FTC Busts “Fake Influencer” Racket

As the marketing power of social influencers has grown, so has the Federal Trade Commission’s desire to have influence, by monitoring and attacking deception in influencer marketing.  In legal actions against both advertisers using influencers and the influencers themselves, the FTC has sought to enforce its endorsement rules requiring clear and conspicuous disclosure of a “material connection” between a paid influencer and its sponsor, so that the consumer can know the endorsement is not entirely objective and weigh that fact in her product consideration and purchasing decision. 

What makes an influencer attractive enough to an advertiser to want to pay to use the person in its social media marketing is, of course, that the person has influence over the buying decisions of the advertiser’s target customers.  And the larger the influencer’s following, the more valuable she becomes to advertisers and the more money she makes.  It is therefore in the influencer’s self-interest to maximize the size of her following in just about any way she can.

One way, the FTC has discovered, is to buy “fake influence.” This month, the FTC again exerted its influence over social media marketing by suing and obtaining a settlement with a company that was selling fake indicators of influence, including fake followers, subscribers, views, and likes, to users of social media platforms, including LinkedIn, Twitter, YouTube, Pinterest, Vine, and SoundCloud. The company, Devumi, sold fake Twitter followers to actors, athletes, musicians, writers, and others who wanted to increase their appeal as online influencers, and to motivational speakers, law firm partners, investment professionals, and others who wanted to boost their credibility to potential clients. It allegedly filled more than 58,000 orders for fake Twitter followers; made more than 4,000 sales of fake YouTube subscribers and over 32,000 sales of fake YouTube views, including to musicians who wanted to increase the apparent popularity of their songs; and sold more than 800 fake LinkedIn followers to marketing, advertising, and public relations firms; companies offering computer software solutions; banking, investment, and other financial services firms; human resources firms; and others.  With these fake followers and views, the buyers were able to deceptively magnify their influence, thereby fooling consumers, potential clients, and investors.

The settlement bans the Devumi defendants from selling social media influence to users of social media platforms and misrepresenting anyone’s social media influence, and imposes a $2.5 million judgment against the owner-CEO, which was to be suspended upon an “ability to pay” payment of $250,000.

Although the deception was committed by the purchasers of the fake influence metrics and not by Devumi itself, the FTC’s complaint alleged that it was liable because it provided the “means and instrumentalities” for the deception.  Because the FTC lacks “aiding and abetting” authority other than in telemarketing cases, it seeks to get around that limitation by resorting to the use of this rather nebulous – and legally dubious – alternative pleading device.  Even if “means and instrumentalities” is merely “aiding and abetting” by another name, the FTC will continue to use it in non-telemarketing cases to sweep in third party defendants who cannot be directly charged with deception – until a party so charged has the means to sustain, and a court upholds, a legal challenge to the FTC’s own arguable fakery.

Pleading gamesmanship aside, the Devumi case is a warning not only to other sellers of fake social media influence, but to buyers of it, that the FTC is watching you and will not tolerate fraudulent gamesmanship in the influencer world.  When the FTC began to police influencer marketing, it first went after the sponsoring advertisers for failing to meet “material connection” disclosure requirements, and only later against the influencers themselves.  We can expect the same pattern here.  The next time the FTC discovers hanky panky in the acquisition and representation of fake influence, the purchasers, and not just the peddler, may incur its wrath as well.

Talking about FTC

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