In May 2022, the FTC proposed changes to its Endorsement Guides. Among other things, those changes created more prescriptive disclosure requirements for endorsements, imposed various requirements for consumer reviews, and clarified that all parties involved in a marketing campaign could be held liable for lapses. At that time, we analyzed the FTC’s proposed changes and examined how they might impact advertising practices and influencer marketing.
This morning, the FTC announced the final version of the Guides. The final version largely mirrors the version proposed last year, with minor modifications that generally serve to further constrain the discretion that companies have when working with endorsements and reviews.
Here are the key changes appearing in the new Guides:
“Clear and Conspicuous” Definition
Unlike the 2009 Guides, the new Guides include a strict definition of what constitutes a “clear and conspicuous” disclosure. Among other things, the FTC wants disclosures to be “unavoidable.” In the examples, the Guides clarify that disclosures at the bottom of a social media post, where consumers have to click “more” in order to see them, are not unavoidable. (This mirrors the position the FTC has taken in recent settlements.) The Guides further caution companies against simply relying on a social media platform’s built-in disclosure tools if those tools are not sufficiently prominent, legible, or unavoidable. (FTC staff has previously cast doubt on those tools.)
The revised definition also provides that a disclosure must appear through the same means as the triggering claim – i.e., if the triggering claim is made both visually and audibly, then the disclosure must also appear both ways. (We’ve seen the NAD take similar positions in recent cases.)
Express Liability for Endorsers and Intermediaries
While it’s obvious that advertisers can be on the hook for deceptive endorsement practices, the new Guides clarify that all parties in an advertising transaction could share liability for problematic conduct. Intermediaries – such as advertising agencies, public relations firms, and reputation management companies – may be liable for their roles in creating or disseminating what they knew or should have known were deceptive endorsements. And endorsers (such as influencers) themselves can be liable for their representations. (See, for example, the FTC’s recent order against two real estate celebrity endorsers.)
Focus on Consumer Ratings and Reviews
The new Guides focus extensively on companies’ practices surrounding procuring, suppressing, boosting, organizing, editing, and publishing consumer ratings and reviews. Specifically, companies may not treat reviews in any way that distorts or misrepresents consumers’ opinions. Examples of misleading conduct include deleting or suppressing negative reviews, offering incentives in exchange for positive reviews, review gating (i.e., encouraging positive reviews and discouraging negative reviews), and falsely reporting negative consumer reviews as “fake” on a third-party platform without substantiation.
Companies may edit unlawful, harassing, abusive, obscene, vulgar, or sexually explicit content from consumer reviews, but such editing criteria must be applied uniformly to both negative and positive reviews.
In addition, if a company incentivizes consumers to provide numerical/star ratings and then includes those incentivized ratings in the average ratings, such inclusion could be deceptive if the incentivized ratings materially increase the average rating. In such a situation, the company will likely need to provide a clear and conspicuous disclosure regarding the incentivized ratings.
Although the FTC acknowledges that companies generally aren’t responsible for reviews written by ordinary consumers without any connection to the company, companies can be responsible for those reviews if they feature, highlight, repost, retweet, share, or otherwise adopt the reviews as part of their own marketing efforts. In those cases, a review becomes an endorsement and must follow all endorsement requirements. For example, they must be truthful, claims must be substantiated, and the reviews must include any necessary disclosures.
Expanded Disclosure Requirements for Atypical Results
The new Guides add additional guidance regarding atypical results disclosures, specifying that the disclosure used to qualify an atypical result should not itself misrepresent what consumers can expect. The new Guides also include new and revised examples, which reflect more stringent expectations related to disclosures of results that consumers can generally expect.
The new Guides also strengthen the FTC’s view that “Results not typical” types of disclaimers are unlikely to be effective in conveying what consumers may generally expect to receive. Specifically, the new Guides delete a previous reference in a footnote stating that “the Commission cannot rule out the possibility that a strong disclaimer of typicality could be effective in the context of a particular advertisement.” The modification sends a clear signal that general disclaimers that do not tell consumer what results they can generally expect to receive are likely to be viewed as insufficient.
Additionally, the new Guides clarify that in order to be effective, disclosures for atypical results “must alter the net impression of an advertisement so it is not misleading.”
Expanded Definition of “Endorsement”
The new Guides expand the definition of “endorsement” to clarify that simply tagging a brand could constitute an endorsement (though the FTC acknowledges that isn’t always the case). In addition, the new Guides specify that a “fake” positive review is considered an endorsement.
Additional Examples for Influencer and Affiliate Marketing
While the Guides have long specified that material connections must be clearly and conspicuously disclosed, the revised provisions include new examples of material connections that necessitate disclosure, including the provision of free or discounted products or the possibility of winning a prize, of being paid, or earning money through affiliate links. Even things with no monetary value – such as the opportunity to appear on television or in media promotions – could constitute a material connection that requires a disclosure.
Increased Scrutiny of “Independent” Review Sites
The new Guides address so-called “independent review sites” that have material connections to various companies, or that offer a pay-to-play ranking system of products or services. The Guides are clear that sites connected to a company cannot be described as “independent” and that sites purporting to rank products or services based on objective criteria must ensure that a company’s payment does not influence its rank. Indeed, the Guides states that marketers could be liable if they pay to advance in the rankings of such purportedly “objective” ranking sites.
Statement of Special Concern with Regards to Child-Directed Endorsements
The new Guides include a new section addressing endorsements in advertisements addressed to children. The section states that “[p]ractices that would not ordinarily be questioned in advertisements addressed to adults might be questioned in such cases.” The Guides don’t provide further insight on how such endorsements might be questioned or evaluated, but the FTC claims it is “exploring next steps.”
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The FTC has also updated its guidance document, “FTC’s Endorsement Guides: What People Are Asking” to respond to additional questions related to the new Guides.
Although the new version of the Guides includes some big changes compared to the previous version, most of them shouldn’t be surprises. (One surprise is a new example involving “dog influencers,” which has some of us considering additional revenue streams, but that’s a topic for another day.)
Many of the changes reflect guidance we’ve seen in enforcement actions, warning letters, and various types of business guidance over the past decade and are largely consistent with the proposed edits the FTC announced last year. If you’ve been following our tips on this topic, you may already be on your way to compliance with the new Guides. If not, now is the time to evaluate your practices before the FTC does.
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