Do Influencers Need Regulating?

NEW YORK, United States — Influencers: they are people too. Are they?

Kendall Jenner is a flesh and blood human being, as is Chiara Ferragni and Leandra Medine. But at some point, when someone's projected identity becomes a product, or the conduit for a product — when Ferragni becomes The Blonde Salad, and Medine the Man Repeller — we have to see them as something else.

Or even if we don’t, regulatory bodies, like the United States Federal Trade Commission (FTC), do. In 2015, the agency, whose principal mission is the promotion of consumer protection and the prevention of anti-competitive business practices, went after and settled with Lord & Taylor for paying 50 influencers, and the magazine Nylon, to post about a dress without disclosing to readers that it was a paid promotion.

What’s at work here is a nuanced version of a simple principle: advertisers are not allowed to deceive prospective customers by disguising commercially motivated content as something it isn’t. When we see a post on the Instagram account of a vitamin supplement company we follow, it’s reasonable to assume we know this is marketing. But if Kendall Jenner posts about the same product on her personal account — and is being paid to do so — the law requires that consumers are alerted to this fact. Now, if Kendall Jenner decides to post about her breakfast and those vitamins happen to be on her plate, well, that’s where things get complicated.

“We care about any influencer who isn’t disclosing that they have material connection to a brand that they’re endorsing,” says Michael Ostheimer, a senior staff attorney at the FTC. These aren’t just kids taking selfies; this is powerful marketing. “People are paying them many thousands of dollars. It seems like they do have power,” he continues. Moreover, Instagram posts from influencers doubled in 2017, according to Klear, a social media analytics firm, while influencer marketing became a billion-dollar business on Instagram last year (it’s expected to hit $5 billion by 2020).

It was Ostheimer's name and number — should recipients have any questions — printed towards the end of more than 90 "educational" letters sent in March 2017 to executives (at brands including Nike, Chanel, Dunkin' Donuts) and influencers (Naomi Campbell, Snooki, Lindsay Lohan) who they suspected to be flouting its regulations on Instagram. Essentially, they weren't tagging their paid posts properly — or at all.

As per FTC guidelines, any sponsored post should have a clear tag such as #Ad or #Sponsored. The agency gets specific. The tag needs to be near the post, preferably right at the beginning of the caption (and definitely not in the part of a photo caption revealed only when you click “more”). And you can’t get away with using tags like “#sp” and “#partner” or by saying “Thanks Louis Vuitton.”

Did it work? “There’s anecdotal evidence that certain posts may have been corrected or taken down, but as a general matter, it appears that most popular social media influencers are continuing to skirt laws,” says Bonnie Patten, executive director of Truth in Advertising, an advocacy group that, in September 2017, filed a complaint — their second — with the FTC, noting the Kardashians and Jenners — the reality TV stars, fashion emissaries and beauty business gurus — repeatedly failed to disclose. (It’s important to note that the FTC is not the only regulatory body users of Instagram — 80 percent of whom live outside the US — need to consider; there’s the Competition Directorate in the EU, as well a regulatory body in each individual European nation, as well as non-governmental ones, like the UK’s Advertising Standards Authority.)

A favourite Kardashian/Jenner workaround is to come up with their own hashtags, like “#KJ4EL” which is an acronym for Kendall Jenner For Estée Lauder. The problem here is that it may not be clear to consumers that this acronym indeed indicates an advertisement. “Consumers have a right if your motives and interests are financial and there’s a monetary gain,” says Patten.

The Kardashians did not receive an FTC letter back in the spring of 2017, but one fashion executive who did was Riccardo Pozzoli, at that time the business partner of Chiara Ferragni (12.5 million followers) in her Chiara Ferragni Collection. Pozzoli did not return a request for comment, and Chiara Ferragni said through a representative that she cannot speak for Chiara Ferragni Collection, only for herself as an influencer (neither she, nor her business, The Blonde Salad, received any notice from the FTC: “I’ve always been very transparent towards this issue,” she said. “I’ve been using #ad and #advertising since 2017”).

While brands seem to have fallen in line, adding language to contracts that force influencers to properly disclose in their posts, “The influencers don’t seem to care at all,” says Julie Zerbo, an attorney and the author of the website The Fashion Law. For the past two years, her blog has examined this issue with its “The Annual Brand and Influencer Report: The Good, Bad, and Highly Problematic.” For 2017, Bryanboy and Caro Daur were among the most “exemplary,” Chiara Ferragni was somewhere in the middle, while Olivia Palermo and Camila Coelho bottomed out the list. “The vast majority of them fall very low on this ranking in terms of who is properly disclosing. It is dismal,” says Zerbo.

If it makes no difference, why not tag sponsored content as "#ad" in the first place?

Ferragni claims to be “one of the first” influencers to have applied the “ad” hashtag when the issue was first raised with authorities. But as she sees it, whether her actions were reactive or proactive, such disclosures are irrelevant, because: “I don’t think that my followers are interested to know if content is sponsored or not, especially because I choose to work only with partners, products and projects that are near to who I am and what I like,” she says.

This begs the question: if it makes no difference, why not tag sponsored content as “#ad” in the first place? But it also gets to the crux of the issue: separating what content is sponsored from what is editorial, and whether readers actually care.

All the available evidence points to the fact that people, especially young people, care deeply. Two out of every three millennials have installed ad blockers; 2016 saw 309 million downloads for ad blockers for mobile, according to Pagefair. Sixty-nine percent of Gen-Z viewers are likely to physically avoid ads, according to a study by Kantar Millward Brown’s AdReaction. The most convincing evidence, while anecdotal, comes from the influencers themselves: almost uniformly, they state that their engagement drops when they tag something “#ad.” While influencers noted that this may be the result of the way Instagram programs its algorithmic feed, the implication being that the platform buries posts tagged #ad (the average Instagram user doesn’t see 70 percent of the posts on their feed), Instagram says they don’t penalise content tagged #ad or similar.

In June 2017, Instagram instituted a program wherein the geo-tag that appears at the top of a post can be replaced with a note indicating that the post was paid for by a sponsor. This still falls outside current FTC guidelines (influencers have to say #ad and they need to say it clearly) but what may ultimately matter is whether the execution delivers on the underlying issue and consumers are not deceived. More recently, the platform added a feature wherein posts suspected — by humans and its algorithm — of improper disclosure would be tagged with a banner that only the poster would see. There are no repercussions, mind you, but the suspected offender is invited to read Instagram’s policies on sponsorship.

Not that every influencer needs a refresher. As the latest Fashion Law report reveals, Bryanboy is crystal clear about paid content to his 665K followers. “Whether it’s a gift I received, or a paid advertisement, or sponsored content or press junket, I always declare it,” he says. To him it makes him more trustworthy, and prominent. “A lot of influencers are hesitant to out these disclaimers because they don’t want to look like they’re always being paid.” It comes down to a question of authenticity, that discursive, hard-to-pin-down element that makes an influencer actually influential.

An Instagram post by Bryan Yambao with the caption "Sponsored by Bally" | Source: @bryanboy

Here is where things get really messy. To keep things authentic, influencers often return to the thing that made them popular in the first place: posting images of themselves with the products they love. But what happens when the product was given to them for free? Or the company behind the product owns another brand who pays them? Or the same company flew them somewhere fabulous? On that trip do they need to tag all the posts as advertisements? Just some of them? How about a post where an influencer is wearing mostly items of her own, and one that she was paid to post about, but not in that particular photo? Where do we draw those lines?

“When I go on a trip with a brand there is no money involved. I don’t tag that stuff,” says Veronika Heilbrunner, whose @heywomancom Instagram has 40K followers (she tags all paid content religiously). “Of course I’m going to post stuff because I’m excited to go there and share my experience with my followers. I see it as a press trip. When I was an editor I went on many trips; it was never marked as a promotion or advertising.”

Heilbrunner hits on an important point: fashion magazines have been pulling this stuff for decades. While an ad page is fairly clear (when Nylon produced an editorial article that Lord & Taylor paid for in 2016, the FTC called them out), many of the clothes that end up in the fashion pages of a magazine are pulled from advertisers. And magazine editors do plenty of back-channel deals and accept a pirate’s booty in freebies. So, what’s the difference?

It’s murky, and as the internet has reduced barriers to entry while upping the thirst for content (one example: old school magazines can’t easily afford to say “no” to press trips to compete in the same digital spaces), it’s only gotten murkier.

“I think that influencers are waking up to the notion that authenticity is the reason that they’re so popular in the first place,” says Zerbo. “Readers started looking to them as an alternative to the Vogues of the world that were clearly in bed with advertisers.”

But when it comes to disclosing paid partnerships, authenticity cuts both ways. “I think that one of the things about social media is that the goal is to be really authentic and to peer into somebody’s life,” says Patten. The challenge then becomes — for the FTC, social platforms, consumers and influencers — to decide where life stops and business begins, all the while knowing it’s disadvantageous for some parties to acknowledge there’s any separation at all.

Influencers are waking up to the notion that authenticity is the reason that they're so popular in the first place.

Some say it’s time to take some of the big fish, like the Kardashians, to task — publicly and expensively — and let the ripple effect take its course. “If the FTC had taken action against [the Kardashians] a long time ago, maybe things would be very different now,” says Zerbo. While it would be nice to think the FTC’s letters were having an impact, a 2018 report by influencer marketing agency Mediakix indicated that 93 percent of influencers are still flouting FTC regulation.

“We’re interested but we also have lots and lots of other responsibilities beyond influencers,” says Ostheimer. “Our position is that the FTC is understaffed and underfunded and that they do not have the resources to police the influencers,” says Patten. There is an argument that, given time, any inauthenticity will catch up with an influencer, and will result in lost followers and business. But it’s unclear that we have that time to spend. Washington moves slowly, and increased regulation is not exactly the flavour of the day. So, some kids buy some makeup because Kendall Jenner likes it, even though Kendall doesn’t really; what’s the real damage? The answer isn’t in the money Jenner makes or the engagement Instagram receives, it’s in the wide berth Instagram — and similar platforms — have been permitted to make that decision for consumers. And these platforms have not exactly proved themselves worthy of credulity.

But all we have to do is look upwards, at Instagram’s parent company, Facebook, and its current crisis with fake news and data privacy, to be reminded of the consequences of an unchecked social media network. Indeed, while the FTC and other bodies might act independently against influencers, or even Instagram, it is perhaps the social media companies themselves that have the biggest stake in keeping their platforms clean.

This article first appeared in BoF's latest special print edition. This issue, which includes our special report on The Business of Beauty, is available for purchase at shop.businessoffashion.com and at select retailers around the world. If you sign up to BoF Professional before June 29, 2018, you'll receive this issue as part of your annual membership, which also includes unlimited access to articles, exclusive analysis, invitations to networking events and the members-only app. Subscribe here today.

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