Social Media Endorsements in the Age of Fyre
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S O C I E T L Y A O N F O I P T R A I M N E R O C I E S T Y R L E A O N F O I P U T R ParadigmT A I M N S E N R R E U I T S N L I L O C I E S T Y A L A A O W N F O I P F W T R I A I R M 1 N 9 M E S R 9 R 2 E F U - T 2 S 0 1 7 N I I L R A 1 W M 9 F S I 1 R 9 INTERNATIONAL SOCIETYM OF PRIMERUS LAW FIRMS 9 O C I E S S T Y 9 2 L A O N F 2 O I P - T R 2 - A I 0 M 1 7 N E R R 2 E U 0 T S 1 7 N I L O C I E S T Y A L A O W N F O I P F T R I A I R M 1 N 9 M E S R 9 R 2 E U - T 2 0 S 1 7 N I L A W F I 1 R 9 M 9 S 2 - 2 0 1 7 S O C I E T L Y A O N F O I P T R A I M N E R R E U T S N I L O C I E S T Y A L A O W N F O I P F T R I A I R M 1 N 9 M E S R 9 R 2 E U - T 2 0 S 1 7 N I L A W F I 1 R 9 M 9 S 2 - 2 0 1 7 President’s Podium: A Bright Future FALL 2017 Primerus Looks Ahead: +Trends in the Legal Industry Current Legal Topics: Asia Pacific Europe, Middle East & Africa Latin America & Caribbean North America North America – United States Social Media Endorsements in the Age of Fyre On April 27, 2017, thousands of affluent instead were Styrofoam box lunches, of the communication.” A “material millennials descended on the Bahamian disaster relief tents and feral dogs. connection,” in turn, is defined by the Island of Great Exuma to attend a three- Not surprisingly, a flurry of lawsuits FTC to include “a business or family day concert event known as the Fyre against the festival’s promoters promptly relationship, monetary payment or the Festival. Paying upwards of $12,000 followed—six at last count—each gift of a free product.” a ticket, concertgoers were promised seeking millions of dollars in damages. Rampant non-compliance with the an ultra-glamorous, highly-exclusive Interestingly, in addition to the FTC’s Endorsement Guides is nothing Coachella alternative that was to include promoters, one of these lawsuits also new. Indeed, just one month prior to “first-class culinary experiences and takes aim at a number of unnamed Doe the ill-fated Fyre Festival, the FTC sent a luxury atmosphere,” along with defendants for allegedly engaging in letters to 90 celebrities and social media performances by G.O.O.D. Music, Major unfair trade practices by endorsing the influencers concerning this very issue. Lazer, Migos and more. What they got event on social media without disclosing While the specifics of each letter varied, their financial interest. the FTC’s basic message was the same: This allegation springs from the Anyone using their fame to promote almost exclusive reliance by the festival’s products must disclose a “material promoters on social media influencers connection” between the endorser and to market the event. The promoters the product’s marketer. paid these celebrity influencers, or “Fyre Starters,” as they were called in the festival’s leaked pitch deck, including models Kendell Jenner, Emily Ratajkowski and Hailey Baldwin, hefty sums for their Instagram stamp James R. Molen of approval. (Jenner, in particular, James R. Molen is a litigator with Greenberg reportedly received $250,000 in Glusker. His practice focuses primarily on exchange for a single promotional entertainment and intellectual property related Instagram post.) In virtually no case, matters, and includes the representation of however, did these influencers disclose such clients as Warren Beatty, Uma Thurman that they had been paid. and E! Entertainment. He also represented As the above lawsuit indicates, Shelly Sterling as the lead associate in the $2 by failing to disclose their financial billion sale of the Los Angeles Clippers to Steve interest, these influencers likely ran Ballmer, which stands to date as the largest directly afoul of the Federal Trade sale of a sports franchise in history. Commission (FTC). According to the FTC’s Endorsement Guides, anytime Greenberg Glusker there is a “material connection” between 1900 Avenue of the Stars, 21st Floor a person endorsing a product and the Los Angeles, California 90067 advertiser, “that connection should be 310.734.1965 Phone clearly and conspicuously disclosed, [email protected] unless it is already clear from the context greenbergglusker.com 20 T H E P R I M E R U S P A R A D I G M | Celebrating 25 years with the world’s finest law firms It pays to be alert here, lest one be Fyre Festival, only Emily Ratajkowski below the “more” button. If alone and misled into a false sense of complacency included “#ad” in her post to indicate above, it likely complied. If it failed and conclude that these actions by that it was sponsored content. Is this to satisfy either of these conditions, it the FTC amount to little more than yet enough? probably didn’t. Then again, depending on another bureaucratic exercise—all According to the FTC, maybe. the circumstances, maybe it did. bark and no bite. Despite the seemingly Then again, maybe not. So much for guidance. innocuous choice of title, the FTC’s To help answer this question, Fortunately, thanks to Instagram, misnomered “guides” are actually consider a recently-issued public brands and influencers looking to avoid codified regulations located in the statement by the FTC, wherein the the FTC’s wrath are not left completely in Code of Federal Regulations (16 CFR Commission observes that “when the dark. In the wake of the Fyre Festival, § 255 et seq., for those keeping track multiple tags, hashtags or links are the social media juggernaut announced at home). These regulations, in turn, used, readers may just skip over them, a new feature intended to make those are promulgated by the FTC pursuant especially when they appear at the end of hidden hashtags easier to spot: a “Paid to 15 USC § 45, which empowers the a long post—meaning that a disclosure Partnership With” tag that easily alerts Commission to prevent the use of “unfair placed in such a string is not likely users that a post has been paid for. Best methods of competition in or affecting to be conspicuous.” In addition, the practices dictate taking advantage of commerce and unfair or deceptive acts or Commission points out that “consumers this feature, as it could well become the practices in or affecting commerce.” viewing Instagram posts on mobile gold standard of compliance once users In other words, rather than merely devices typically see only the first three become accustomed to seeing it. serving as a friendly reminder of best lines of a longer post unless they click Of course, whether or not the new practices, the FTC’s Endorsement Guides ‘more,’ which many do not.” Thus, says Instagram feature will ultimately carry the full force of law. The penalty the FTC, endorsers “should disclose any satisfy the FTC is something only the for their infraction? Up to $16,000 per material connection above the ‘more’ Commission itself can decide. Hopefully, violation. button.” the public will get some clear guidance on Unfortunately, given the increasingly In the case of Ratajkowski’s “#ad” this question soon. Just don’t expect it to scattered nature of online influencers, it hashtag then, the question of compliance come from the FTC. becomes very difficult to determine what likely turns on whether it stood alone, violates the FTC rules. In the case of the or whether it was part of a longer string, and/or whether it appeared above or F A L L 2 0 1 7 | Celebrating 25 years with the world’s finest law firms 21.