Influencer marketing is one of the most effective ways for cannabis businesses and cannabis-related businesses to get their brands in front of consumers, but like most marketing tactics, there are rules to follow when you invest in influencer marketing.
Most importantly, the Federal Trade Commission (FTC) has a set of rules published in the Code of Federal Regulations (CFR) that all businesses must adhere to when they provide something to a person or entity in exchange for a mention, review, endorsement, or anything else that creates a material connection.
FTC Endorsement Rules Related to Influencer Marketing You Should Know
In simplest terms, the FTC requires that anytime a person or entity mentions your brand, products, services, or business in exchange for something (e.g., money, free products, discounts, or any other tangible or intangible perk you can think of), then a material connection exists and that person or entity must disclose the material connection.
In influencer marketing, businesses provide something to a person or entity who has the eyes and ears of a large, focused audience. Typically, the influencer’s audience follows and listens to influencers on Instagram, Facebook, blogs, offline, and more. Influencers could be global celebrities, YouTube stars, small bloggers who have highly engaged niche followers, and more.
With that said, a material connection could be something as small as a coupon that an influencer receives after sharing a link to the cannabis business’ website on Twitter, posting an image of the business’ product on Instagram, or sharing a link to an online contest the business is holding.
On the other hand, a material connection could be money in exchange for a blog post that reviews a product or a blog post that simply includes a link to the product’s web page (referred to as native advertising or sponsored posts). Even a Facebook post that suggests people follow the cannabis business’ Facebook Page would be a material connection if the influencer who posts it receives something in return from the business.
Here are a couple of extremely important things that you need to understand before you invest in influencer marketing:
1. “Endorsement” is a Broadly Interpreted Term
The FTC uses the word “endorsement” in its guidelines, but an influencer doesn’t have to actually endorse your product, service, business, or brand (e.g., “I love this product!”) for the FTC’s rules to apply.
The FTC’s rules apply if there is any type of mention, link, or anything else that could influence consumers and benefit the business in exchange for something tangible or intangible.
2. There are Many Types of “Material Connections”
A material connection doesn’t just mean money. Anything that an influencer will receive in exchange for doing something your business asks for that will directly or indirectly promote your company, products, services, or brand could be considered a material connection.
Some examples of non-monetary material connections include a special VIP ticket to your next event, a free T-shirt, an entry into a contest, a link back to their website or web page of choice from your site or social media, or even a mention of them in your next newsletter.
3. “Endorsement” + “Material Connection” = You Need to Follow the FTC’s Rules
Bottom-line, if a person or entity mentions, links to, or otherwise raises awareness of your business, brand, products, or services in exchange for something, then a material connection exists and you need to follow the FTC’s rules for disclosing that material connection.
How to Adhere to the FTC Endorsement Guidelines
Make sure all influencers you work with understand and follow the FTC’s endorsement guidelines by clearly and conspicuously disclosing the material connections they have with you. The FTC’s Disclosures 101 for Social Media Influencers provides great information about when to disclose material connections and how to disclose them.
Here are some of the FTC’s recommendations that you should share with all of your influencers:
- Disclose a material connection whenever there is a financial (money and not money), employment, personal, or family relationship with a business or brand.
- If you mention a brand, make a disclosure if the brand gives you a free or discounted product or other perk, even if they didn’t ask you to mention the brand, product, service, or business.
- Even unbiased evaluations, content, or mentions require disclosure if there is a material connections.
- Influencers who publish content outside of the U.S. must still adhere to U.S. law if it’s “reasonably foreseeable” that the content will affect U.S. consumers. Foreign laws also apply to influencers outside the U.S.
- Even things like social media pins, tags, likes, and shares must include a disclosure if there is a material connection.
- Make sure disclosures are obvious, placed with the endorsement message, and hard to miss.
- If an endorsement is a picture or video, the endorsement should be in the picture (e.g., superimposed over the image) or video, not just in the description.
- Disclosures should be repeated multiple times when endorsements are included in live streams.
- Disclosures shouldn’t require that people click, hover, scroll, or complete any other action to see them.
- A disclosure must appear on every web page, post, etc. where an endorsement is made, remembering that there are all kinds of “endorsements” under the FTC’s rules.
Of course, this list isn’t comprehensive, but it does give you a good place to start a conversation with your influencers and ensure your business is compliant with the FTC’s rules. If you’re caught violating the guidelines (and that includes if an influencer you work with fails to include disclaimers in their content), you could be in trouble.
Be sure to read the FTC’s stance on what businesses are responsible for (whether they run their own influencer marketing campaigns or a third party agency manages campaigns for them).
To learn more about the FTC’s endorsement guidelines, here are some helpful links:
- Code of Federal Regulations (16 CFR Part 255)
- FTC Endorsement Guide FAQs
- FTC .com Disclosures Guide for Online Advertising
- FTC Guide to Native Advertising
Key Takeaways for Cannabis and Cannabis-Related Businesses
Influencer marketing works very well for many cannabis and cannabis-related businesses, but just like you have to comply with a variety of laws to operate in the cannabis industry, you also need to follow a variety of laws to promote it – including the FTC’s endorsement guidelines.