FTC Seeks New Potential Advertiser, Influencer Liability

The agency is exploring a comprehensive privacy rulemaking, updates to its Children’s Online Privacy Protection Act rules and new guidelines for social media influencers. Consumer advocates say there’s room for the agency to extend liability to advertisers targeting young children on social media, particularly with sponsored content. Any overbroad definitions and bans that come with those limits are sure to be challenged, advertisers said.

The American Academy of Pediatrics recommended the agency ban all influencer marketing for “young people.” That’s unlikely to get consideration because it would violate the First Amendment, said BBB National Programs Executive Vice President-Policy Mary Engle, a former FTC Advertising Practices Division director. But questions remain about when a child is old enough to distinguish organic content from sponsored content that mimics the former, she said. FTC Chair Lina Khan said recently the blurring of lines has the agency very concerned for children.

“Is it under 5, under 8?” asked Engle. “That’s a little bit unclear. That will be a tough line for the FTC to try to draw.” She noted the FTC considered banning TV ads for children under a certain age in the late 1970s. Congress amended the FTC Act to prevent the agency from completing its rulemaking. The agency might be better served pursuing case-by-case enforcement against companies for specific conduct, said Engle. FTC enforcement in the 1990s challenged TV marketing for paid, 900-number phone calls with the Easter bunny and Santa Claus. Some children racked up hundreds of dollars in bills for parents on those calls. More recent examples of questionable marketing include Apple and Amazon allowing in-app purchases for children in video games. These are arguably manipulative practices, but the FTC’s job is to prove unfairness or deception, she said.

Proving deception doesn’t come with “easy, bright lines,” so any attempt to ban advertising for a certain audience will come with legal pushback, said Lartease Tiffith, Interactive Advertising Bureau executive vice president-public policy. Advertising visibility is something that should be legislated through Congress, not decided by unelected bureaucrats, he said: The FTC is “well outside of its bounds.” It looks like the agency wants to regulate the entire economy, since every business in the U.S. uses data, he said. First Amendment precedent errs on the side of more speech, not less, and to infringe on speech, the government needs to provide “super compelling” evidence, he said.

There's precedent for regulation of advertising of products deemed to be harmful, such as tobacco, and there's good evidence of advertising being linked to harms in children, said University of Michigan pediatrics professor Jenny Radesky. She noted the First Amendment doesn't protect commercial speech if it's deemed to be “deceptive.”

Even with disclosures, it’s not easy for young children to know what a sponsor’s motives are because children feel “very connected” with influencers, who they think have their best interests in mind when they’re recommending products, said Ghent University associate professor Liselot Hudders: “Implicit mechanisms make influencers very persuasive, even if you know it’s advertising.” Risks to children include unhealthy food, impacts on eating habits, harmful alcoholic products and influencers who encourage gambling habits. Regulation is one thing, but regulatory action takes a long time, so it’s important for platforms to raise awareness and monitor content better, for influencers to honor their responsibilities and for parents to guide their children.

One can certainly argue preschool children aren’t going to be receptive to any sponsorship disclosures, said Tracy Miller, George Mason University Mercatus Center senior policy research editor. The other question is parental responsibility: “Children are bombarded with all kinds of ads,” but influencer marketing isn’t fundamentally different from previous forms of marketing. Whether it's advertising, privacy or antitrust, there’s danger of FTC overreach, including attempts to ban large swaths of advertising and overbroad definitions of child-targeted content that expose too many parties to liability, said Miller. COPPA rules, for example, ban companies from collecting children’s personal information without parental consent, he said. Since 2013, this information includes IP addresses. “Those two problems mean it’s too easy for a content creator who’s producing content that isn’t even really directed to children to be at risk” of fines, he said.

Stealth marketing includes risks associated with underage drinking, underage e-cigarette use, supplements, harmful diets and deceptive income claims that inspire people to quit jobs or school, said Truth in Advertising Executive Director Bonnie Patten. The FTC is a relatively small agency with limited resources, so it’s unrealistic to think the agency can pursue cases unless there’s obvious consumer harm, she said. While it can be like whack-a-mole, the agency has been sending warning letters to hundreds of national brands about their obligations concerning social media endorsements and testimonials. Brands that received those letters are subject to $47,000 fines per penalty. It’s similar to establishing a consent decree, which enables the agency to seek monetary relief.