Podcast

Ethan

Welcome to the social media lawcast I am your host social media attorney Ethan wall with me is my friend and co-host Shawn Depasqale. oh you're Australia now I we do. We're go do entire episode just walk this.

Shawn

Good eye might oh true on something new that I might another 3 throw another shrimp on the bobby if we did the whole episode in an accent.

Ethan

So was wallaby say.

Shawn

Would that make it more interesting to talk about Influencer integrity.

Ethan

O I don't I don't know because it's going to take a lot to make that subject better and for maybe um.

Shawn

Ah, ah, ah, all right? Let's go. Okay, let's start at the beginning right? I want to talk about. Influence integrity specifically ftc guidelines on like promotional disclosure stuff right? So what does any of those words mean let's start small what are Ftc guidelines concerning influencer marketing in like in Layman's terms the easiest explanation you can give for that.

Ethan

The Ftc the federal trade commission is the governmental entity that enforces truth and advertising laws and they are trying to create a legal framework so that when influencers do marketing people know. That they are being paid or being endorsed and so they've put together a set of guidelines to help us clarify the law so that influencers know what to do and what not to do so the general public knows what is a sponsored post that somebody is getting paid for and what is just a post that somebody has about a product or service that they.

Shawn

Okay, that makes sense. That's why you see people like write up a whole thing and at the end they go Hashtag ad or whatever right.

Ethan

Truly love.

Ethan

Exactly I mean if think about it this way the best way I like to think about it is if you were looking to hire a social media lawyer and you went online and you saw a review from a guy named Dave Kushner and he says the social media law firm is the greatest law firm in the entire world Ethan walls. So cool. He knows everything he explains it down to herth hire him. But that influence you and whether or not to hire the social media law firm.

Shawn

Well if I trusted this shady Dave Kushner character maybe maybe but but you know but I see your point you know? Yes, if if my favorite celebrity says I love to eat at Mcdonald's I love it so much. You guys should also go eat. Mcdonald's.

Ethan

Yeah I mean yeah.

Shawn

Maybe I wouldn't but there's definitely people who'd be like oh I should go to Mcdonald's Now

Ethan

Right? But the difference in this situation is Dave Kushner is not a celebrity I'm not a celebrity. It's easy to know when Shaq says eat at Papa John's that he's probably getting paid for it. But when it comes to anybody else. That's out there on the internet.

Shawn

Who.

Ethan

You don't know and so it probably would have influenced you in 1 way or the other positively about the firm but had you known that I paid Dave $100 for that review or that if he was an employee of mine or if I gave him free legal services. You would probably want to know that to put that review into context you still might hire our firm. You still might. Believe Dave because you know when you trust him. But at least it's important for you to in the context of that review know that he was somehow compensated for it and that's really what the laws are about and that's why the Ftc is trying to put guidelines in place because you know what shac is doing. You know he's getting paid for it. But you don't know what that. That popular influencer or friend or colleague or someone that you know on the internet whether they're getting paid or not.

Shawn

Yeah, and I mean I I'd argue that in in a lot in some cases you don't always know right when when it comes to a celebrity or you know a band that that uses all the same brand instruments. And you know people go Oh I got to go get those and then if I found out later Well well they they don't even really like those instruments. They only use them because they get them for free from the company I would be upset, especially if I bought one and it was a piece of shit right.

Ethan

Yes, and as the influential market has grown. Okay, people don't want to say Hashtag ad they don't want to say sponsored because it makes them look like they're a sellout or that the content is inauthentic so they want to connect with people.

Shawn

And.

Ethan

As authentically as possible so people can trust them in the moment that you see these things you lose a degree of trust on the other hand, you're violating the law and the law has significant penalties because the whole purpose of the Ftc of the federal trade commission is to try to make sure that advertising is truthful. They don't care whether you buy a product or service.

Shawn

Right? ah.

Ethan

Or not all that they really care about is that people aren't being misled and there is potential for misleading people when you are getting paid or receiving product for free and then promoting it on your channels and not letting people know about it because for the same reason as the band. There's a piece of information that's missing and so the Ftc. Guidelines are designed to try to educate influencers and brands before they come after them for finding them for not following the laws.

Shawn

Right? Which transitions perfectly into my next question. What are like the potential legal repercussions for not following these guidelines. So let's say. Let's go with the the Dave scenario right now we find out. Oh you actually paid dave a bunch of money to go and you know talk about how great your law firm is online but he never disclosed that who gets in trouble is it. You is it. Dave is it both of you and and what. Type of trouble. Are we talking? are you is it forty years in rikers.

Ethan

So okay, first question who is responsible for someone violating the influential laws. The answer is both the influencer and the brands that hired them why because the influencer has legal responsibilities to include the right disclosures.

Shawn

Yeah, yeah.

Shawn

Ah.

Ethan

And the brand is getting a benefit from the influencer promotion and they have responsibilities to educate the influencer require them to follow the law and have them correct things if they're not following the law in the first place I don't if you can hear a truck outside my window right now.

Shawn

Um, very very very very quiet. That's why I wear these big cans because I have to be aware of everything going on as the producer of this show.

Ethan

Okay, um, literally in the middle of the damn mountains up here. There's like 1 country row that that passes between the cabin I'm currently working out of and of course a gigantic truck decides to pull up on recording day. So.

Shawn

Country road outside Ethan's home taken trucks past his window while he's recording his law podcast country road outside Ethan's home

Ethan

Take the truck.

Ethan

That's the remix ladies and gentlemen. It's the remix. So okay, both brands and the influencers can be responsible for violating the law and 2 What are the penalties financial penalties and cease and desist orders from the government which is essentially an injunction for you to to do certain activities.

Shawn

Thank you, Thank you.

Ethan

So give you 2 examples of how this came up recently Kim Kardashian fined one point two five million dollars by the Ftc for promoting bitcoin on her social media channels without saying that it was a sponsored post.

Shawn

Look at.

Ethan

So financial penalties by the influencer was was 1 major example and the reason that they find her is because the fc sent her a cease and desist letter previously saying we see that you're not following the law. This is your warning. She didn't follow it so they gave a big fine because ah, a letter didn't work.

Shawn

Sure, okay, right? Ah I'm sure she I'm sure that fine really hit her. It's so hard in all her millions.

Ethan

Second situation season sister. Yeah um, really I don't think of course it didn't hurt her but what what the what the Ftc does is they create press releases and it goes out in the news and it puts the public on notice to say now we're enforcing. That's an example of what can happen come at me, you know, try like like now now don't follow the law at your own peril now there's precedent for what's out there. So Second example, it goes through brand xbox xbox released a cool video game. They hired Youtube influencers to play the game.

Shawn

Okay, mm.

Ethan

On their channel or stream it and be like oh this game is so freaking cool. But these people got paid 50000 or whatever financial compensation for doing so it didn't tell people it was sponsored so the Ftc had a cease and desist order against Xbox saying they were going to limit their advertising abilities for.

Shawn

And.

Ethan

Not following the law and require them to cease and desist from those types of activities and basically says you violate them again and there's going to be even larger penalties so two ways in which the Fda can enforce the laws.

Shawn

Wow! So all right? if if that's true. Ah that that they they give you like a slap on the wrist First it sounds like right? you get like a little warning or.

Ethan

Um, no.

Shawn

Or no, they they did it in these situations but now they could just come at you full force and be like you messed up, give us fines. Basically.

Ethan

Yeah, the timeline has been probably unfolding over the last 3 or 4 years okay four years ago the Ftc said hey there are laws out there. You have to follow them. People are like what's the law. What do I do so then the Fdc said we're going to give out guidelines here's the guidelines please follow them.

Shawn

Okay.

Shawn

When her.

Ethan

People didn't follow them so then they said okay at about December of 2021 they sent out a cease and desist letter to a number of high profile celebrities. Um Kylie was a Kylie Kardashian get Kylie Jenner thank you Kylie Jenner

Shawn

Jenner. Welcome. Oh sure. Okay.

Ethan

J-lo um Kim ah Kim Kardashian and others. Okay, so they hit a lot of the larger celebrities and basically said your post doesn't violate your post violates. The law here's why this is your warning we're putting basically the world on notice using you as examples. And at the same time that they sent those letters out. They were also going after the brands like Microsoft Xbox Lord and Taylor other companies so they were fighting it on 2 fronts now. The Ftc is saying people aren't listening to our warnings. They're not following the cease and desist letters in order for us to stop this misleading practice.

Shawn

Ah.

Ethan

Have to take the next step which is now beginning to find major celebrities and potentially coming after the brands and smaller and smaller influencers as well. So it's been a step so I can't say if you're a microinfluence or the first time that you. Violate the law you're getting locked up in jail or having a one point two five million dollars fine but I also can't say keep doing it until you get a seasoned desist letter because that's also not accurate.

Shawn

That's fair. That's probably good. It's probably smart thinking as a lawyer to not give that advice out. That's why you're the lawyer and I'm just the podcast producer. So okay, looking looking ahead. But I also want to caveat real quick. This whole conversation and celebrities getting in trouble with the Ftc reminded me of something tangently related that I'll bring up at the end of the show that I think's like a fun little add on to it's it's all related to sort of what we're talking about and I want to know if if you're if you were familiar with this story when it when it happened but before we get there.

Ethan

Or shadowing you've got to wait through this whole episode to figure out how Sean is going to bring this all back together.

Shawn

Um.

Shawn

Yeah, yeah, exactly it's called good hosting so before we get there. Just keep that in your little take that and pin it put it in your little boop put a little pin. Let's look ahead. How have these you talked a little bit about how the the Ftc guidelines changed over time right? Like how they've sort of been rolling this out so where where do you see this going realistically knowing that you know. Government intervention stops at a certain point and let's be honest, corporate um, ah, ah, corporations being ah held accountable for their actions is also like they're not really a thing that happens too often. So realistically how far do you see them actually taking this. Um, you know.

Ethan

Yeah I think that as influencer marketing continues to grow, big and small. The problem becomes bigger and more prevalent and therefore the legal remedy to be able to stop this type of behavior is also going to continue to grow.

Shawn

Are.

Ethan

I think years ago this was small because this just wasn't happening that often. The laws didn't know how to catch up how to interpret how to enforce it and look the government literally was about to shut down. They're trying to figure out where to put money and resources for these things and coming after influencers is probably not as important as making sure there's enough money for health care and the military. So I can't say this is on the top agenda item of the government but from the Ftc's standpoint the portion of the government that enforces truth and advertising laws. This is important and it's becoming more. Pervasive and so what I think is a possibility and what they do in other cases is they begin growing their staff having more enforcement starting to make more examples of people and starting to have the actual man or woman power or staff power to be able to begin enforcing these laws. So i. Is 1 potential and likely path because this is continuing to grow and I also think that they're starting to go after the social media companies themselves and saying you need to take responsible action which is why Instagram and others now allows you to say this is a sponsored post so that.

Shawn

Right.

Ethan

When there is a violation Instagram can say we told them to do it and we gave them the tool and they didn't so don't come after us come after them so you can see what's happening is the Fdc is going after the bigger social media companies because that's where the misleading content often takes place.

Shawn

Yeah. The.

Shawn

So okay, that's the realistic version Now. Let's go down Idealistic Lane. What is the idealized sort of enforcement of this kind of thing look like like in your perfect world. What what would actually. Solve the problem or or you know be the right amount you know type of enforcement to to seriously curtail. It.

Ethan

Well I think that there needs to be predictable penalties for non-compliance that influencers and brands can expect to happen and have it enforced more often. So that more brands are are following the law and requiring their influencers to follow the law.

Shawn

So.

Ethan

Which then corrects influrs' behaviors by making sure that they follow the law and it also incentivizes influencers to say look I know how to follow the law I should be a good partner for you brand I can tell you over the last week I have reviewed influencer contracts for a liquor company partnering with um, an online alcohol related brand and a major television production network. Um. And these contracts are now including specific clauses that say you are responsible for filing the Ftc guidelines here is the link here's a suggested language here's what you have to do here's what you must avoid here's what happens if you don't follow it. It includes me canceling your contract.

Shawn

So.

Shawn

Wow.

Ethan

And so what's happening is that now that the brands know they can get in trouble. They're contractually requiring certain types of behavior and building in certain types of legal protections which means as a lawyer whether I'm working for a brand or I'm working for an influencer I'm carefully reviewing these provisions and crafting them in a way. Most favorable to my client to make sure that they are in the best possible position to figure out how to manage those situations.

Shawn

Kind of cool it it. It's cool to me the method with with which they did this makes a lot of sense right? they went they went after the largest fish first. And scared them enough that those guys don't want to get in trouble. So now they're going to just contractually enforce it which probably did cut down on it by you know, a large percentage and now there's people that obviously because now it's not just oh I might you know piss off some weird government. Potential body that might come after be but now it's I might violate this contract that I signed and piss off my employer and that is ah you know a more immediate fear than like the Ftc is going to come kicking my door down.

Ethan

Mean right? and think about this in terms of 2 completely other aspect or super interesting. The war on drugs. Okay, at first the government was going after like every person that carried a little bit of marijuana then they're like no, we're going to go after.

Shawn

It is.

Ethan

Drug dealers the big companies we're going to use the people on the bottom to get to the people at the top to try to fix the problem at the source spoiler alert right? You know taking ah ah probably a better example. Um people stealing copyrighted music on Napster and Pirate Bay

Shawn

Well, that was the idea I mean it's ah yeah.

Shawn

Yes, yes.

Ethan

First the recording industries went after the people themselves and they became villainized so then they went to the Spotify's the apples of the world and said we need you to fix your policies so that other people can comply and I think the government or the Ftc is taking the same approach here. It's too hard to go after every influencer.

Shawn

Sir.

Shawn

Yes.

Ethan

We're going to go after the brands and the big ones and then everyone else will follow because eventually the brands now know what the law is and they're not going to work with someone that's going to put themselves at risk which requires influencers and creators to know to understand the law. Ah, because they're only going to be able to get away with not following the law for so long and if they want to work with the big companies. They got to follow those rules and guidelines and have a track record of doing so because the brands look at their profiles and say we see these sponsored posts. But you're not complying that creates risk for Us. We're going to work with another creator.

Shawn

Yes.

Shawn

Right.

Ethan

Another influencer.

Shawn

So okay, what should um, you know what should influencers and brands be most mindful of when when doing these types of things we we I mean obviously the obvious one is make sure you're telling people that you're doing an ad if you're doing an ad right first and foremost just do it like it. It would.

Shawn

Whatever yeah you are a sellout but who cares the whole concept of like selling out. It doesn't mean anything Anyway, we live in the capitalist world. We're all by default sold out at Birth. So yeah, you know? um so but what else is there other things that people should be mindful of.

Ethan

Yeah, so I think answering the question for both brands and creators at the same time is sometimes hard but I'll try to kind of figure it out first is no and follow the law whether you're a brand or you're a creator you are going if you're a brand.

Shawn

You.

Ethan

To know what the law is allows you to draft the right contracts and hire the right creators if you are a creator knowing and following the law is going to allow you to work with larger brands because they're gonna look at your past content and see if you're complying. So really, the first thing is just know what you need to do and do it and.

Shawn

Okay.

Ethan

If you are if you are frustrated that the world has changed and that we have to use Hashtag ad or sponsored and you can't get past that because you think it's going to hurt your audience. You will be left behind unfortunately.

Shawn

Yeah.

Ethan

What I think is working are creators and influencers who say hey I'm still going to create great authentic content that's entertaining and that you want to connect with and you know I'm getting paid for this thing but that's okay. Because I genuinely like this thing and it really does help me and I think that it can help you too and that's persuasive because it's honest and that creates that type of Connectivity. So No one following the law I think is is the best thing and and as a creator having the track record of following. The law is really helpful.

Shawn

Yeah.

Ethan

Ah, just reviewed an influencer contract from a very large company that said have you bought followers have you bought likes have you engaged in other brand deals show me examples of where your content is because they want to see that you can do things correctly and that they can trust you.

Shawn

Me.

Shawn

Yeah, well and I would I would add from a consumer standpoint if you know for for influencer specifically makes it up. Don't make everything an ad because then people don't trust you.

Ethan

So having that track record is also really helpful.

Shawn

Find stuff you actually like and just talk about it and don't get paid for it. That's okay too and then when people discover that stuff and it's good and they trust it then when you do get paid to do an ad people aren't gonna be like oh well are yeah, are they just shilling this to me, you know so building up that trust is I think a really really important part from an influencer standpoint. Um, so okay, now let's talk about a little news story that connects to this on several levels and to introduce that I shall play this.

Ethan

Um, what is happening right now. Um, now way.

Shawn

So welcome to the news corner with Sean hi I hope you're all relaxed Milla Kunis got in trouble with the SEC okay why for selling NftTs

Ethan

You can.

Shawn

But you go but what does that mean the million people sold n fts why aren't they all in trouble. It turns out it comes down to the way she advertised to them. Do you know this story. Are you familiar with what what happened here? Okay so.

Ethan

No no, that's just news to me I like the news corner.

Shawn

The Ftc. Ah the ah sorry the s ec ah the the Us securities and exchange commission. Ah basically came down pretty hard on Mila Kunas and orchid farms production company which had marketed an nftt project called stoner cats. Ok now where did she go wrong. You're wondering right? because there's a million There's stoner cats. There's Ape Monkeys Yacht Apes whatever it is right? So here's where she went wrong. She went on a bunch of places and she said that you know, ah. I'm promoting this It's my Nft. We're making a cartoon. We're going to do an animated series. It's a whole thing and in July 2021 the Nfts went on sale and they sold 10000 of them for 800 each $ 8000000 they raised like that right? Holy Mackerel so then the animated show debuts shortly after the sale. It's ah it's ah it's a short form web series with like Kunis and Kucher and Chris Rock and all these names and and and it and seems you know like a lot of projects but maybe off to a better start than most Nft projects now here's the problem. The scc says that. Donor cats marketed in its and nfts as an investment not as a piece of art that you can buy and be part of a thing because they were telling Nft owners that they could resell them on the after market for a profit and the scc says.

Shawn

Stoner Cat's Marketing heavily focused on the expertise of Hollywood producers and big name actors actors who were all involved with this which led investors to believe oh this is going to turn me a huge profit. They also pointed that the sheer volume. Of Nft Stoner Cat After Markete Sales was so high that clearly the company was not selling fun. Non-fungible collectible tokens they were selling assets to then be sold off so how does that tie in. Well. I think it ties into what we're talking about with the way things are marketed and what you're telling your audience and how truthful you're actually being and if you're setting yourself up to get kicked in the nuts by the you know Fcc or the the Ftc or the scc in this case. Um, and I think it is all part and parcel of your sort of parting words which is like follow the law and be honest, right.

Ethan

Yeah, no, no and follow the law. Yeah, and and be honest and and this actually came up with an actual client situation. So I'm gonna have to change the whole situation up for purposes of of illustrating the point.

Shawn

Confidentiality. Sure.

Ethan

But basically there was I'm just going to make it up. Let's say there's financial laws that somebody had to follow and then they advertised a product in the marketplace and I was the expert in the financial aspect and they came to me and said there's an error in.

Shawn

Who.

Ethan

The product placement of how we're describing things help me fix it and I'm like look this isn't a financial law problem. This is an advertising law problem and you've got to fix it by fixing the advertisements I think it's the same thing here with the scc and me lacunis is that.

Shawn

Who's right.

Ethan

This is an advert is an advertising issue but it related to securities and investments and so at the end of the day regardless of what type of law it is FTCSEC know your a Vcs and your x y z's it doesn't matter it just matters to if you're going to play the game.

Shawn

Yes, yes.

Shawn

Yeah.

Ethan

You have to followul the rules in order to followul the rules you have to know the rules. That's why I say no one follow the law and be truthful and be authentic and it's all going to work itself out and I think the situation probably not wear Milicoonnas wanted to violate the law. They probably didn't know that that promoting Nfts in that way.

Shawn

Yeah, and.

Ethan

Would violate investment laws and so they had a gigantic campaign without running it through the proper channels and got trouble and then it's what you said? Well there are millions people out there doing it. They went after the big celebrity because it's going to help be on a podcast episode like this one for other people to be able to learn from that mistake and not.

Shawn

yeah yeah I thought it was a really interesting story and I and I think you know your your point of no and understand is especially important. You know if you are a Milek Kuis or a big influencer. There's a tendency to trust other people.

Ethan

But do that in the future.

Shawn

Well my my lawyers going to handle this my accountant's gonna handle this my this guy's gonna handle this and at the end of the day. Sure. But you're going to get in trouble so having a basic understanding asking a lot of questions and like really knowing what you're doing is really really important even at those big levels I think because people will. Set you up to Fail. You know.

Ethan

Yeah, yeah, and it's and they don't do it on purpose. It's just that you can't at the end of the day you're responsible for your actions. Even if other people are helping you out and of course we want to rely upon our professionals and rely upon your lawyer to make sure that you're getting good advice.

Shawn

Sure.

Ethan

But at the end of the day you got to make that decision and you may be responsible if the people that you hire don't know what to do and give you to pattern life. Yeah.

Shawn

Thecc is not coming after Milla Kunis's attorney ah or her marketing and or financial advisor they're coming after Mila Kunis and her production company. So yeah.

Ethan

Sure this nothing a begins me laoon. This is just an illustrative example and this this happens all the calm. Ah.

Shawn

I got plenty of good bones to pick with Nela Kunis let's not even get into that though because we're clearly out of time I wasted at least a minute playing that song for no reason so there was that and then I sang a parody song. Also this has been a jam-packed episode honestly Ethan if people.

Ethan

That was the highlight of the episode too was that singing So don't never apologize for that.

Shawn

Thank you, Thank you if people want to ah insist that you find a new co-host where can they reach out to the show.

Ethan

Yeah, they can reach out to us by searching for the social media law cast on Apple Podcasts or Spotify or they can comment on 1 of our social media posts by following the social media law firm where we post social media news analysis and tips for creators small businesses and anyone out there. That's interested in social media and the law including you milicoonis.

Shawn

That's right hi mila and if you if you want to hear me talk more which I can imagine why you would I have a podcast. Ah, that I host with a friend of mine. Another friend that's about the nanny. It's a tv show from the 90 s starring friend dresher who is now a union leader like ah like an iconic figure in ah in union in union ah leadership now.

Ethan

Back to Batman 2023

Shawn

What a wild wild world. We live in anyway, on that note Ethan I will see you next week when we do another exciting episode of the social media law cast goodbye my friend bye.

Ethan

I'll see you then.