Client Alert: Proposed FTC Updates Provide a Roadmap to the Use of Endorsements and Testimonials in Advertising
Date: July 14, 2023
Section 5 of the FTC Act prohibits businesses from engaging in unfair and deceptive trade practices. The Guides reflect the FTC’s interpretations of Section 5 in the context of endorsements and testimonials and are largely drawn from more recent enforcement efforts by the FTC. They provide valuable guidance to businesses on ways to avoid potential correction or enforcement actions.
Generally, the core principles previously articulated in the Guides, last updated in 2009, remain unchanged. Namely, the Guides define endorsements and testimonials as advertising or promotional messages that consumers are likely to believe reflects the opinions, beliefs, or experience of someone other than the advertiser itself. These types of advertisements, as all other advertisements, must be honest, truthful and non-misleading and must reflect the actual opinions or experience of the endorser. An endorser must continue to fully disclose any material connection between themselves and the business, if that connection might materially affect the weight or the credibility of the endorsement. Lastly, the advertiser and the endorser must be able to substantiate all advertising claims, both express and implied.
However, in an attempt to reflect the growing prevalence of social media and other online advertising, the FTC has introduced some notable updates:
- Consumer Reviews. The FTC has proposed adding a new section concerning how businesses handle consumer reviews—suppression, boosting, publishing, upvoting, downvoting, or editing—in ways that may distort or otherwise misrepresent what consumers think of the applicable products or services. We have previously detailed the business compliance requirements under the Consumer Review Fairness Act (the “CRFA”) and Section 5 of the FTC Act, setting out the do’s and don’ts of online customer reviews. The Guides are generally consistent with the CRFA and moderating or suppressing consumer reviews remains permissible in accordance with the CRFA. The Guides now additionally address instances where the use of third-party review platform’s mechanisms or policies for review suppression may constitute an unfair or deceptive practice. In addition, the updated Guides are seeking to address “review gating” - a practice that involves asking past customers to provide feedback on a product or a service and then inviting only those who give positive feedback to post online reviews. Because “review gating” practices often lead to more positive reviews in the aggregate, the proposed update to the Guides indicates that they are likely to be considered unfair or deceptive by the FTC.
- Endorsements by employees. Certain new examples in the Guides address endorsements made by employees about their employer’s business. Employers can limit their liability for an employee’s failure to disclose their connection to an endorsed employer by taking steps to ensure compliance, including by having appropriate policies in place, training employees on these policies and monitoring endorsements. The Guides clarify that an employer need not monitor its employees’ reviews or endorsements unless the employer solicits or directs them, or otherwise has reason to know about them.
- Social Media Platform Disclosure Tools. The FTC has added certain examples to caution marketers and influencers that built-in disclosure tools on social media platforms may not be sufficient to clearly and conspicuously disclose a material connection between the endorsed business and the person making the endorsement.
- Social media tags can be regulated as “endorsements.” The definition of an “endorsement” has been revised to make clear that something as informal as a tag in a social media post can be an endorsement.
- Those who fabricate endorsements are regulated as “endorsers.” The definition of “endorser” has been revised to include virtual (i.e. bots) or fabricated endorsers, in an effort to further focus on those who write fake reviews or attribute reviews to “entities” that do not exist.
- Disclosures must be “unavoidable” in order to be deemed “clear and conspicuous.” The FTC uses the definition “clear and conspicuous” to describe the characteristics necessary to make any disclosures effective in the context of an endorsement. For online disclosures, under the updated definition, such disclosures must be “unavoidable” to meet the “clear and conspicuous” standard. As a result, online endorsements should be carefully reviewed to ensure that any related disclosures meet this new “can’t miss” standard.
- Purchasing or creating indicators of social media influence is deceptive. The Guides now expressly state that it is a deceptive practice for users of social media platforms to purchase or create indicators of social media influence (such as “likes”) and then use those indicators to misrepresent the true scope of the user’s influence for a commercial purpose.
- Liability for intermediaries. The proposed FTC updates also state that intermediaries, like advertising agencies, public relations firms, review brokers and reputation management companies, may be liable for their roles in creating ads containing endorsements that they know, or should know, are deceptive. These intermediaries may also be liable for their roles with respect to endorsements that fail to disclose material connections between the endorser and the endorsed business, whether by disseminating advertisements without necessary disclosures or by hiring and directing influencers who fail to make necessary disclosures.
If you think your business may be impacted by the updates to the Guides, or if you need any assistance in connection with your advertising practices, Whiteford attorneys stand ready to help.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.