The FTC’s Teami Case: “All [the FTC] really wanna see is the money.”

March 12, 2020By Dara Katcher Levy

Last Thursday, March 5, 2020, the FTC filed a formal complaint alleging deceptive marketing practices against tea and skincare company, Teami, LLC, and its co-founders, as well as a stipulated order for permanent injunction and monetary judgment.  In conjunction with the filings, the FTC also issued 10 warning letters to Instagram influencers regarding their failure to disclose material connections to Teami in Instagram posts about Teami products.   On Friday, the FTC issued a press release about its settlement with Teami, posted about the settlement to its Consumer Information blog, published a separate post on its Business Blog, published links to Teami endorsement videos from Cardi B, Brittany Renner and an Instagram post from Jordin Sparks, tweeted about the case using images of Cardi B, Brittany Renner and Jordin Sparks, and announced and hosted a conference call for media.  That’s a lot of content in a short amount of time –  all aimed at ensuring high media coverage of one of FTC’s latest enforcement actions around deceptive marketing practices and the use of social media influencers/advertisers.

But first, the complaint.  The FTC alleges that Teami disseminated false or unsubstantiated efficacy claims about its teas through express or implied claims about treating cancer, reducing cholesterol, decreasing migraines, preventing and treating colds, causing weight loss and burning body fat.  Specific examples provided in the complaint relate to content on the Teami website from as late as December 2018.  The FTC also alleges that Teami engaged in deceptive advertising by failing to disclose material connections.  The complaint notes that the FTC wrote to the company in April 2018 about several influencer product endorsements and that in May 2018, Teami had implemented a social media policy to ensure relationships were clearly and conspicuously disclosed.  The complaint notes that many paid influencers were contractually obligated to obtain Teami approval before posting about Teami products.  Despite this requirement, the FTC alleges that Teami did not enforce its own social media policy requirements and numerous influencer posts did not clearly and conspicuously disclose that they were paid by Teami.   As part of the complaint, the FTC identified influencers, excerpts from their posts, as well as the number of influencer followers, illustrating the size of the audience affected by the content.

The FTC warning letters to influencers reference the FTC complaint against Teami and state that “[I]ndividual influencers who fail to make adequate disclosures about their connections to marketers are subject to legal enforcement action by the FTC.”  The FTC requests responses from influencers describing actions that have been taken or will be taken to ensure that social media endorsement posts clearly and conspicuously disclose relationships.  Responses are due to the FTC by March 30, 2020.

FTC does acknowledge that, in many instances, influencers did disclose their relationship as a “#teamipartner,” however the disclosure was not clear and conspicuous.  FTC states that the information did not always appear in the first two or three lines of text accompanying pictures and videos, and, on mobile platforms, users would need to click “more” to see that disclosure.  And FTC also points out how different technology renders posts differently to users – reinforcing that marketers need to consider the different platforms in which users will access content and whether disclosures are clear and conspicuous in each of those platforms.

As part of the settlement, the FTC set forth the following as part of its definition for “Clear(ly) and Conspicuous(ly)”:

  • A required disclosure is difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers, including
    • In any communication that is solely visual or solely audible, the disclosure must be made through the same means through which the communication is presented. In any communication made through both visual and audible means, such as a television ad, the disclosure must be presented simultaneously in both the visual and audible portions of the communication even if the representation requiring the disclosure is made in only one means
    • Visual disclosures, by size, contrast, location, the length of time it appears, and other characteristics, must stand out from accompanying text or other visual elements
    • Audible disclosures, including by telephone or video, must be delivered in a volume, speed, and cadence sufficient for ordinary consumers to easily hear and understand
    • When using an interactive electronic medium, the disclosure must be unavoidable
    • Disclosures must use diction and syntax understandable to ordinary consumers and must appear in each language in which the representation that requires the disclosure appears
    • Disclosures must comply with these requirements in each medium through which it is received
    • Disclosures must not be contradicted or mitigated by, or inconsistent with, anything else in the communication

The disclosure and monitoring language largely tracks the language in the FTC’s first case involving individual social media influencers in 2017, however this is the first case to challenge claims made in social media endorsements about the effectiveness of health-related products.  The FTC is requiring Teami (and in turn, its influencers) to have adequate substantiation for weight-loss and other claims.

What’s notable about the Teami case is the FTC media blitz around the settlement – in addition to utilizing a variety of platforms to communicate, the FTC also uses celebrity images and videos as a hook.  And, while there are references to the FTC allegations around unsubstantiated efficacy claims, the bulk of FTC’s content focuses on the second count in the complaint – deceptive failure to disclose material connections related to paid endorsements.

Advertisers’ use of endorsements is a priority area for the FTC, particularly given emerging technology and use of social media.  FTC’s Endorsement Guides have been in place in some form for about 40 years, with its most recent update in 2009.  As we recently blogged, last month, the FTC announced it is seeking public comment on whether changes should be made to the Guides, including questions related to what, if any, changes should be made to account for changes in technology.

The FTC seems to be taking a page from industry’s book on the use of technology and celebrity images to capture audience attention.  Industry should take note, and exercise caution and compliance in implementing promotional strategies.  Your marketing, if done improperly, may someday become part of the FTC’s self-promotion.