Industry on notice as FTC probes social media, video streaming platforms
The Federal Trade Commission (FTC) ordered eight social media and video streaming platforms to hand over information on how the companies detect and restrict paid commercial advertising that is deceptive or exposes consumers to fraud. The orders were sent using the FTC’s 6(b) authority, which authorizes the Commission to conduct wide-ranging studies that do not have a specific law enforcement purpose.
Meta, Instagram, YouTube, TikTok, Snapchat, Twitter, Pinterest and Twitch were each sent the orders, which the companies are required to comply with by law. The orders specifically relate to fraudulent health products, financial scams and counterfeit and fake goods, though all scams will be scrutinized by FTC.
The orders will collect information about the companies’ standards and policies related to paid commercial ads and their processes for screening and monitoring for compliance with those standards and policies via human review and automated systems. They also require the companies to report their ad revenue, the number of ad views and other performance metrics, including for ads involving categories of products and services more prone to deception such as those intended to treat, prevent or cure substance use disorders and tout income opportunities. The probe will dig into everything from whether the platforms treat English-language and Spanish-language ads differently to the use of generative artificial intelligence.
The Commission requested this information pertaining to the years between 2019–2023. In 2022, consumers reported losing over $1.2 billion to fraud that started on social media, more than any other contact method, according to FTC data.
“Social media has been a gold mine for scammers who tout sham products and other scams that have cost consumers enormously in recent years,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “This study will help the FTC ensure that social media and video streaming companies are doing everything they can to keep scammers and deceptive ads off their platforms.”
Lauren Aronson, advertising and consumer protection partner at Amin Talati Wasserman LLP, said that while historically the FTC had been focused on television and print advertising, “the current FTC has made it no secret that it is concerned about the enormous influence that social media companies have over consumers and appears to be following the old adage ‘with great power comes great responsibility'."
"They are now turning to social media platforms to ensure that they are policing advertising for health products and services,” he added.
Disease prevention, weight loss and MLMs
In the sample order FTC posted, one of the questions requests information about ads related to specific products including “products or services intended to prevent, cure or treat diseases, including, but not limited to, COVID-19 or cancer;” “weight-loss products or services;” and “income opportunities, including participation in multi-level marketing businesses.”
The information requested pertains to the years 2019–2023, which covers the start of the COVID-19 pandemic, a time that served as a catalyst for scams.
“For decades now, the FTC has focused on advertising for dietary supplements and other products with false claims of treating diseases or causing weight loss. We saw the FTC focus enforcement efforts on claims relating COVID-19 during the pandemic, and the FTC recently updated its Health Products Compliance Guidance,” explained Aronson.
Industry on notice
Kevin Bell, partner at Arnall Golden Gregory LLP, said these types of FTC actions are putting on notice all industries that provide products and services in the identified subject areas of weight loss, COVID-19, substance abuse and more.
“Working in Washington, D.C., I am often inundated with information regarding what different divisions of the FTC are focused on the most. This is certainly at the top of the list regarding consumer protection,” said Bell.
“It has been known for decades that nutritional supplement products cannot be sold as preventing, curing and treating diseases, and the fact that these claims are still being made is an indication that there is still quite a shortfall in both knowledge and enforcement of these regulations,” said David Sandler, CEO of BYLT Sport Drinks. “Protecting the consumer has always been the goal of regulating bodies. To that end alone, something should be done. Countless times consumers have been deceived, information has been embellished or simply incorrect, and the supplement industry has still gotten scrutinized for its bad players."
More scrutiny to come
“With this action, the big social media platforms were ordered to provide information about how they screen and monitor ads for health care products for deceptive and fraudulent claims and report on their business conduct since the beginning of the COVID-19 pandemic," cautioned Aronson. "As a result, we can expect advertising for dietary supplements and other health products on those platforms to be even more closely scrutinized.”
Influencers, liability and enforcement
Another key piece of information that the Commission seeks information on is how these platforms help consumers distinguish ads and other commercial messages from other types of content, including disclosure tools for endorsers and influencers.
“In recent years, the number of self-proclaimed ‘experts’ with little or no knowledge and no basic training with respect to the products themselves has exponentially increased, with many having large followings where consumers are given inaccurate information and recommendations,” observed Sandler, who has over three decades in the nutritional supplement industry.
“Dietary supplement companies cannot be vigilant enough right now regarding the advertising content and strategies they employ to market and sell products and services," said Bell. "With the amount of social media and influencers used in the supplement industry, it increases their potential liability. The FTC will collect enormous amounts of data, analyze it and then launch significant enforcement actions. This is what that agency is made for—and they don’t hesitate to pull the trigger."