Two social media influencers, Trevor Martin, ‘TmarTn’ and Thomas Cassell of The Syndicate Project, settled with the Federal Trade Commission on charges that they failed to disclose their ownership in CSGO Lotto when they endorsed the online gaming company, which constitutes a violation of the FTC Act. According to the FTC, Martin and Cassell paid other social media influencers thousands of dollars to promote CSGO Lotto on YouTube, Twitter, Facebook and Twitch, but failed to disclose this in their social media posts.

In the complaint, the FTC said Martin is the CSGO Lotto president and Cassell is vice president. Each posted videos on YouTube of them gambling on their website and encouraged others to use the service. Cassell posted videos promoting the website and those videos have been viewed more than 5.7 million times. Through an influencer program, Martin and Cassell paid online gaming influencers between $2,500 and $55,000 to promote the CSGO Lotto website to their social media followers and prohibited the influencers from saying anything negative about the site.

‘Consumers need to know when social media influencers are being paid or have any other material connection to the brands endorsed in their posts,’ said FTC Acting Chairman Maureen Ohlhausen in a statement. ‘This action, the FTC’s first against individual influencers, should send a message that such connections must be clearly disclosed so consumers can make informed purchasing decisions.’

As part of the settlement, the FTC requires the pair to ‘clearly and conspicuously disclose any material connections with an endorser or between an endorser and any promoted product or service.’ Also, Martin, Cassell and CSGO Lotto are prohibited from misrepresenting that any endorser is an independent user or ordinary consumer of their products or services. Clear and conspicuous disclosures of ‘any unexpected material connections with endorses’ is also a term of the agreement.

In addition to this settlement, the FTC staff has followed up on more than 90 educational letters it sent to social media influencers and brands in April, sending warning letters to 21 of the original recipients. In the letters, the FTC cites specific social media posts that violate the FTC Act and asks for details on any material connections and what details they will be taking to ensure that all such relationships are clearly and conspicuously disclosed. The FTC would not disclose the recipients of those letters.

In its announcement, the FTC referred readers to its Endorsement Guides, a series of rules that instruct individuals and businesses on best practices, so they do not violate the FTC Act or the truth-in-advertising principle. The FTC says that endorsements must be honest and not misleading. They must reflect the honest opinion of the endorser and that person can’t make a claim that the product’s owner couldn’t make legally. Also, relationships between endorsers and marketers/owners must be disclosed. That’s where the Martin and Cassell got themselves into trouble.

Insider Take:

Being transparent and disclosing unclear relationships are important best practices in the business world. In this case, violating the principle of transparency also violates the FTC Act. Social media influencers, sponsored posts and native ads bring a whole new element that needs to be overseen. The FTC is being proactive in educating and following up on possible violators. We expect to see more of this.