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Got Endorsers? Federal Trade Commission Issues Updated Advertising Guides

Got Endorsers? Federal Trade Commission Issues Updated Advertising Guides

July 10, 2023

Got Endorsers? Federal Trade Commission Issues Updated Advertising Guides

By: Michelle Cohen

The Federal Trade Commission (“FTC”) recently issued updated “Endorsement Guides.” Guides, last revised in 2009, give businesses guidance on what endorsement practices may be considered “unfair” or “deceptive” under the FTC Act.  They also provide the general principles the FTC will use in evaluating endorsements and testimonials. As social media has evolved, the FTC has repeatedly stated that the FTC Act and the agency’s rules on unfair and deceptive practices apply to endorsements on social media (in addition to traditional media).

“Endorsements” under the Guides include “any advertising, marketing, or promotional message for a product that consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser.” This includes verbal statements, tags in social media posts, demonstrations, name, image and likeness of an individual, and the name or seal of an organization.

Companies and product endorsers are required to disclose material connections (such as when a social media influencer promotes a product and is paid for the post or given free products or services). Over the past several years, the FTC has taken several actions against companies for endorsers’ failure to disclose their connection to the advertised product or service, or the use of fake reviews, among other .[1]

The FTC also issued an updated version of its “Q and A” guidance document (last revised in 2017) that covers key areas such as when and how to disclose material connections, online reviews, and negative feedback. The Q and A remains a useful resource to organizations and endorsers. The FTC has added 40 additional questions.  https://www.ftc.gov/business-guidance/resources/ftcs-endorsement-guides-what-people-are-asking.

Key Highlights from the New Guides

  • A material connection needs to be disclosed when a significant minority of the audience for the endorsement does not understand or expect the connection. In some circumstances, well-known influencers may be so closely identified with a particular brand that they do not need to be disclosed. However, this would typically involve a fact-based analysis. The agency declined to specifically identify any particular endorsers meeting this exception.
    • The FTC recognizes that even where many people in an industry (such as video game players) may be aware that influencers have received some sort of incentive (like early access) when the influencers are reviewing or showcasing certain types of products – “an audience knowing generally about such early access is not the same as knowing what a given influencer may have received— whether it’s merely early access or a large monetary payment—in connection with a given game”
  • In terms of what constitutes a “clear and conspicuous” disclosure, the FTC states that online disclosures must be “unavoidable” in order to be effective. Specifically, “a disclosure is difficult to miss (e., easily noticeable) and easily understandable by ordinary consumers.” The FTC reiterated that the Guides’ principles and examples, together with staff guidance on use, language, and placement of disclosures of material connections, will continue to apply to disclosures.
  • The FTC disfavors disclosing material connections in links, stating “if the endorsement is visible without having to click on the link labeled ‘more,’ but the disclosure is not visible without the viewer doing so, the disclosure is not unavoidable and this is not clear and conspicuous.”
  • The New Guides clarify that “tags” and “likes” can be endorsements, as can fake positive reviews used to promote a product. Bots and other entities can be considered endorsers. A fake positive consumer review published on a third-party review website can be an endorsement. Purchasing “likes” and misrepresenting them in advertising can constitute a deceptive practice.
  • Advertisements targeting particular groups (g., Spanish language ads) require that the disclosure be in the same language as the ad.
  • Endorsements in advertisements addressed to children may be of special concern; the FTC will continue to review this area.
  • Regarding the liability of advertisers, the FTC states that it continues to expect “advertisers to be responsible for and monitor the actions of their endorsers.” Advertisers should provide guidance to their endorsers regarding disclosing material connections and not being misleading, monitor their endorsers’ compliance, and take action to remedy non-compliance.
  • Endorsers may be liable for statements, such as deceptive representations, or stating they use a product when they do not use it. Endorsers can also be liable for failing to disclose material connections between themselves and an advertiser.
    • In one example, the FTC addressed a video game influencer who is paid to play and live stream a game and appears to enjoy playing it. The FTC modifies its earlier language to clarify that the player’s apparent enjoyment is implicitly a recommendation.
  • Similarly, ad agencies, public relations firms, review brokers, and other “intermediaries” may be liable for actions similar to advertisers and endorsers where they create ads containing endorsements that they know or should know are deceptive.
  • Advertisers should not distort or misrepresent what consumers think of their products through “upvoting,” “downvoting, or editing consumer reviews of their products.

New Proceeding Targets Fake Reviews

The FTC also launched a proceeding directed at fake reviews and testimonials. We will cover the FTC’s proposals in a future blog. In summary, the FTC seeks to prohibit businesses from procuring reviews by someone who does not exist, did not have experience with the product, or who misrepresented their experience. Businesses would also be barred from offering compensation conditioned upon the writing of a review with a particular sentiment (whether positive or negative). The proposed rule would  prohibit businesses from buying or selling false indicators of social media influence (like fake followers or views).

The FTC’s publication of the updated Guides, Q & As, and the new rulemaking signal that the agency will continue to closely monitor endorsements, particularly on social media and through evolving practices. Many of the requirements track traditional FTC mandates, such as the obligation that advertisements be truthful and not-misleading and that endorsers disclose their material connections.  The agency is applying these “traditional” principles to the explosive use of influencers and other endorsers, and has signaled that advertisers, endorsers, and even ad networks can face liability under the FTC Act for failure to make required disclosures or misrepresenting endorsement.


[1] https://www.ftc.gov/legal-library/browse/cases-proceedings/182-3174-teami-llc

 

https://www.ftc.gov/legal-library/browse/cases-proceedings/192-3008-sunday-riley-modern-skincare-llc-matter

Michelle Cohen

Michelle Cohen

At Ifrah Law, Michelle’s practice focuses on helping clients establish powerful and enduring relationships with their customers and prospects while remaining compliant with state and federal law governing privacy and advertising laws and regulations.

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