Advertising Compliance in the Age of AI and Influencers

Claudia Lewis: 00:11

You're building a beauty or wellness brand in a fast moving, highly competitive market.

Kristen Ruisi: 00:16

Standing out isn't just about developing quality products and creative campaigns. It's about navigating regulations, protecting your brand, and managing risk.

Claudia Lewis: 00:25

From FDA oversight and product claims to data privacy and consumer expectations, the legal and regulatory landscape is becoming more complex.

Kristen Ruisi: 00:34

Social media, influencer marketing and global expansion are only accelerating that complexity.

Claudia Lewis: 00:40

I'm Claudia Lewis.

Kristen Ruisi: 00:41

And I'm Kristen Ruisi. We're partners in Venable's beauty and wellness team.

Claudia Lewis: 00:46

On this podcast, we talk with our Venable colleagues and industry insiders about the legal and regulatory issues shaping the beauty and personal care market.

Kristen Ruisi: 00:55

And focus on practical guidance brands can use to stay compliant and competitive.

Claudia Lewis: 01:00

Welcome to the Beauty Law Glow-Up.

Claudia Lewis: 01:03

This week, we're talking about how beauty brands can navigate AI and influencer marketing. Hi, I'm Claudia Lewis, co chair of Venable's FDA group. As beauty brands increasingly rely on influencers, digital content, and emerging AI tools to reach consumers, they are also facing a new wave of regulatory scrutiny and litigation risk. From AI generated images and synthetic endorsements to evolving FTC enforcement priorities and state consumer protection laws, the rules governing product advertising are becoming increasingly more complex and more consequential.

Claudia Lewis: 01:44

In this episode, we explore how beauty and wellness brands can navigate influencer marketing, AI driven campaigns, and disclosure requirements while mitigating risk in an increasingly aggressive enforcement environment. To help us do that, we're talking with Caitlin Blanche, a venerable partner and seasoned litigator who focuses on consumer class action and product focused litigation, and Len Gordon, cochair Venable's advertising and marketing group. And, Len, I'm gonna start with you. You've been at Venable for a number of years. We've worked together shoulder to shoulder many times.

Claudia Lewis: 02:19

How have you seen the firm evolve, particularly in the beauty and wellness space?

Len Gordon: 02:25

Claudia, thanks for having me. It's great to be here. It's great to have a chance to chat with you and Caitlin. Venable's grown tremendously since I've been here, in particular in the New York office. It was about 30 people when I got here through the merger with Fitzpatrick Cella and organic growth. It's grown tremendously, and the beauty and wellness space has grown here as well. That probably reflects some the fact that New York is more of a beauty and wellness hub than, say, Baltimore or Washington where the firm traditionally grew up. I think as our West Coast presence has expanded, that too is quite a good support, good frame for doing additional work in the beauty and wellness space. And the addition of someone like Caitlin who has a strong presence and history there, I think has further done it. It's also a growing industry.

Len Gordon: 03:16

So if we're looking at where the opportunities lie, beauty and wellness is certainly one of them, and it fits well with our FDA and advertising practices and our litigation practice. So it's one of things the firm has tried to do is build strength on strength, and beauty and wellness is one of those areas where we've added, but by by doing so, by building on our our existing bench.

Claudia Lewis: 03:37

Absolutely, Len. Caitlin, you're newer to the team, but I felt like I've known you forever. I remember when we first met, we clicked instantly. Your practice is very much litigation focused, and we do work on matters together. How have you seen the recent transition, and can you share more about your current role and how you came to focus on this area of beauty and wellness?

Caitlin Blanche: 04:01

Sure. Thanks, Claudia, and thanks so much for having me on. This is a real treat. And I appreciate that I'm assimilating well from your perspective. Hard to believe it's been two years since I joined Venable now because it's really flown by.

Caitlin Blanche: 04:16

But just to go back a minute, I started as a product liability litigator in the very beginning of my practice, I was litigating cases for pharmaceutical companies. And our largest client was a company that focused in the aesthetic space for a product that was, you know, a neuromodulator also known as a neurotoxin. And and I think something sparked for me back then at the intersection of beauty and science. But as the three of us know, product liability work is kind of commoditized and and carrier driven at times, and, ultimately, it's hard to develop as a young attorney or even as a young partner. So I turned toward consumer beauty and sort of adjacent spaces and started building relationships in that community and just found that it was so relatable and interesting and that there was really fantastic innovation being done in consumer beauty just like in medical aesthetics.

Caitlin Blanche: 05:09

And so I really have enjoyed playing in that space. And when I came over to Venable, like Len mentioned, having such a phenomenal presence in Ad Law and in FDA and regulatory really was able to round out what I was doing already for consumer beauty and even consumer food companies in terms of litigation risk, advertising risk. But I was missing those pieces. And so this has been the perfect completion to my puzzle, if you will, to be more full service for companies specifically in the beauty industry. And really, I've been able to grow that foundation where we really have to watch closely what's happening in the litigation arena. We need to know what kinds of companies are being challenged, what those challenges look like, what arguments are winning in court on motion to dismiss, which arguments are losing on motion to dismiss, who the players are, what's impacting those players' activity levels, and really building from that foundation of beauty and science. And once we have a good playing field here and we understand the the players and the activity, we can be so full service and so ahead of the game for our clients. It's really been fun to to see that practice evolve in conjunction with you all and all the great things that Venable does.

Claudia Lewis: 06:34

And, Caitlin, you touched on so many things and how large and growing this industry is and how encompassing it is. It's a huge magnitude. We're talking about skincare, fragrance, cosmetic, and beauty technology, which you talked about in the aesthetic space. I'm just gonna throw out a few statistics here. So the beauty industry is expected to generate $700 billion in 2026, with The US covering about a $110 billion alone.

Claudia Lewis: 07:01

And they're expecting, depending on where you read, growth anywhere between 4% to 12%. So it leaves a lot of room for regulatory work, but it also leaves a lot of room for litigation that you and Len do so well. So one of the things that I want to talk on is something that's growing and is touching all of our lives. I know that we at Venable have been talking about it internally and how it's touched on the legal space, but it's also impacting the beauty world. So we're seeing a lot of AI.

Claudia Lewis: 07:30

There's a lot of AI going on here, and influencers in the marketing and the beauty world, and there's a big intersect between those things. From your perspectives, how are brands currently using those tools? What are some of the key benefits, and where should companies be cautious? Len, I'll start with you for those three questions.

Len Gordon: 07:48

Sure. Thanks, Claudia. And I'm going to focus more on where they should be careful because people usually don't come to see me until after things have gone sideways, unfortunately. AI images are incredibly powerful, and they're amazing. My daughter was amusing the family the other day with pictures of my 80 year old aunt dunking.

Len Gordon: 08:08

So, you can do just about anything. But, for the beauty space, that's dangerous. Because if you're using an AI generated image to say or imply that is what you will look like, your skin will be that smooth or the blemishes will disappear, before and after using AI, That seems to me to be very, very dangerous because it's not real. So that's a problem in advertising.

Len Gordon: 08:35

And having influencers do that and maybe not even knowing that an influencer is providing you with AI generator, AI enhanced images can be a a real challenge. So I think you want to be really, really careful about that. Influencer marketing is so powerful because consumers think it's real. It's a person who's had a real experience and the skepticism that someone might have when they see an ad, a pop up ad or a television ad, that skepticism isn't applied. I mean, that's certainly the line the FTC gives that because influencer marketing is supposed to be someone just like you or me or someone to whom we wish to aspire, if it's a celebrity or maybe a a well known influencer, that skepticism doesn't attach to when someone's viewing the ad. So I think that's why it's so powerful, but also why it can be risky.

Claudia Lewis: 09:33

Okay. Caitlin, what about you?

Caitlin Blanche: 09:38

It's false and fake by nature in a lot of respects. And I think when we're talking about anything that's false or fake in nature, it's ripe for a challenge. I mean, we have enterprising plaintiffs' attorneys everywhere we turn, and they multiply like gremlins because there's money to be shaken out of brands. Unfortunately, for the brands.

Caitlin Blanche: 10:00

AI is a new frontier. I don't think from a litigation perspective, plaintiffs' attorneys have fully grasped yet the best way to formulate and craft those challenges. And I think, we're not just at the the tip of the iceberg. I don't even think we're there yet. But, you know, certainly, AI is a game changer for our clients. In terms of how it's being used and what companies should be cautious about, first of all, it's being used to reduce spend, and we recognize that. And that has to be embraced and owned to a certain extent. You can't hide from the days of the the bean counter narrative.

Caitlin Blanche: 10:40

That's just not a good idea for our clients anymore to dodge the economic impact of AI on their marketing budgets. We know that it can increase volume and reach broader audiences. We know that it can segment your audiences, and that it's a tremendous tool for our clients. But as their use grows and expands, we hope, so does their consultation with their attorneys to talk about proper disclosures, to talk about the perception of a plaintiff's attorney and the way the plaintiff's attorney might be viewing either an AI created advertisement or an advertising campaign that's structured using AI, and the enhancement of algorithms. All of those things present risk, and some of it's really complicated and some of it's really not. I'll put my plaintiff's attorney hat on and and sit there twirling your mustache trying to figure out what a claim looks like. How was a consumer misled by this potentially? And they don't usually think through to the next layer, which is how do you calculate damages based on that? What is the financial harm to a consumer look like because they relied allegedly on an AI created advertisement or an influencer advertisement to purchase something? And that's where I really think this is going to get fascinating.

Claudia Lewis: 12:05

It sounds very fascinating, and it's is so multifactorial. Len, you were once at the FTC. Do you feel like the current regulatory framework is equipped to deal with this AI phenomenon that we're dealing with and some of the issues that Caitlin raised from a litigation a private litigation perspective, but a regulatory perspective. I'm just wondering about that. I know what the FDA is thinking, but I'm wondering what you think about the FTC's perspective on this.

Len Gordon: 12:34

So the FTC is trying to figure out AI a little bit, and the frustrating part for the FTC right now is that their toolbox is a little limited. An AI fake ad, if it doesn't trigger some other statute that the FTC enforces, just challenged under section five of the FTC Act, the FTC does not have the ability to get money back for consumers who may have relied to their detriment on that. That's the result of the Supreme Court's decision in the AMG case, and the chairman of the FTC last week wrote a concurrence to a decision that they were approving, a settlement they're approving bemoaning the fact that congress has not yet restored the FTC's ability to get monetary relief for basic false advertising claims. So when we think about things that might violate the endorsement and testimonial guidelines, the FTC can't get money for that. And I think as a result of that, they are spending less time on those kinds of claims and more on claims where they can use another statute that gives them a money hook to do that.

Len Gordon: 13:33

Like every FTC, this one especially, is very focused on press releases that announce that they have recovered x million dollars for consumers. And despite criticism in the past about the way the prior administrations may have squeezed and twisted statutes to try and find a hook to find a way to get money, the current FTC is doing the same thing using the Restore Online Shoppers Confidence Act aggressively, using the rule on fake reviews aggressively to try and cram things in there, using the business opportunity statute to try and cram things in there. So, you're seeing it, but there are limits. And if companies are willing to fight on those things, they they often know they may may lose. So that's one thing.

Len Gordon: 14:15

The other thing is often when there were new areas that the FTC was trying to figure out, they would use their administrative litigation to try and tease out the law and how the law ought to be applied in new areas before they went to court. Sort of a nice home field advantage. The current FTC has essentially abandoned the administrative proceeding route due to some perhaps well founded constitutional challenges to the the soundness of that remedial scheme, but it means that the FTC has to play like everybody else when they go to court in front of a judge, and they don't have that home court advantage of being judge, jury, and executioner. So a lot has changed at the FTC under Chairman Ferguson. But, if they get additional funding - it's not clear whether they're going to ask for that.

Len Gordon: 15:03

And if they get some additional remedial tools, I think you'll see more emphasis on basic AI related fake advertising. We've just settled one case that was AI focused. We've got another one that will be announced soon. But there were other hooks in those cases that the FTC could use to try and get money. And that really is, can they get money out of this case, is a big deal in their decision making.

Narrator: 15:26

Artificial intelligence is transforming every industry, but with opportunity comes new legal, business, and strategic challenges. On AI and IP: The Legal Frontier, Venable partner Justin Pierce talks with industry leaders and legal professionals about AI governance, innovation, intellectual property, compliance, and risk management. Get practical insights to help your organization harness AI with confidence. Search for AI and IP: The Legal Frontier, wherever you listen.

Claudia Lewis: 15:58

So, Caitlin, Len just described some handicaps that the FTC might have. Often in my space, the FDA is taking activity, but the plaintiff's bar is also making some headway as well, especially in areas where the FDA might be quiet. Are you seeing the plaintiff's bar being more aggressive in this space, influencers, AI, and the like? What kind of claims are you seeing, especially in the beauty and wellness space?

Caitlin Blanche: 16:23

Well, beyond the standard false advertising claims for just the written words on your labeling and on your digital, last year we saw a spike in influencer advertising cases and It's certainly not a big tidal wave, but we saw some creative approaches and some plaintiffs' attorneys testing the waters with either lack of disclosures or inadequate paid advertising disclosures for influencers, sometimes even suing the influencers. So we saw that with some well known drink brands, beverage brands, clothing brands, fitness apparel, some of which stems from NAD decisions and plaintiffs attorneys who might be monitoring for NAD activity and then sort of trying to to ride a little free work product there. And some that really just wanted to race to the courthouse to be the first to take an influencer false advertising case up as far as they could and get a class wide settlement at least.

Caitlin Blanche: 17:26

We are still watching those cases. Some have settled, some have successfully compelled arbitration, which is something we should circle back to because that is certainly a tool that every brand should make sure to consult legal counsel on and make sure that have the most enforceable class action waivers and arbitration provisions so that they have that available at their disposal should they be hit with one of these cases. We've seen unsuccessful motions to compel arbitration as well. And these these claims are chugging along, but we haven't gotten anywhere near the damages, arguments, and merit based assessments that I previewed earlier. And I really think that's where these cases are going to turn and and hopefully for industry where they're going to fail for plaintiffs.

Caitlin Blanche: 18:16

You know, it's very different to have a plaintiff's attorney assess a price premium based on a natural statement on a product. It's very different to say, well, here's the premium associated with believing this influencer's advertisement was organic and she really thought this t-shirt was cool as opposed to had I known this was paid and that she may or may not ever actually wear a t-shirt like this. How much would I have paid for that then? So that's going to be really fascinating to watch. And I think there's a difference between those types of cases and the cases where an influencer is used to market a product that perhaps they've never used with a very tangible benefit like teeth whitening. So if you're using an influencer with very, very white teeth to say, I love this teeth whitening kit and somebody relies on that and turns out that influencer is a paid influencer, never used the teeth whitening kit, has never drank a cup of coffee in their life, and is genetically very, very blessed. I would love to see an expert break down that damages analysis, and we're just not there yet. So I guess the takeaway is, yes, these influencer advertising cases are a thing now. There's something to watch and be mindful of, and it's just another reminder that plaintiffs attorneys will use many FTC acts as a predicate under state consumer protection laws, and they will scour your disclosures.

Caitlin Blanche: 19:41

Yeah. Len, I bet you have something to add on to that there.

Len Gordon: 19:44

I was just going to say one other point on the FTC is, I said they're looking for hooks. Well, one of the hooks is what we call the fake review rule, which came out two years ago. And there is a provision in there that says if you use a fake or false consumer review, consumer testimonial, or celebrity testimonial, it's a violation of the rule. And the importance of that is the FTC can try and get damages, but as Caitlin just mentioned, that's very hard. But they can also get civil penalties for every violation of the rule.

Len Gordon: 20:14

And that could be every time somebody clicked on that endorsement. That could be every time it was published. And that would fit very nicely with the way the FTC is operating right now where they're looking for ways to get big dollar settlements efficiently. That is a real risk. So whether it's a AI generated consumer testimonial or one that's just a person never used it and they've sort of used AI to fill in some gaps, that is a real risk area, and you're tap dancing in the minefield, I think, if you're doing those types of things.

Claudia Lewis: 20:45

Well, we have a few minutes left. We have talked about the problems and we've identified some of the issues, but let's just close out with some solutions. So brands often do come to ask for questions. Where would you start if you were evaluating a marketing program today? Just one or two initial areas, like the two prime areas that you guys would look at to determine risk and help mitigate some of that risk.

Caitlin Blanche: 21:12

I would say disclosures and arbitration provisions. Your contractual terms and conditions. What else do you have to rely upon? And and I guess the corollary, not necessarily corollary, but the other contractual piece is what contracts and terms and conditions you have with regard to your expectations with your influencers and your talent and your talent agreements.

Len Gordon: 21:34

I think as advertising real estate gets smaller and smaller, and so the ability to use disclaimers and disclosures becomes more and more challenging. It's important to think about trying to craft claims that don't need a lot of disclaimers and disclosures because your messaging can get very muddled or it's, illegal. I had a conversation last week with a client. He's like, what do I need for a disclaimer to make this claim okay? And I'm like, there is no way you can disclaim this claim.

Len Gordon: 22:01

You know, it's Advertising 101. You can't in the footnote or in the asterisk change what you said in in the headline. And sometimes people are like, well, I've got the asterisk there. I'm fine. And no, you're not. So really thinking about simplifying your message will allow you to use your real estate better and make your messaging more powerful because it's not muddled. But then people are concerned about losing market share because everybody else is doing it. That doesn't work any better with the FTC than it worked with your parents. So I would try and avoid that rationale.

Claudia Lewis: 22:40

Well, Len and Caitlin, we're out of time for today. You've given us a lot of food for thought and a lot of good practical, feedback on some of these issues. Thank you for joining me today, and I look forward to seeing you both soon.

Caitlin Blanche: 22:52

Thanks, Claudia. That was a lot of fun.

Len Gordon: 22:54

Thanks, Claudia.

Claudia Lewis: 22:56

Okay. That's all the time we have for today. I want to thank Caitlin and Len for helping us better understand how AI and influencer marketing are reshaping advertising risk and how beauty brands can navigate evolving FTC enforcement and litigation trends. You can read more about Venable's beauty and wellness team by visiting venable.com/beauty.

Claudia Lewis: 23:17

I'm Claudia Lewis. Thanks for listening to The Beauty Law Glow-Up