The Federal Trade Commission recently released updated Guides Concerning the Use of Endorsements and Testimonials—commonly referred to as the “Endorsement Guides.” The updated Endorsement Guides, which were closely followed by the Commission’s proposal of a new endorsement-related rule, serve as the latest signal of heightened scrutiny and enforcement in this area.

On June 29, 2023, the Federal Trade Commission (FTC or Commission) announced that it has finalized an updated version of the Guides Concerning the Use of Endorsements and Testimonials in Advertising (Endorsement Guides or Guides). The announcement was followed by the FTC’s June 30, 2023 release of a proposed new trade regulation rule titled “Rule on the Use of Consumer Reviews and Testimonials” (Proposed Rule), which would prohibit certain types of deceptive conduct involving consumer reviews or testimonials.

Publication of the Notice of Proposed Rulemaking in the Federal Register is forthcoming—once published, interested parties and members of the public will have 60 days to submit comments to the Commission online or on paper. If promulgated, the Proposed Rule would enable the Commission to seek civil penalties against violators (up to $50,120 per violation) as well as other monetary relief, such as consumer damages.

The updated Guides, coupled with the Proposed Rule, should be viewed as a harbinger of increased scrutiny and enforcement action in this area.

BACKGROUND

Last revised in 2009, the Endorsement Guides set forth general principles relating to the use of endorsements and testimonials in advertising and reflect the FTC’s administrative interpretation of how Section 5 of the FTC Act, 15 USC 45 (which prohibits “unfair or deceptive acts or practices in or affecting commerce”) applies to the same. The Guides are grounded in the key tenets underpinning truth-in-advertising laws: claims in advertisements must be truthful, cannot be deceptive or unfair, and must be evidence-based.

While the fundamental truth-in-advertising standards remain firmly in place, the contours of the Guides have been updated to reflect current market realities—namely, the increasing reliance of advertisers and marketers on digital and social media marketing.

ENDORSEMENTS

While the practice of endorsement advertising has long been a preferred means of promotion for companies seeking to connect with consumers, the form and shape of endorsement advertising has significantly evolved. Initially, the Guides were oriented to address endorsements presented by advertisers in the context of traditional media forms, such as print ads or TV commercials.

Today, endorsement advertising primarily takes place on social media platforms and is typically presented by the endorsers themselves (e.g., celebrities, influencers, and micro-influencers), rather than through a brand’s own advertisements.

It should be noted that where the material connection between a brand and its endorser was once more readily obvious to consumers, it is now unequivocally less so. In an era where discerning consumers are increasingly turning to blogs and social media platforms for “authentic” and “genuine” opinions on products and brands, the connection between an influencer and the brand or product they promote can go undetected by modern consumer audiences.

TESTIMONIALS

Testimonials, too, have taken a new shape. The digitization and widespread publication of consumer reviews on websites and social media has led to increased liability for companies looking to feature or leverage consumer reviews. Advertisers and marketers are increasingly embracing incentivized reviews and rating scales (e.g., star-rating systems) as a means to encourage communication with consumers.

Further, the practice of resharing or spotlighting user-generated content—that is, unpaid or unsponsored content created and shared by consumers based on their reported experiences with or opinions of a brand or product—has become widely popular among brands seeking to strengthen brand awareness and loyalty in a cost-effective manner.

Amid these growing market trends, the updated Guides seek to “strengthen and clarify” guidance for advertisers. In a May 2022 statement released shortly before the Commission unanimously approved a request for public comment on proposed amendments to the Guides, Chair Lina M. Khan underscored the timeliness of the updated guidance and the Commission’s focus on deterring deceptive conduct:

[The] revisions come at a time when influencer marketing is becoming increasingly prevalent and as consumers increasingly rely on online consumer reviews to decide what to buy . . . Influencers who are paid, receive free product or services, or have a relationship with a brand sometimes fail to disclose that material connection, hoping to appear more authentic to consumers. Consumers’ increasing reliance on online reviews can also incentivize advertisers to harness fake reviews, suppress negative reviews, and amplify positive ones.

KEY IMPLICATIONS OF UPDATED GUIDES AND PROPOSED RULE

Updated Guides

The updated Guides feature several notable revisions. Below are some key takeaways for advertisers to be aware of.

Updated “Endorsement” and “Endorser” Definitions

The updated Guides include updated definitions of the terms “endorsement” and “endorser.”

“Endorsement” is defined 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.”

The updated Guides make clear that an “endorsement” can come in many forms, including “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.”

The updated Guides also clarify that an “endorser,” defined as “the party whose opinions, beliefs, findings, or experience the message appears to reflect,” includes actual as well as fictitious individuals, groups, or institutions.

In the Commission’s words, the updated “endorser” term is drafted to “encompass the writers of fake reviews and non-existent entities that purport to give endorsements.” As discussed herein, fake reviews (among other illicit review and endorsement practices) are a subject of the Proposed Rule.

Updated “Clear and Conspicuous” Definition

Under the updated Guides, “clear and conspicuous” means a disclosure that is “difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers.” The Commission articulates its intention behind the updated “clear and conspicuous” definition, which it characterizes as “both useful and flexible,” in its section-by-section discussion of the revisions: “For online disclosures to be effective, they must be unavoidable.”

Despite concerns from some public commenters that the burdens of ensuring that an online disclosure is “unavoidable” would likely outweigh any potential benefits to consumers at the cost of companies and advertisers, the new “clear and conspicuous” definition requires that a disclosure be made in the same format as the representation or claim it relates to.

For example, if a claim is presented in audio format, any required disclosure must be presented through audible means. Likewise, for visual representations and claims, necessary disclosures must be presented visually. For communications made both audibly and visually (such as video posts), necessary disclosures must be made in both the visual and audible portions of the communication.

The updated definition also provides guidance on how disclosures must be presented and sets out specific characteristics required for visual disclosures (e.g., size, contrast, location, duration) and audio disclosures (e.g., volume, speed, cadence). Consistent with longstanding truth-in-advertising principles on the use of disclosures, the updated “clear and conspicuous” definition reiterates that a disclosure must not be “contradicted or mitigated by, or inconsistent with,” anything else in the communication.

As reflected in recent FTC consent orders and informal guidance, the updated definition also includes language requiring enhanced measures when targeting specific audiences, such as older adults.

New Guidance on the Procuring, Suppressing, Boosting, Organizing, Publishing, Upvoting, Downvoting, or Editing of Consumer Reviews

The updated Guides include a new principle addressing the “procuring, suppressing, boosting, organizing, publishing, upvoting, downvoting, reporting, or editing of consumer reviews,” accompanied by examples intended to illustrate the underlying proposition that “advertisers should not take actions that have the effect of distorting or otherwise misrepresenting what consumers think of their products, regardless of whether the reviews are considered endorsements under the Guides.”

By way of illustration, § 255.2 of the updated Guides includes a new example that addresses an online retailer’s suppression of negative reviews on its website. The new example establishes that where a website represents that it is “providing an accurate reflection of the views of the purchasers who submitted product reviews to the website,” suppressing or excluding certain reviews (such as reviews with fewer than four stars or reviews that contain negative sentiments) “would be misleading as to purchasers’ actual opinions of the products.”

Expanded Guidance on the Use of Incentivized Reviews, Employee Reviews, and Fake Negative Reviews of Competitors

The updated Guides (as well as the Proposed Rule discussed herein) include additional language and refreshed examples designed to address when reviews qualify as endorsements and how they could be deceptive or misleading to consumers. Below are some key examples:

• Incentivized Reviews: The updated Guides indicate that incentivized reviews that fail to “clearly and conspicuously disclose the incentives provided to [the] reviewer” are “likely deceptive.” Where reviewers “believe they might face negative consequences from posting negative reviews” or are otherwise required to provide “positive” reviews, a disclosure regarding the incentivized nature of the reviews would be insufficient. The updated Guides caution that “[e]ven if adequate disclosures appear in [an] incentivized review,” the practice could still be deceptive “if the solicited reviews contain star ratings that are included in an average star rating for the product and including the incentivized reviews materially increases that average star rating.”
• Employee Reviews: The updated Guides reiterate that where knowledge of an endorser’s employment “likely would affect the weight or credibility” of an endorsement made by the endorser, such information should be clearly and conspicuously disclosed. Reinforcing the principle that employers bear responsibility for endorsements by employees, the updated Guides provide that, “[t]o the extent that [an] employer has directed [endorsements by employees] or otherwise has reason to know about them, it should also be monitoring them and taking other steps to ensure compliance.” Relatedly, the updated Guides provide that employers can limit liability for endorsements by employees by engaging in appropriate employee training.
• Fake Negative Reviews of Competitors: The updated Guides make clear that while a “paid or otherwise incentivized negative statement about a competitor’s service” is not an endorsement, such a statement (e.g., a paid negative review of a competing product) can nevertheless be actionable as deceptive in violation of Section 5 of the FTC Act. The use of fake negative reviews is further addressed by the Proposed Rule.

Expanded Guidance on the Potential Liability of Advertisers, Endorsers, and Intermediaries

The updated Guides reinforce the Commission’s expectation that advertisers be “responsible for and monitor the actions of their endorsers.” In addition to being subject to liability for “misleading or unsubstantiated statements made through endorsements or for failing to disclose unexpected material connections between themselves and their endorsers,” the updated Guides clarify that an advertiser’s liability may extend to deceptive endorsements “even when the endorser is not liable.” Further, even where an endorser’s statement is true, an advertiser may nonetheless be held liable if the endorsement is deceptive.

The updated Guides stake out the FTC’s position that a connection between an advertiser and endorser is not necessary for an advertiser to be liable for an endorsement: “If [an] advertiser retweets a positive statement by an unrelated third party or republishes in an advertisement a positive review by an unrelated third party, that statement or review becomes an endorsement for which an advertiser is liable, despite the lack of any such connection.”

With respect to endorsers and intermediaries, the updated Guides include new language reflecting the FTC’s efforts to expand the liability of both groups. Endorsers, for example, face potential liability under the updated Guides for statements made in the course of their endorsements—this includes making deceptive representations (such as falsely representing that they personally used a product) or failing to disclose unexpected material connections between themselves and an advertiser. Additional considerations apply with respect to endorsers who are (or purport to be) experts.

Intermediaries (which may include “[a]dvertising agencies, public relations firms, review brokers, reputation management companies,” among others) face potential liability under the updated Guides for the creation and/or dissemination of “endorsements containing representations that they know or should know are deceptive,” as well as for their roles with respect to endorsements that fail to disclose unexpected material connections.

In addition to the non-exhaustive examples listed above, the updated Guides include language and examples designed to reinforce longstanding substantiation and typicality principles. The need for advertisers to substantiate all claims prior to dissemination remains paramount—§255.2(a) of the updated Guides emphasizes the applicability of this principle to both express and implied claims: “[An] advertiser must possess and rely upon adequate substantiation, including, when appropriate, competent and reliable scientific evidence, to support express and implied claims made through endorsements in the same manner the advertiser would be required to do if it had made the representation directly, i.e., without using endorsements.”

Relatedly, the updated Guides articulate how an endorser’s truthful statement of their actual opinion (and an advertiser’s promotion of that opinion) could nevertheless be deceptive or misleading—for instance, if the opinion is not consistent with the typical effectiveness or characteristics of the product or service promoted. The updated Guides also emphasize the Commission’s heightened concerns with respect to child-directed advertising and caution that advertisers should not rely solely on a social media platform’s built-in disclosure tools or mechanisms to facilitate/monitor compliance.

In tandem with the updated Guides, the Commission also issued a revised version of its related guidance document: FTC’s Endorsement Guides: What People Are Asking (Endorsement FAQs). Designed to address frequently asked questions about the Guides, the Endorsement FAQs (last updated in 2017) includes 40 additional questions, updated answers, and specific guidance regarding influencer marketing, disclosures of material connections across platforms (including with respect to considerations like use, language, and placement), and the use and treatment of online reviews and feedback.

As always, key truth-in-advertising principles apply to all forms of advertising and marketing. In addition to the updated Guides and the revised Endorsement FAQs, companies should continue to take heed of the guidance set out in more informal (and more frequently updated) materials published by the Commission, such as its Disclosures 101 for Social Media Influencers and Soliciting and Paying for Online Reviews: A Guide for Marketers guidance documents.

Proposed Rule

The Proposed Rule announced on June 30, 2023 (titled “Rule on the Use of Consumer Reviews and Testimonials”) would formally prohibit many of the practices described as deceptive in the updated Guides. While the Guides summarize the FTC’s view of Section 5 and may inform its enforcement discretion using other legal remedies—such as cease-and-desist orders—a violation of a trade regulation rule gives the FTC additional powers to seek monetary relief.

Rule violations may also be more attractive targets for state attorney general enforcement and class action litigation because the FTC has already declared the practice unfair or deceptive with the force of law.

Below are some examples of conduct that would be prohibited under the Proposed Rule:

Fake or False Consumer Reviews, Consumer Testimonials, or Celebrity Testimonials

The Proposed Rule would broadly prohibit the creation, procurement, purchase, sale, or dissemination of a consumer review, consumer testimonial, or celebrity testimonial that (1) is by “a reviewer or testimonialist who does not exist;” (2) is by a reviewer or testimonialist who “did not use or otherwise have experience with the product, service, or business that is the subject of the review or testimonial;” or (3) materially misrepresents the reviewer’s or testimonialist’s “experience with the product, service, or business that is the subject of the review or testimonial.”

Consumer Review Repurposing

The Proposed Rule would prohibit the use or repurposing of a consumer review “written or created for one product so that it appears to have been written or created for a substantially different product,” commonly referred to as consumer review repurposing. Proposed § 465.3 would also prohibit causing such use or repurposing.

Buying Positive or Negative Consumer Reviews

The Proposed Rule would prohibit the provision of “compensation or other incentives in exchange for, or conditioned on, the writing or creation of consumer reviews expressing a particular sentiment, whether positive or negative, regarding the product, service, or business that is the subject of the review.”

Insider Consumer Reviews and Consumer Testimonials

The Proposed Rule would prohibit officers or managers of a business from writing or creating a consumer review or consumer testimonial about their business absent “a clear and conspicuous disclosure of the officer’s [or manager’s] relationship to the business.”

Relatedly, the Proposed Rule would prohibit a business from disseminating (or causing the dissemination of) a consumer testimonial about itself by one of its officers, managers, employees, or agents, or any of their relatives absent “a clear and conspicuous disclosure of the testimonialist’s relationship to the business or to the officer, manager, employee, or agent.”

The Proposed Rule would also impose restrictions on the solicitation of consumer reviews from employees, agents, or relatives in certain circumstances.

Company-Controlled Review Websites or Entities

The Proposed Rule would prohibit a business from representing that “a website, organization, or entity that it controls, owns, or operates provides independent reviews or opinions about a category of businesses, products, or services including the business or one or more of its products or services.”

In other words, the Proposed Rule would prohibit a business from misrepresenting that it is providing an independent review or opinion about its products or services (for instance, on a sister website or other website that is owned or controlled by the business).

Review Suppression

The Proposed Rule would prohibit the use of “an unjustified legal threat or a physical threat, intimidation, or false accusation in an attempt to prevent a consumer review or any portion thereof from being written or created or cause a consumer review or any portion thereof to be removed.”

Subject to certain carveouts, the Proposed Rule would prohibit a business from misrepresenting “that the consumer reviews of one or more of its products or services displayed on its website or platform represent most or all the reviews submitted to the website or platform when reviews are being suppressed (i.e., not displayed) based upon their ratings or their negativity.”

Misuse of Fake Indicators of Social Media Influence

The Proposed Rule would prohibit the selling, distributing, purchase, or procurement of “fake indicators of social media influence” such as fake followers, subscribers, views, and likes. This would include the selling or distributing of fake indicators that “can be used by persons or businesses to misrepresent their influence or importance for a commercial purpose” as well as the purchase or procurement of fake indicators by any person “to misrepresent their influence or importance for a commercial purpose.”

WHAT’S NEXT

With the updated Guides and likely forthcoming implementation of the Proposed Rule, companies and marketers need to closely reevaluate and audit their internal and external advertising policies, standards, and contracts—including protocols surrounding the use of consumer reviews and user-generated content as well as influencer and social media disclosure policies.

For some, the updated Guides may require modifications to business practices (e.g., revisions to influencer contracts, vendor agreements, and internal policies) and enhanced monitoring initiatives. Such efforts should be conducted promptly, carefully, and with input from counsel.

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