As influencer marketing continues to dominate social media, the legal risks are catching up. In two recent class action lawsuits, companies and their social media influencers are facing allegations of deceptive advertising. Viewed in conjunction with a string of decisions coming out of the National Advertising Division (NAD), these cases reflect a trend of increasing scrutiny around influencer promotion and the question of whether consumers are being properly informed of these partnerships.

One class action complaint filed in California federal court, Dubreu v. Celsius Holdings, Inc. et al.,involves claims against an energy drink company. The complaint also names three of the brand’s influencers as defendants. The lawsuit alleges that the influencers violated federal and state law by promoting the company’s products on social media without properly disclosing that they were paid by the brand.

According to the complaint, instead of using a #paid or #paid disclosure early in the post, or Instagram’s “paid partnership” label, the influencers buried tiny disclosures in their posts that were almost impossible for a viewer to locate. The complaint argues that this failure to clearly and conspicuously disclose the material connection between the brand and the influencers misled consumers into paying more for the products than they were actually worth. Plaintiff seeks to recover the difference between what consumers paid and what the drinks allegedly were worth—which may ultimately be difficult to prove in a class action, but that’s a discussion for another day.

In Bengoechea et al. v. Shein et al., a similar class action filed in Illinois federal court, fast-fashion giant SHEIN was alleged to have partnered with influencers who made undisclosed endorsements on social media. The lawsuit names seven influencers as defendants, claiming that they promoted SHEIN products without making it clear they had been paid by the brand to do so, leading consumers to believe the endorsements were genuine. The lawsuit also notes that because SHEIN sells exclusively online, social media promotions were a critical part of its marketing strategy, making the lack of disclosure even more harmful. As with the complaint filed in California, plaintiffs seek to recover the difference between what consumers paid and the alleged value of the products.

Influencer marketing has also faced strong headwinds at the NAD, which monitors national advertising in all media. The organization brings actions against and resolves advertising disputes between competitors. Since the beginning of the year, there have been multiple NAD decisions that address influencer advertising.

Since most cases NAD hears are filed by competitors, the fact that NAD initiated these cases on its own highlights the strong interest NAD has shown in influencer marketing. The organization appears to be taking a more proactive role of late in enforcing the Federal Trade Commission (FTC) rules on endorsement disclosures.

One recent case in which the NAD brought a challenge involved a cosmetics company’s influencer advertising, in NuOrganic Cosmetics Eyelash Serum. An influencer promoted the brand’s eyelash serum on social media and claimed it naturally grew long lashes, a claim that NAD determined was unsupported. The NAD further found that the company had a financial relationship with the influencer, who participated in its social media affiliate program, and this relationship amounted to a material connection that should have been disclosed. The cosmetics company argued that it could not control content made by influencers, but the NAD determined that the company was responsible for content shared by its influencers about its products.

The parallel rise in private litigation and NAD enforcement activity since the FTC updated its Guides Concerning the Use of Endorsements and Testimonials in Advertising underscores the potential legal and regulatory risks associated with conducting influencer marketing. Together, these developments signal that both regulators and private parties have intensified their scrutiny of disclosure practices, which makes it more important than ever for companies to ensure their strict compliance with the FTC’s Endorsement Guides and related advertising standards.

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