Podcast - Social Media Advertising and the FTC: Deception and the Architecture of Compliance

Anthony DiResta: Welcome to another podcast of Clearly Conspicuous. As we've [noted] in previous sessions, our goal in these podcasts is to make you succeed in this environment, make you aware of what's going on with the federal and state consumer protection agencies and give you practical tips for success. As always, it's a privilege to be with you today.

Today we discuss social media advertising and the FTC: deception, unfairness and the architecture of compliance. Let's start out with an introduction, folks.

Why Social Media Advertising Is a Regulatory Priority

Social media advertising now sits at the center of modern consumer commerce. It is persuasive, personalized, algorithmically amplified and often indistinguishable from organic content. For regulators, especially the Federal Trade Commission, this combination presents a familiar problem in a new technological form: how to protect consumers when persuasion is embodied, implicit and seeable.

The FTC's core statutory authority has not changed. Section 5 of the FTC Act still prohibits unfair or deceptive acts or practices. What has changed is the environment in which persuasion occurs. Social media collapses the traditional separations between advertising and content, between speaker and marketer and between voluntary influence and commercial inducement.

From the FTC's perspective, social media is not a "new" category of law - it is just a new factual context in which old doctrines apply with renewed force.

What Companies Are Trying to Accomplish Through Social Media Advertising

At its core, social media advertising is designed to do three things simultaneously:

1. Leverage trust rather than assert claims
   Unlike traditional advertising, social media marketing often relies on relational credibility: the perceived authenticity of creators, peers or communities.
2. Reduce consumer resistance
   Ads are embedded in feeds, stories, reels and posts that consumers do not cognitively process as advertising in the traditional sense.
3. Exploit algorithmic amplification
   Content that performs well - emotionally, socially or visually - is rewarded with greater reach, often without meaningful advertiser intervention once deployed.

Thus, from a regulatory standpoint, these goals are not inherently problematic. But they increase the risk of deception, because consumers may not recognize commercial content as advertising, material connections may be hidden, claims may be implied rather than stated, and responsibility may be diffused among multiple actors.

The Key Players in the Social Media Advertising Ecosystem

Understanding FTC scrutiny requires understanding who the FTC believes bears responsibility. The Commission does not accept the premise that liability stops with the speaker.

First, there are the advertisers or the brands. Advertisers are the primary beneficiaries of social media advertising and, therefore, the primary compliance target. The FTC has consistently held that brands are responsible for claims made on their behalf, brands must ensure influencers comply with disclosure requirements, [and] brands cannot outsource compliance to creators or agencies.

Then, there are the influencers and creators. Influencers are treated as endorsers under the FTC Guides. They are not passive users. When they receive payment, free products, discounts, early access or any material benefit, and promote a product, they are engaged in commercial speech subject to disclosure obligations.

Then there are the agencies and the marketing intermediaries. Agencies are increasingly viewed as compliance gatekeepers. When agencies structure campaigns, data scripts or manage influencer relationships, they may face independent exposure.

Finally, there are the platforms. While platforms enjoy certain statutory protections, the FTC has made clear that platform design choices, especially those that facilitate deception, are relevant to an unfair analysis.

The FTC's Legal Framework: Deception and Unfairness

Deception is defined as an act or practice where there is a representation, omission or practice that is likely to mislead a reasonable consumer and that it is material. In social media advertising, omission is often the problem: a failure to disclose a material connection, a failure to clarify that content is sponsored or a failure to qualify claims made implicitly through visuals or lifestyle portrayals. The FTC is clear: If a consumer would give less weight to an endorsement if they knew it was paid, that fact must be disclosed clearly and conspicuously.

Then there's the unfairness problem. Unfairness focuses less on truthfulness and more on structural harm. Does the practice cause substantial consumer injury? Is the injury reasonably avoidable? Is it outweighed by countervailing evidence? So social media practices that exploit cognitive biases, use manipulative design, obscure consumer choice and target vulnerable populations may be unfair even if no single statement is false.

FTC Endorsement and Testimonial Guides: Core Requirements

The FTC's Endorsement Guides apply fully to social media. Key principles include:

1. Disclosures must be clear and conspicuous. "Clear" means understandable, [and] "conspicuous" means hard to miss. Hashtags like #ad or #sponsored are generally acceptable. Vague tags like #partner or #thanks often are not.
2. Disclosure must be prominent. Not buried, not behind "more," not at the end of a long caption.
3. Disclosure must be also platform-[appropriate]. What works on Instagram may not work on TikTok or YouTube. Audio disclosures may be required in video [also].
4. Endorsements must reflect honest opinions. No fabricated experiences, no endorsements for products never used.
5. Claims must be substantiated. Especially those focused on health, financial or performance claims.

Common Enforcement Triggers

The FTC repeatedly focused on [undisclosed] influencer relationships, health and [wellness] claims, financial opportunity claims, youth-targeted marketing and repetition of noncompliant influencer conduct after notice. A key enforcement insight here: Failure to monitor and correct known violations significantly increases liability.

The FTC's Expectations for a Company's Social Media Policy

Now let me stop here a second, folks. Hidden in there is a presupposition. The FTC expects every company to have a social media policy. The FTC increasingly evaluates corporate governance, not just outward messaging. A company without a social media policy signals lack of oversight, lack of training [and] lack of internal controls. In enforcement actions, the absence of a policy undermines defenses and supports claims of recklessness and knowing misconduct. So what needs to be inside a social media policy, you ask?

A credible social media policy should include:

1. Scope and applicability to employees, executives, influencers and agencies.
2. Disclosure requirements when disclosures are required, when approved disclosure has certain language and platform-specific guidance.
3. The policy has to have substantiation rules. Prohibiting claims that aren't provided by substantiation. There has to be sometimes required internal approvals and documentation standards, of course.
4. Approval and monitoring processes. You need pre-approval for campaigns, ongoing [monitoring] of influencer posts and corrective action protocols.
5. Training and education. There has to be evidence of regular training, updated guidance and clear escalation channels.
6. Enforcement and discipline. There needs to be consequences for violations of the policy and reporting obligations.
7. Recordkeeping contracts, posts, disclosures and corrections.

From the FTC's perspective, a policy is not symbolic - it is evidence of a reasonable compliance effort.

Key Takeaway

The FTC's position on social media advertising can be summarized simply: If advertising is persuasive because it appears authentic, the law demands transparency.

Social media did not eliminate consumer protection law - it amplified the need for it. Companies that treat compliance as an afterthought invite scrutiny. Companies that embed compliance into design, governance and culture reduce risk and preserve trust.

So stay tuned to further programs as we identify and address the key issues and developments and provide strategies for success. I wish you continued success and a meaningful day. Thank you.