimble the federal government is (insert gif of container ship stuck in Suez Canal). So, how will it police tens of millions of influencers? It’ll rely on the Consumer Sentinel Network, an online database for law enforcement that captures millions of complaints from citizens, businesses, and other agencies. In 2020, the network fielded more than 2.3 million fraud reports at a reported loss of about $3.4 billion.
They got caught: While the majority of fake reviews and misleading influencer marketing ploys will slip through the cracks, the FTC has nabbed a few companies through the years. In 2016, Warner Bros. settled with the FTC on charges that it duped consumers during an influencer marketing campaign for the video game Middle Earth: Shadow of Mordor. The FTC also hit a gaming advertiser for deceptive influencer videos that hyped the Xbox One.