Another Federal Agency Says: “Paid Influencers Must be Disclosed”

The Federal Drug Administration (“FDA”) joined a growing list of federal and state agencies that are intending to punish companies and businesses that pay social media influencers without fully disclosing the relationship and the payments. If you are using social media influencers or paid spokespersons, every San Diego business should take note. First, fully and prominently disclose the relationship and any payments or gifts. Second, seek the advice and guidance of an experienced San Diego corporate attorney familiar with how to avoid fraudulent advertising and deceptive business practices.

In early June 2019, the FDA — in conjunction with the Federal Trade Commission — sent warning letters to four companies that manufacture and market flavored e-liquid products. E-liquid is also marketed as e-juice and vape-juice and is used in electronic cigarettes, commonly called vape pens. The FDA letters provided warnings with respect to two issues:

• The companies were using so-called influencers on social media sites such as Facebook, Instagram, and Twitter to endorse the products without disclosing the relationship between the companies and the influencers and without disclosing payments and other forms of remuneration
• The social media postings also did not contain warnings that the products contained nicotine, an addictive chemical

As the USAToday’s headline read: “Vaping harms the brain and companies shouldn’t pay influencers to promote it, FDA says.” With respect to the influencers, the FDA warned that failing to disclose material connections between a company and a social media influencer is considered to be fraudulent advertising and a form of deceptive business practice. See FTC news release here.

In a separate action, the FDA’s Office of Prescription Drug Promotion, Division of Advertising and Promotion Review (“OPDP”), issued a guidance letter severely criticizing a direct-to-consumer video. The video was produced and uploaded to various online platforms by a company that manufactures and markets a prescription-only hydrogen-peroxide topical solution for treatment of raised seborrheic keratoses, a skin condition. As with the vaping warning letters, two warnings and criticisms were issued:

• The video failed to mention the warnings and precautions that are on the label including the fact that the topical solution could cause blindness; in total, the video failed to provide a fair and balanced assessment of the risks and benefits of the product
• The video was a taping of a segment from The View television show where the product was discussed with a physician who was also a paid company spokesperson; while the video disclosed that the physician was paid, the segment posted on various social media platforms downplayed and minimized the paid spokesmen status while emphasizing his status as a physician

According to the OPDP, the resulting effect was a video that created a misleading impression regarding the effectiveness and safety of the product. See full PDF of the OPDP’s letter here.

Legal Lessons

If you are using social media influencers and other paid sponsors, be aware of the guidelines and rules with respect to disclosures. It may not be enough to disclose the paid status of an influencer if the full “impression” of the video or blog or social media post is misleading.

Contact San Diego Corporate Law

For more information, call Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard focuses his practice on business law, transactional, and corporate matters, and he proudly provides legal services to business owners in San Diego and the surrounding communities. Call Mr. Leonard at (858) 483-9200 or contact him via email. Like us on Facebook.

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