INFLUENCERS AVOID SERIOUS PUNISHMENT FROM FEDERAL TRADE COMMISSION

(This post was contributed by Alan Conklin, an intern for Roger R. Quiles, Esq. and recent graduate of Villanova Law)

On September 7, two Youtube stars, Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell, avoided any significant punishment or fine from the Federal Trade Commission for  failing to disclose their interests in a website they were promoting, by agreeing to terms set forth by the agency.
 
The settlement agreement comes nearly a year after the social media influencers’ connection with CSGOLotto was discovered. After the discovery, the FTC filed a complaint against Martin and Cassel, its first ever complaint against individual social media influencers, for deceptively endorsing the online gambling service CSGO Lotto, while failing to disclose that they jointly owned the company.
 
Settlement
 
In the settlement, the FTC order requires Martin and Cassell to “clearly and conspicuously disclosure any material connections with an endorser or between an endorser and any promoted product or service.” The duo was lucky to avoid any fines for these specific actions, but the order did state that each infraction in the future would cost the violator $40,654. While this punishment may seem like a slap on the wrist for Martin and Cassel, the FTC hopes this action will send a message to other social media influencers and show them that they must disclose their connections to products they promote in order to allow consumers to make informed decisions during the purchasing process.
 
What happened?
 
In late 2015, Martin and Cassell, began operating a website called CSGOLotto, which allowed consumers to gamble, using “skins” as virtual currency. “Skins” are collectable virtual items used to cover weapons in the popular game, Counter-Strike: Global Offensive, also known as “CS: GO.”
 
Without informing the public of their positions as president and vice president of CSGO Lotto, Martin and Cassell, respectively, promoted the website to their massive followings on their social media channels. On Youtube, their combined accounts had over 10 million subscribers.
 
Martin and Cassell posted videos on these accounts with alluring titles such as, “HOW TO WIN $13,000 IN 5 MINUTES (CS:GO Betting),” and “$24,000 COIN FLIP (HUGE CSGO BETTING!) + Giveaway.” Alone, Cassell’s videos promoting the website were viewed more than 5.7 million times.
 
The duo also used their Twitter accounts to promote the site without disclosing their connection to CSGO Lotto:
 
“ ’I lied… I didn’t turn $200 into $4,000 on @CSGOLotto…I turned it into $6,000!!!!
csgolotto.com/duel-arena” [screen shot of Syndicate winning a betting pool worth over
$4,400 on CSGO Lotto] (April 20, 2016 tweet by @ProSyndicate)’ (Exhibit N)”
 
While this may have seemed like an adequate amount of marketing for the content creators, they did not stop there. The two influencers and their company had an “influencer program,” where they paid other gaming influencers between $2,500 and $55,000 to promote the CSGO Lotto website to their followers, and prohibited them from saying anything negative about the site.
 
Soon after their affiliation to the website was revealed, the FTC filed a complaint against Martin, Cassell, and their company, alleging that they “misrepresented that videos of themselves and other influencers gambling on the CSGO Lotto website and their social media posts about the website reflected the independent opinions of impartial users of the service.” The complaint also referenced the deceptive social media posts by the paid influencers.
 
Impact
 
Despite the soft “punishment” handed down by the FTC, social media influencers should take note that the Commission is ready and willing to take action against them should they fail to adequately disclosure their relationship to companies in any post for which they have a connection. This past April, the FTC sent over ninety educational letters to social media influencers and brands, informing the influencers that their relationships must be “clearly and conspicuously disclosed.” On Thursday, the Commission sent follow up letters to twenty-one of those initially targeted influencers, warning them of potential violations. Although the punishments do not appear to be severe, social media influencers should not take any risks with future “paid-for” posts or posts for companies with which they have connections. The FTC has recently updated its “Endorsement Guide” to help social media influencers understand what is appropriate when endorsing a product.