New guidelines for testimonials, proposed rulemaking for reviews and disclosures, and other takeaways for advertisers

The lead-up to the July Fourth holiday was a busy time for endorsement and testimonial watchers—the FTC issued (i) its final, updated Guides to the Use of Endorsements and Testimonials in Advertising, (ii) an updated version of its companion FAQs—The Endorsement Guides: What People are Asking (with 40 new questions and lots of updated answers and an example), and (iii) its proposed trade regulation rule to combat fake reviews and testimonials.

The big takeaway? We have seen most of this before, whether in initial proposals or in consent orders, but what the trifecta makes very clear is how important it is for marketers to have very clear policies on the use of disclosures related to influencers, testimonials, and reviews; to communicate those policies; and to monitor and enforce them. Compliance will be key. The FTC has made very clear it is watching. Below we review the updated Guides—much of which encapsulate the proposals the FTC published more than a year ago.

Background and Major Revisions

The Federal Trade Commission (FTC) issued its long-awaited revised Endorsement Guides on June 29, 2023—just about a year after seeking public comment on its initial proposal, and about 14 years since the last set of updates. As with all guidance documents, the Guides are not themselves law, but rather describe the principles the FTC will use to evaluate whether endorsements and testimonials (and/or the marketer's uses of them) are false and misleading under Section 5 of the FTC Act. But the final Guides do more than that. The Guides address head-on the meteoric rise in social media influencer marketing since the last round of revisions in 2009. According to the FTC, the increased use of endorsements in social media has led to widespread and pervasive deceptive advertising. The Guides are designed to reign in these practices.

In a Business Alert announcing the final Guides, the FTC made its intent clear: the Guides are intended to crack down on "companies that use deceptive endorsements and reviews" which "harm consumers with misleading tactics that subvert their choices at check-out. And [] take business away from honest competitors that work hard to comply with the law."

The FTC took direct aim at social media influencers and testimonials, as the Guides make clear that the disclosure of material connections between an endorser and the advertiser must be unavoidable. Advertisers will no longer be able to rely solely on a "click for more" link with a disclosure, a general disclosure in fine print, or a disclosure in an influencer profile. The disclosure must appear in at least the same location and same format as the endorsement: for example, if the endorsement is audible, then the disclosure must be made at least audibly. And the disclosure must be tailored for the intended audience. For example, if an endorsement targets non-English speakers, then the disclosure cannot only be in English.

The updated Guides are a long time coming, but the FTC has been very active since their last Guide revisions. The updated Guides follow FTC's issuance of nearly 2,000 warning letters and notices of penalty offenses to advertisers and influencers sent between 2017 and 2021. The letter campaigns forewarned advertisers and influencers of the FTC's expectations, as did many a consent order during the past decade, and many provisions of the examples and requirements that appear in the final Guides come from warning letters and consent orders.

Although the updated Guidance, FAQs, and Notice of Proposed Rulemaking bear a great deal in common—the last (like the first rounds of the FTC-issued Notice of Penalty Offense Letters) is a response to the Supreme Court's decision in AMG Capital Management that stripped FTC of its ability to use Section 13(b) of the FTC Act as a means of obtaining monetary equitable relie. Similarly, faced with the loss of 13b-based monetary relief, the FTC recently issued a Notice of Penalty Offense to hundreds of food and supplement manufacturers that make health-related claims, and the FTC recently updated its health claims guidance.

The final, updated Guides are the result of three years' worth of FTC receipt and review of comments from the public. In 2000, the FTC sought comments on the overall costs, benefits, and regulatory impact of the Guides. In July 2022, the FTC published proposed revisions to the Guides, again seeking comments. The FTC's final Guides address the substantive comments received, make relevant revisions, and seek to bring clarity to endorsement advertising guidelines.

The FTC identified six final changes from the 2009 Guides that merit attention:

1. Continuing the FTC's focus on reviews, the Guides make clear that companies cannot manipulate customer reviews in any way that misrepresents them.
2. The Guides specifically address incentivized reviews, reviews by employees, celebrities, and experts, and fake negative reviews of a competitor.
3. The Guides update the definition of "clear and conspicuous" disclosures, noting that many current disclosures of material relationships are likely inadequate.
4. Defining "endorsements" to make clear they include fake reviews, virtual influencers, and tags in social media.
5. Breaking down the potential liability of advertisers, endorsers, and intermediaries for deceptive ads.
6. Highlighting that child-directed advertising is of special concern.

Links:

Updated Endorsement Guides

FAQs

Proposed Rule

Endorsement is Broadly Defined and Can Include "Tags" – § 255.0

What is an "endorsement"?

The Guides define an "endorsement" as "any advertising, marketing, or promotional message for a product that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser. Verbal statements, tags in social media posts, demonstrations, depictions of the name, signature, likeness or other identifying personal characteristics of an individual, and the name or seal of an organization can be endorsements."

The FTC clarified the language from the proposed rule to note that "tags" can be, but are not always, endorsements. The FTC clarified in comments that this definition is intended to "encompass the writers of fake reviews and non-existent entities that purport to give endorsements."

What is a "product"?

A "product" is any product, service, brand, company, or industry.

Who is an "endorser"?

An "endorser" is the "party whose opinions, beliefs, findings, or experience the message appears to reflect . . . and could be or appear to be an individual, group, or institution."

Importantly, the definition of endorser now expressly includes fake endorsers. This issue is likely to heat up as a result of advances in artificial intelligence, which can now be used to create near-perfect images, videos, and voice profiles of real people.

A key change from the draft Guides is that the definition of "endorsement" clarifies that "tags and certain other types of communications 'can be' endorsements."

Examples of endorsements identified by the Guides:

• Selective use of only positive aspects of a critic's review by an advertiser.
• A famous race car driver hired to speak in a commercial about a brand of tires.
• A television advertisement for golf balls with a prominent golfer. If the golfer is also paid to post the video to her social media account, it is an endorsement if the brand is identifiable, such as by a "tag" or being mentioned in the post.
• An actor in an infomercial for exercise equipment is endorsing a product when offering what appears to be their personal opinion about the ease of use of the equipment.
• A company's use of an objective review can become an endorsement where the company highlights that review on its website.
• An agreement to receive free products and write reviews.
• A "dog influencer" who is given a year's worth of free dog food and asked to feature the product in their social media.
• Paying a gamer to live stream a product where the gamer appears to "enjoy" the product.
• Fake positive reviews used to misrepresent the advertiser's influence to potential clients, purchasers, investors, partners, or employees.
• Testimonials, which are treated the same as endorsements.

The following are not endorsements according to the Guides:

• Fake negative reviews (but those might be unfair trade practices).
• A spokesperson clearly presents the company's views, not her own.
• A speaker in an infomercial merely providing details about a machine and not saying anything that appears to be a personal belief.
• A consumer who purchased dog food and posts about how good it is on their own accord, or submits an independent review on a third-party website.
• Unsolicited review from a regular product consumer even where the manufacturer gives away the product to the consumer, but not where the consumer is part of a marketing program and receives free food in exchange for the occasional review.

"Clear and Conspicuous" For Social Media Means "Unavoidable" – § 255.0(f).

The Guides, for the first time, define a "clear and conspicuous" disclosure. A disclosure that is "clear and conspicuous" must be "difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers."

In response to commenters' requests for flexibility, the FTC said: "[f]or online disclosures to be effective, they must be unavoidable."

Whether it is unavoidable will depend on the use, language, and placement of a disclosure.

Basic principles of "clear and conspicuous" include the following:

• If the disclosure is needed because of a visual representation, then the disclosure should be made in at least a visual manner. The same rule applies to audible representations. And, if the representation is made in both audible and visible means, then the disclosure should be in both means.
• A visual disclosure must stand out from any other text or visual elements so that it is "easily noticed, read, and understood."
• An audible disclosure should be "delivered in a volume, speed, and cadence sufficient for ordinary consumers to easily hear and understand it."
• In an interactive electronic medium (i.e., social media), the disclosure should be unavoidable.
• The disclosure should not be contradicted, mitigated by, or inconsistent with anything else in the communication.
• For ads that target a specific group, the ordinary consumers are members of that group. "The adequacy of the disclosure will be evaluated from the perspective of the microtargeted individuals, and the disclosure must be in the same language as the ad."

Specific applications identified by the FTC include:

• An endorser cannot rely solely on the social media platform's built-in disclosure tool.
• An endorser cannot rely on a clickable link—i.e., "click for more" —that contains a disclosure.
• An advertisement that "microtargets" foreign language speakers cannot rely on a disclosure in English.
• A disclosure must be "clear and conspicuous" on all devices used (i.e., internet webpage and smartphone).
• A disclosure only on the influencer's profile page is insufficient; it must be made in conjunction with the claim.
• A small disclosure in white text against a light background of an image that appears for a short time is insufficient.

General Principles For All Endorsements – Endorsement Must Be Honest

• The Guides rely on six bedrock principles:
• First, endorsements must reflect the "honest opinions, findings, beliefs, or experience of the endorser."
• Second, "an endorsement may not convey any express or implied representation that would be deceptive if made directly by the advertiser."
• Third, although an advertisement may paraphrase, rather than directly quote an endorser, the "endorsement may not be presented out of context or reworded so as to distort in any way the endorser's opinion or experience[.]"
• Fourth, "[a]n advertiser may use an endorsement of an expert or celebrity only so long as it has good reason to believe that the endorser continues to subscribe to the views presented." An advertiser must secure "the endorser's views at reasonable intervals where reasonableness will be determined by such factors as new information about the performance or effectiveness of the product, a material alteration in the product, changes in the performance of competitors' products, and the advertiser's contract commitments."
• Fifth, if an advertisement represents the endorser actually uses the product, "the endorser must have been a bona fide user of it at the time the endorsement was given." Moreover, an advertiser can only "continue to run the advertisement" if it has a reasonable belief that the endorser still uses the product. Issues in this space will arise with respect to product reformulations. Advertisers must make sure that the endorser uses the right formulation or design of a product.
• Sixth, "The use of an endorsement with the image or likeness of a person other than the actual endorser is deceptive if it misrepresents a material attribute of the endorser."

Guidelines Specific to Consumer Endorsements – § 255.2

The Guides provide clear guidelines for ensuring that endorsements not only truthfully reflect the endorser experience, but that any performance or efficacy claims contained in that endorsement are supported by independent and appropriate substantiation.

As the FTC has said over and again, a consumer endorsement is not itself competent and reliable scientific evidence. Like any product or service claim, all consumer endorsements must be predicated on "adequate substantiation, including, when appropriate, competent and reliable scientific evidence, to support" all express and implied claims made.

Endorsements by consumers about product performance are "interpreted as representing that the product is effective for the purpose depicted in the advertisement."

Equally importantly, advertisements showing an endorser's experience of a product are deemed to represent "that the endorser's experience is representative of what consumers will generally achieve with the advertised product in actual. . . conditions of use." As such, "an advertiser should possess and rely upon adequate substantiation for this representation."

If the advertiser does not have sufficient evidence that the endorser's results or use are typical, "the advertisement should clearly and conspicuously disclose the generally expected performance in the depicted circumstances, and the advertiser must possess and rely on adequate substantiation for that representation."

Any "disclosure must alter the net impression of the advertisement so that it is not misleading." The Guides expressly state, as they have since the last round of updates, that a "results not typical" statement is an insufficient disclosure.

Endorsements that appear as or claim to be actual customers must use actual consumers "or clearly and conspicuously disclose" that they are not.

What is prohibited?

• Advertisers must not procure, suppress, boost, organize, publish, upvote, downvote, report, or edit consumer reviews of their products.
• Hiding or altering bad customer reviews on an advertiser's website for the sole reason that they are negative—for example, by failing to publish anything other than four- or five-star reviews.
• Applying review suppression policies only to negative reviews (i.e., suppressing negative reviews containing profanity but not positive reviews containing profanity).
• Labeling a review as "most helpful" when it was not actually selected by consumers as helpful, but rather by the advertiser.
• Paying genuine purchasers for only positive reviews on third-party websites (deceptive even if disclosed).
• Issuing threats to consumers who post negative reviews on third-party websites.
• Where a company flags, as fake, actual consumer reviews on third-party websites because they are negative, and without a reasonable basis to claim they are fake.
• Using stock photos to demonstrate the benefits of a cosmetic.
• Using an image of someone who appears to have lost weight, but that person did not use the advertiser's product.
• Showing a picture of a four-year-old in social media and falsely suggesting that the product helped the four-year-old learn to read.
• Giving "typical" national results when the advertisement is directed to a particular region.

Guidelines for Expert Endorsements – § 255.3

When an ad represents in any way that the endorser is an expert, then the qualifications must exist as to the endorsed product. In addition, if an expert represents to have evaluated the product, it must have examined or tested the product "at least as extensive[ly] as someone with the same degree of represented expertise would normally need to conduct in order to support the conclusions presented in the endorsement."

If the expert claims to compare products, the expert must have actually done the comparison herself and have determined that the products are comparable. "[W]here the net impression created by the endorsement is that the advertised product is superior to other products with respect to any such feature or features, then the expert must in fact have found such superiority."

Endorsements by Organizations – § 255.4

An organization's endorsement must be reached by a process sufficient to ensure that the endorsement fairly reflects the collective judgment of the organization.

Disclosure of material connections – § 255.5

When there is a connection between the endorser and the seller of the product that might "materially affect the weight or credibility of the endorsement, and that connection is not reasonably expected by the audience, such connection must be disclosed clearly and conspicuously."

All material connections must be disclosed when a "significant minority of the audience for an endorsement does not understand or expect the connection." A disclosure must clearly communicate the nature of the connection.

Material connections can include:

• A business, family, or personal relationship.
• Monetary payment or the provision of free or discounted products to an endorser.
• Other benefits to the endorser, such as early access to a product or the possibility of being paid, winning a prize, or appearing on media promotions.

Examples given in the Guides:

• A drug company's payment of research must be disclosed in an advertisement about the results.
• No disclosure is required where a film star endorses a food product on a television commercial because customers expect there be a payment in that case.
• A professional tennis player discussing the benefits of a particular eye procedure at a clinic must disclose a contract with the clinic because consumers wouldn't necessarily know they have been engaged by the clinic. The relationship should be disclosed even if the tennis player is only getting the procedure at a reduced cost.
• A physician must disclose when it receives a portion of the product sales from goods it endorses.
• A disclosure is required for "spontaneous" interviews with patrons of a restaurant who were told beforehand they would be interviewed about the food product.
• Actors in a commercial must be disclosed if it’s not obvious that they represent the views of the advertiser or are speaking on behalf of the advertiser.
• Paid website reviewers must be disclosed even if they are allowed to write negative reviews.
• A person using a free product online and discussing its positive qualities must disclose the relationship, and the manufacturer must inform the person of this obligation, and have "reasonable procedures in place to monitor" the postings for compliance.
• A college student receiving points for posting on social media about a product must disclose the relationship.
• A reviewer who gets money for getting viewers to click on affiliate links must disclose the relationship.

Endorsements directed to children – § 255.6

The Guides simply state that practices that would not ordinarily be questioned in advertisements addressed to adults might be questioned when aimed at children.

Specific Statements on Advertiser Liability

The Guides make clear that FTC "expects advertisers to be responsible for and monitor the actions of their endorsers." Therefore, advertisers are liable for (1) "misleading or unsubstantiated statements made through endorsements" or (2) for "failing to disclose unexpected material connections between themselves and their endorsers."

To avoid liability, advertisers should: (1) advise endorsers to ensure statements are not misleading and to disclose unexpected material connections; (2) monitor their endorsers' compliance; and (3) take action to remedy noncompliance and prevent noncompliance.

Specific Statements on Endorser Liability

Endorsers may be liable for statements in the following instances:

• When an endorser "makes a representation that the endorser knows or should know to be deceptive, including when an endorser falsely represents that they personally used a product."
• When an endorser who is not an expert makes a (1) misleading or unsubstantiated representation regarding a product's performance or effectiveness, (2) makes representations that are inconsistent with the endorser's personal experience, or (3) makes "representations [that] were not made or approved by the advertiser and go beyond the scope of the endorser's personal experience."
• When an endorser "fail[s] to disclose unexpected material connections between themselves and an advertiser[.]"

Specific Statements on Ad Agency Liability

Advertising agencies and other intermediaries may be liable under the following scenarios:

• Their own "roles in creating or disseminating endorsements containing representations that they know or should know are deceptive," and
• Their own roles in "endorsements that fail to disclose unexpected material connections, whether by disseminating advertisements without necessary disclosures or by hiring and directing endorsers who fail to make necessary disclosures."

For a review of your website or social media, or more information, contact Nancy Felsten, Kim Bousquet, or Alli Condra.

Nancy is well-known for her extensive practice representing all manner of clients in false advertising challenges before the National Advertising Division (NAD) and the National Advertising Review Board (NARB), and the television networks, as well counseling clients regarding regulatory compliance and claims substantiation.

Kim's practice covers the entire food and beverage industry and beyond. Recent legal advice includes compliance in matters related to: statements of identity and other mandatory elements on prepacked food labels; nutrient content claims; marketing claims and website graphics; pet supplement labeling; vitamin and supplement labeling; and COVID-19 product efficacy claims.

Alli represents food, beverage, and pet food companies, distributors, retailers, farms, and restaurants. She advises on a broad range of topics, such as label claims (e.g., "natural," "organic," and other health-related claims); Prop 65; hemp-derived CBD; food and alcohol delivery; plant-based foods and alternative proteins; standards of identity; food safety; and menu labeling.

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