Best Practices for Brands in Connection With Celebrity Endorsements, Testimonials, and Influencer Marketing Activities

On November 15, 2024, in Dallas, Texas, a 27-year-old social media influencer fought a 58-year-old boxing legend and approximately 108 million people tuned in to witness the spectacle. While not quite the Super Bowl, the impressive numbers speak to the popularity of Mike Tyson and Jake Paul. For reference, the most watched show in the United States during any given week is Sunday Night Football (NBC) with approximately 20 million viewers. The interest in the Tyson-Paul fight, whether a gimmick-driven money grab or serious sporting event, supports the notion that we are witnessing the golden age of the influencer economy.

New Media Marketing

Any casual user of digital and social media can attest to the popularity of influencers among brand advertisers. Solicitations promoting goods and services now pepper the newsfeeds of TikTok, Facebook, and Instagram; paid advertisements introduce most YouTube videos; and promotional ads even sneak their way into closed and seemingly private platforms such as LinkedIn. As our attention continues to migrate away from traditional media to digital and self-curated channels, advertisers are certain to follow the traffic. By engaging spokespersons with a substantial (or otherwise valued) following, brands can directly, and oftentimes seamlessly, engage a curated audience without much effort or expenditure.

Regulatory Attention and Enforcement Actions

The growth of influencer and endorsement advertising, coupled with the likelihood for consumer confusion, has piqued the interest of regulators at the Federal Trade Commission (“FTC”). In 2009, FTC sounded the initial alarm with the release of the revised “Guides Concerning the Use of Endorsements and Testimonials” (the “Guides”), which received another update in early 2024. The publication was designed to provide guidance to the brand advertising ecosystem concerning the use of consumer, expert, and celebrity endorsements and related activities. In recent years, FTC has also ramped-up enforcement actions and warnings against third parties that fail to comply with the Guides and applicable law.

Disclosure, Disclosure, Disclosure

According to FTC, if a celebrity, or any other person, is paid or otherwise enticed to promote (e.g., discuss, review, wear, depict, share, or compliment) a product or service, then the relationship must be disclosed in the advertisement. Non-monetary enticements such as the provision of free products or services may also require disclosure depending on the circumstances. The basic test articulated by FTC is: “If a consumer knew an endorser was compensated or incentivized in any way, would that materially affect the weight or credibility of the endorsement?”¹ The underlying policy goal of disclosure is to ensure that the endorsement is honest and accurate, and simultaneously prevent consumer deception or confusion. As such, disclaimers must effectively communicate the relationship between an advertiser and the spokesperson, which must include the existence of any quid pro quo between the parties. As a matter of course, any failure to communicate that relationship will be deemed misleading and subject the parties to liability under the FTC Act, in addition to applicable state consumer protection laws.

Who’s Responsible?

While the burden to disclose is primarily placed upon the brand advertiser, both the advertiser and endorser/spokesperson (along with any third-party intermediaries) may be liable for any failure to comply with the legal rules. With such risks in mind, brands must consider and monitor how their goods and services are being promoted and the methods employed to do so. The decision to engage a spokesperson should not be taken lightly. Once the engagement is formalized, it is incumbent upon brands to ensure that the campaign is administered in accordance with applicable laws.

Below is a non-exhaustive list of best practices that brands should consider prior to commencing an influencer advertising campaign.

1. Conduct internal brand due diligence and develop legal compliance and quality control policies

• Develop internal policies and procedures that govern influencer and endorsement advertising activities
• Adopt quality control and compliance guidelines and procedures
• Train staff and implement the policies

2. Carefully evaluate and scrutinize potential spokespersons to ensure “brand compatibility”

• Brands should perform background checks and social media reviews of the potential spokesperson
• Conduct legal clearance review of related intellectual property and potential conflicts
• Develop morality clauses to address potential concerns

3. Prepare a comprehensive talent services agreement that binds the spokesperson and protects the brand

• Talent contracts should include various vital concepts such as scope of engagement, timelines, deliverables, and payments
• Additional concepts might include exclusivity, rights grants, morality clauses, and renewals
• The agreement should include all relevant brand policies and procedures that apply to the campaign and advertising activities (e.g., content clearance)

4. Ensure compliance and monitor spokesperson activities

• FTC recommends that brands have a system in place to monitor and review spokesperson content
• Brands should have the right to require content removal or correction as needed
• Take appropriate action

5. Ensure that spokespersons comply with applicable social media platform guidelines for branded content

• In addition to various laws and rules applicable to influencer advertising, brands should be aware of the guidelines and rules enforced by the social media platforms
• Platform rules should be included

As we continue to encounter new and self-curated media with increasing frequency, the lines separating sponsored advertising from news and editorial content will continue to blur. Understanding FTC’s priorities and policy objectives in this area, it is imperative that brands be conscious of the regulatory landscape when developing and implementing an influencer-focused marketing strategy. A well-crafted and successful influencer campaign can make a brand a household name, while a careless promotion is likely to make the same brand an anecdotal cautionary tale in a lawyer article.

[1] FTC “Guides Concerning the Use of Endorsements and Testimonials in Advertising,” 16 C.F.R. Part 255.5.