In April 2018, the Federal Trade Commission (“FTC”) wrote to Florida-based Teami LLC (“Teami”), a Florida-based producer of Teami tea and skincare products, reminding it of the requirement set forth in the FTC’s Endorsement Guides, that any material connections, including compensation, between advertisers and internet end-users need to be disclosed “clearly and conspicuously” to consumers.  The letter noted that endorsers should use unambiguous language and consumers should be able to notice the disclosure easily without having to look for it; and that because consumers viewing posts in their Instagram feeds typically see only the first few lines of a larger post unless they click “more,” endorsers should decide any material connection above the name look.[1]

Teami implemented a social media policy in May 2018 that either was provided to social influencers or incorporated into their agreements to ensure that disclosures were seen in the first part of social media posts.  Notwithstanding this fact, numerous Instagram posts by Teami’s paid influencers did not comply with the Teami social media policy.  The FTC brought an action against Teami and its co-owners Adi Halevy and Yoyev Malul for violations of Sections 5(a) and 12 of the FTC Act in connection with Teami’s labeling, advertising, marketing, downloading and sale of its branded tea products and tea-based skin care products.[2]  The complaint cited specific examples of Teami online advertisements and social media advertisements through paid influencers making allegedly misleading weight loss claims for Teami’s 30-Day Detox Pack.  Celebrities such as Cardi B, Jordan Sparks, Adrienne Builon, Jenicka Lopez, Leyla Milani-Khoshbin, Darnell Nicole and Alexa PenaVega and Katya Elise Henry, Princess Mae, and Britanny Renner were named in the FTC complaint and had been sent warning letters in April 2018.

The FTC complaint alleged that Teami and its co-owners Halevy and Malul made false claims, without reliable scientific evidence, that their Teami 30-Day Detox Pack and teas and skincare products could cause rapid and substantial weight loss, “fight against cancerous cells,” decrease migraines, unclog arteries, treat and prevent colds and flu, and achieved over $15 million in sales.  The FTC asserted two counts for false or unsubstantiated efficacy claims and deceptive failure to disclose material connection.  Social media followers who read the posts were not able to view the disclosure that the endorsements were paid-for unless they clicked on the “more” option.  In addition to taking action against Teami, the FTC staff sent warning letters to the ten influencers named in the FTC complaint alleged to have made insufficient disclosures.

On March 17, 2020, the United States District Court for the Middle District of Florida, Tampa Division, entered a Stipulated Order for Permanent Injunction and Monetary Judgment[3] which: (1) prohibits Teami from making misleading representations regarding its products; (2) requires that Teami have competent and reliable scientific evidence substantiating any claims made with respect to its products; (3) requires Teami to have clear and conspicuous disclosures of any unexpected material connection between Teami and an influencer; and (4) requires that Teami to advise influencers of their disclosure responsibilities and to monitor and review representations made by endorsers.  Interestingly, the Court differentiated between “endorsers participating in a program through which they only receive free or discounted products sold by [Teami] not to exceed $20 per month” and other “endorsers with material connections to any Defendant or any other individual or entity affiliated with the product” and requires review of each specifically contracted online video and social media posting promptly after publication for those endorsers with a material connection and “monthly reviews of the fifty endorsers generating the highest levels of product sales, in dollars, in the prior month” with respect to other endorsers receiving free or discounted products not to exceed $20 per month.”  The order imposed a judgment of $15.2 million — representing the total sales of the challenged Teami products — which will be suspended upon payment of $1 million, based upon the Defendants inability to pay the full judgment.

The Commission voted 5-0 to file the complaint and stipulated order and 5-0 to release a Statement of the Commission[4], which stated: “The internet is an important mechanism for facilitating the flow of information between businesses and consumers, so combatting the spread of misinformation is critical.  The relief obtained in this matter demonstrates the Commission’s commitment to battling digital misinformation. . . . Importantly, the Commission will continue to review our approach to injunctive relief, and in particular, whether our orders adequately ensure that advertisers under order take responsibility for monitoring their marketing.  Across the board, the Commission is committed to seeking strong remedies against advertisers that deceive consumers because deceptive or inaccurate information online prevents consumers from making informed purchasing decisions and creates an uneven playing field for those who follow the rules.”  This Statement and the relief that was contained in the Stipulated Order demonstrate that the FTC is getting very serious about enforcement of the Endorsement Guides with regard to social media and influencers.  Having a social media policy for disclosures by influencers alone is not enough.  The FTC will hold both advertisers and influencers responsible for a failure to monitor and review of social media posts and the absence of a clear and conspicuous disclosure of any material connection between the endorser and advertisers.

FOOTNOTES

[1] See https://www.ftc.gov/enforcement/cases-proceedings/182-3174/teami-llc (Complaint, Ex. 16).

[2] https://www.ftc.gov/enforcement/cases-proceedings/182-3174/teami-llc.

[3] https://www.ftc.gov/system/files/documents/cases/teami_-_entered_stip_ord.pdf.

[4]https://www.ftc.gov/public-statements/2020/03/statement-commission-matter-teami-llc.