Influencer marketing isn't new. Celebrities have been paid for their endorsement ever since advertisers discovered the value of having a recognizable face next to their product. The difference is that with the growth of social media as a source of information, it is getting harder for consumers to sort through what is authentic and what isn't.

If Michael Jordan appears in a shoe commercial, it's pretty obvious he got paid to show up to a set, put on the shoes, and film the ad. It gets a little murkier when a celebrity takes a photo with herself wearing a new dress and shares it on Instagram, or a YouTuber puts up a video reviewing the latest smartphone. It isn't always apparent that the influencer was compensated for their endorsement.

The Federal Trade Commission (FTC) has guidelines requiring brands and influencers to disclose those relationships, but it can be difficult to police millions of social-media posts every day. In fact, the FTC has done very little in terms of enforcement. Commissioner Rohit Chopra, in a statement on Wednesday, went so far as to conclude that "it is not clear whether our actions are deterring misconduct in the marketplace, due to the limited sanctions we have pursued."

Now it looks as though the FTC could be planning to revisit those guidelines to determine whether they should be strengthened, as well as whether to add civil penalties for violations. Specifically, Commissioner Chopra supports a "close and careful review of the FTC's non-binding Endorsement Guides and a self-critical analysis of the agency's enforcement approach."

According to Chopra's statement, next steps would include:

  • Requirements for technology platforms (e.g. Instagram, YouTube, and TikTok) that facilitate and either directly or indirectly profit from influencer ads.

  • Codifying elements of the existing endorsement guides into formal rules so that violators can be liable for civil penalties.

  • Clarifying requirements that companies must adhere to in their contractual arrangements with influencers.

"The FTC will need to take bold steps to safeguard our digital economy from lies, distortions, and disinformation," said Chopra. "I welcome broad participation during the public comment period to help us chart our path forward."

Those changes could have a broad impact on brands who advertise on social media. 
However, being upfront and transparent about paid endorsements isn't only the ethical thing to do, it's actually better for your business. No amount of short-term sales is worth the price of losing trust, regardless of any penalty from a federal regulator. 

That's an important lesson for entrepreneurs, especially when there's no shortage of opportunities to take a shortcut. Everything you do is an opportunity to build or lose trust with your audience.

And trust is by far your brand's most valuable asset.