Virtual Influencers Are Now Officially Regulated Endorsers

Unless They’re “Spokespersons”

by: Heather Nolan

Virtual identities like AI-generated influencers and Vtubers continue to gain followers, brand partnerships, market value[1] - and now federal regulator attention.  We’ve been advising about AI influencers for years, but now we have real-life governance in the U.S. In its updated Endorsement Guides and related commentary, the Federal Trade Commission (“FTC”) makes clear that virtual influencers, fake reviewers, and others that “appear to be an individual, group, or institution” are included as “endorsers”. [2]  So, when these virtual identities communicate what consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of someone other than the sponsoring advertiser, the message is an endorsement and it must meet the related requirements.

Who is at work behind the identity matters.

Virtual identities may be created to be their own brands - think Lil Miquela, Milla Sofia, and Brazil’s Lu do Magalu - each of which have millions of followers. When those virtual identities “talk” about other brands, products, services, or industries, they will need to act like real-life influencers. The FTC wants consumers to know that a material connection exists and be assured that the statements - and any implied messages - are accurate.

That said, virtual identities also may be created by brands themselves - perhaps you have heard something about Barbie® lately? The Endorsement Guides FAQs arguably leave some wiggle room for virtual identities that are created by the brands they are talking about to fall under the category of “spokesperson” without triggering.  After all, Barbie is known in the context of her own brand, so there’s no connection to disclose when her message is about her own self or company.

What are some key endorser requirements that virtual influencers now have to meet?

The creators behind virtual identities that convey an opinion or claim about a third party product, service, brand, company, or industry, will need to, amongst other things[3]:

●      Avoid making direct statements or implying that the virtual influencer had its own personal experience with the product.  Creators of virtual influencers are now officially liable for statements they know or should know to be deceptive, which includes falsely representing that the virtual identity personally used a product. Since a virtual influencer cannot have a “personal experience”, they cannot form their own opinions based on experience.  If a message or post could imply that it is based on experience, the best practice is to avoid making the statement unless a disclosure could directly accompany the message and be consistent with the message itself.

●      Disclose material connections.  #endorsement, #partner, and #ambassador are not enough.  The FTC encourages hashtags to include the name of the partnering brand.  Under the new Guides, these disclosures must be made when even a “significant minority of the audience” for an endorsement does not understand or expect the connection.[4]

●      Avoid misrepresenting a “material attribute” of the virtual influencer.  The FTC says it is deceptive to pair a consumer testimonial about an acne product’s efficacy with a stock photo of a model with near-perfect skin[5], so be sure to select hashtags and images carefully so as to not misrepresent the virtual influencer’s capacity or attributes.  For example, consider hashtags that may imply the humanity of a virtual persona like “#girlsworkingout” and whether they are consistent with the very nature of a virtual identity. If not, they should be avoided.

●      Comply with ongoing guidance from the brand.  Brands are responsible for providing guidance to endorsers, monitoring endorser compliance with the Endorsement Guides, and quickly remedying any non-compliance.[6] The creators behind virtual influencers and the brands will both be liable for any non-compliance.

Other guidance governing virtual identities

●      The FTC’s move makes it the first U.S. regulator to specify that its guidance applies to virtual identities, but ASCI, India’s advertising regulator, in 2021 became the first national watchdog to issue guidance specifying that virtual influencers “must additionally disclose to consumers that they are not interacting with a real human being. This disclosure must be upfront and prominent.”

●      Platforms are also taking matters into their own hands.  For example, in April, TikTok updated its platform guidelines to require that “synthetic or manipulated media that shows realistic scenes [] be clearly disclosed. This can be done through the use of a sticker or caption, such as ‘synthetic’, ‘fake’, ‘not real’, or ‘altered’". The guidelines require disclosures to be directly in the videos themselves if they contain realistic scenes, not just in the virtual influencer’s bio.

However you slice it, brands are wanting more of the virtual influencer pie - and the risks are no longer just theoretical.  Considering these issues at the outset of the relationship as well as recurring points along the way will be key to reducing your own company’s risk.

[1] Now valued at over $4.6B. Barbara Mutani, “Virtual Influencers and their Social Media Appeal to Brands in the Metaverse”, via Territory Influence on August 23, 2022.

[2] 16 CFR § 255.0 (2023) and related commentary.

[3] See our 10 Key Takeaways post for more information about the updated Endorsement Guides.

[4] 16 CFR § 255.5(a).

[5] 16 CFR § 255.1(g) and 255.1(g)(6)(i).

[6] 16 CFR § 255.1(d)(1)-(3).

Originally published by InfoLawGroup LLP. If you would like to receive regular emails from us, in which we share updates and our take on current legal news, please subscribe to InfoLawGroup’s Insights HERE.