The Federal Trade Commission has issued its updated Guides Concerning the Use of Endorsements and Testimonials in Advertising (Endorsement Guides). Last updated in 2009, the significantly revised Endorsement Guides focus on current marketing trends and techniques, and specifically on social media and influencers as channels for endorsements and testimonials. In issuing the updated Endorsement Guides, the FTC has made clear that the basic truth-in-advertising principle – that endorsements must be honest and not misleading – applies to all advertising across-the-board, regardless of format. Advertisers, endorsers, influencers, and intermediaries – and the multiple platforms they utilize to reach consumers – are all covered by the updated Endorsement Guides.
Now, more than ever, it is important for advertisers, marketers, and media outlets to establish clear policies and procedures to monitor the use of endorsements and testimonials. Lerman Senter can help clients by providing a detailed overview of the new requirements and assistance in implementing effective policies in response.
Key updates to the Endorsement Guides include:
Definition of Endorsement
The revised Endorsement Guides modify and broaden the definition of “endorsement.” To address the explosion of social media endorsements through influencers, and consumers using social media, the new definition clarifies that endorsements can include verbal statements, depictions, and “likes” and “tags” if consumers would be likely to believe that they reflect the opinions, experiences, or beliefs of someone other than the advertiser. The FTC acknowledged that not every social media tag will be an endorsement but reminded marketers that tags “can be” considered endorsements and they should clearly disclose any relationship between the endorser and the brand.
The FTC updated certain examples included in the Endorsement Guides to illustrate the revised definition. One example clarifies when an implicit recommendation may be an endorsement. For example, if a video game influencer is paid to live stream while playing a game and appears to enjoy playing it, the player’s enjoyment is relevant and is an endorsement because his/her apparent enjoyment is implicitly a recommendation of the game.
Definition of Endorser
The revised Endorsement Guides clarify that fake reviews and false testimonials are considered endorsements. Endorsers may be liable if they falsely represent personal use of the product they are endorsing; or when they make a misleading or unsubstantiated claim regarding a product’s performance or effectiveness. The revised Endorsement Guides also clarify that virtual or fabricated persons or entities are considered “endorsers.” The expansion of this definition captures virtual influencers and fake endorsers that claim or appear to be individuals, groups, or institutions.
New Definition of “Clear and Conspicuous”
The revised Endorsement Guides include a new definition of “clear and conspicuous” that applies to disclosures of material connections. A disclosure must be difficult to miss – that is, easily noticeable and understandable by ordinary consumers. A disclosure on social media must be “unavoidable.” The FTC cautioned that a platform’s built-in disclosure tools may not be adequate. In an example, the revised Endorsement Guides clarify that if a consumer has to click on a link labeled “more” to see a disclosure explaining the endorser’s connection to a manufacturer, the disclosure is not unavoidable and therefore not clear and conspicuous.
Disclosures of Material Connections
The existing Endorsement Guides addressed the need to disclose unexpected material connections between the endorser and seller of an advertised product. The proposed revisions provided examples of possible material connections, including payment or the provision of free or discounted products regardless of whether the advertiser requires an endorsement; early access to a product; or the possibility of being paid, winning a prize, or appearing in media promotions. The final Endorsement Guides state that material connections need to be disclosed when a significant minority of the audience does not understand or expect the connection. A few examples from the Endorsement Guides help to clarify when a disclosure would be required. In one scenario, an influencer posts videos of various DIY woodworking projects. A manufacturer sends the influencer a lathe, hoping the influencer will post about it. The influencer uses the lathe and comments favorably about it in videos. The Endorsement Guides state that if a significant minority of viewers are not likely to understand that the influencer received the lathe for free, that connection should be clearly and conspicuously disclosed. In contrast, another example makes clear that a disclosure would not be required when a radio host reads a commercial for a product during a radio program because most listeners will understand that the host was compensated to read the advertisement.
Potential Liability of Advertisers, Intermediaries, and Endorsers
The FTC has and will continue to conduct investigations that may result in law enforcement actions alleging violations of Section 5 of the FTC Act, which generally prohibits deceptive advertising. Advertisers can be liable for false or deceptive statements and depictions by endorsers and influencers. The FTC expects advertisers to be responsible for and monitor the actions of their endorsers. Intermediaries, such as advertising agencies, public relations firms, and reputation management companies can be liable for their roles in creating ads containing endorsements they know or should know are deceptive. However, the FTC acknowledged that entities that merely provide production services and have no direct knowledge of the content of an ad or social media campaign would not be considered intermediaries.
Other Changes
The revised Endorsement Guides explain that advertisers are prohibited from distorting or misrepresenting what customers think of a product by procuring, suppressing, boosting, publishing, organizing, upvoting, downvoting, or editing consumer reviews. In addition, they highlight that child-directed advertising is of special concern. Advertisers and endorsers should be careful when developing endorsements directed toward children and teens. Research suggests children and teens react differently from adults, and disclosures that are adequate for adults probably will not be effective with younger children.
Best Practices for Compliance
Disclosures. Online disclosures should be “clear and conspicuous” and “unavoidable.” Material connections between an advertiser and an endorser should be disclosed “when a significant minority of the audience for an endorsement does not understand or expect the connection.”
Advertiser, Intermediary, and Endorser Liability. Advertisers should monitor the actions of their endorsers because ultimately it is the company’s responsibility for what others do on its behalf. Advertisers should establish a formal training, monitoring, and compliance program to remind employees periodically of the company’s policies and advise endorsers of what they can and cannot do when promoting a brand.
“Intermediaries” should be mindful that they may be subject to liability “for their roles in creating or disseminating endorsements they know or should know are deceptive.”
“Endorsers” should always accurately represent their experiences or opinions. For example, endorsers cannot talk about personal experiences with a product if they haven’t tried it. If a product doesn’t work or is mediocre, the endorser cannot describe it as “effective” or “terrific.” Endorsers should not say or write anything that isn’t approved by the advertiser and should never make claims that require proof the advertiser doesn’t have.
The Endorsement Guides are not considered to be “law.” But companies and individuals that engage in what the FTC considers false and deceptive practices – as described in the revised Endorsement Guides – put themselves at risk of investigations and possible fines if the FTC finds those practices violate the FTC Act.
