Endorsements are not permitted in advertisements, according to the federal trade commission.
May 25, 2022
On May 20, 2022 the Federal Trade Commission’s (“FTC”) Commissioners unanimously approved a request for public comment on proposed updates to its Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Endorsement Guides” or “Guides”). In the draft revisions, released last week, the FTC seeks to update the Endorsement Guides and provide new examples that reflect advertisers’ growing reliance on social media advertising. The Endorsement Guides were last revised in 2009. See 16 CFR pt 255.
The Endorsement Guides require advertisers that feature endorsements made by endorsers with an unanticipated material connection to the advertiser—for example, monetary payment, a sweepstakes entry, or something else of value—to disclose that connection in the advertising. In addition, endorsements must be truthful and accurate, reflecting the endorser’s actual experience with the product. Marketers that fail to comply with the Endorsement Guides violate Section 5 of the FTC Act.
In the thirteen years since the Guides were revised, the landscape of social media advertising has transformed with the introduction of new platforms like Instagram and TikTok and the growth of the “social media influencer.” Marketers have had to look beyond the Guides to guidance documents such as the Endorsement Guides FAQs, warning letters and consent orders, and other guidance documents to ascertain how to comply with the Endorsement Guides.
Two years after seeking public comment on whether the Endorsement Guides should be revised, the FTC has finally released its proposed updates, drawing from the very same consent orders and other guidance the FTC has developed in the past decade. The most notable proposed changes include:
Section 255.0 Purpose and Definitions
Section 255.1 – General Considerations
-Liability of Endorsers: Section 255.1(e) states endorsers may be liable for their statements in situations where they make representations that they know or should know to be deceptive. The level of due diligence required by the endorsers will depend on their level of expertise and knowledge, among other factors. Liability may be imposed on non-expert endorsers when they make misleading or unsubstantiated representations about performance or efficacy that are inconsistent with the endorser’s personal experience or that were not made or approved by the advertiser and that go beyond the scope of the endorser’s personal experience. A paid endorser and the company paying the endorser are both potentially liable for the endorser’s social media post that fails to disclose the endorser’s relationship to the company. This applies to paid consultants and not just employees or those hired to be endorsers. Lastly, an endorser can be found liable for failing to disclose unexpected material connections between themselves and an advertiser, such as when they create and disseminate endorsements without such disclosures.-Liability of Intermediaries: Section 255.1(f) will now impose liability on intermediaries such as advertising agencies and public relations firms, for their roles in disseminating what they knew or should have known were deceptive endorsements. They may also be liable for their roles with respect to endorsements that fail to disclose unexpected material connections, whether by disseminating advertisements without the necessary disclosures of material connection or by hiring and directing the endorsers who fail to make necessary disclosures.
Section 255.2 – Consumer Endorsements
Section 255.4 Endorsements by Organizations
Section 255.5 – Disclosure of Material Connections
Section 255.6 – Endorsements Directed to Children
While the Guides have not yet been adopted, they are part of the FTC’s ongoing focus on endorsements and testimonials. Earlier this year, the FTC issued a guidance document titled “Featuring Online Customer Reviews: A Guide for Platforms. This guide establishes basic principles for companies to follow when handling online consumer reviews such as companies should not discourage negative reviews, should not incentivize reviews generally, should maintain up-to-date processes for verifying reviews and identifying fake reviews, and should not edit or remove verified negative reviews. And, late last year, the FTC issued Notice of Penalty Offenses letters to more than 700 of the country’s largest companies. The letters, issued pursuant to FTC Act § 5(m)(1)(B), were an attempt at an alternative approach to civil penalties following the U.S. Supreme Court’s ruling in AMG Capital Management, LLC v. FTC. The letters specifically described endorsement and testimonial practices that the FTC has found to be deceptive.
Once the notice is published in the Federal Register, comments will be due within sixty days.
Crowell & Moring can offer clients counseling on specific advertising practices discussed in the proposed updates or assist clients in drafting comments on the proposed edits to the Endorsement Guides.
For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.
Does Federal Trade Commission check advertising practices?
The FTC Act prohibits unfair or deceptive advertising in any medium. That is, advertising must tell the truth and not mislead consumers. A claim can be misleading if relevant information is left out or if the claim implies something that's not true.
Are endorsements a form of advertising?
Definition: Endorsements are a form of advertising that uses famous personalities or celebrities who command a high degree of recognition, trust, respect or awareness amongst the people. Such people advertise for a product lending their names or images to promote a product or service.
What does one Federal Trade Commission regulation prohibit businesses from doing with celebrity endorsements?
What does one Federal Trade Commission regulation prohibit businesses from doing with celebrity endorsements? Rewording statements. The Federal Trade Commission states that endorsements may not be presented out of context or reworded to distort the endorser's opinion or experience with a product.
What does the Federal Trade Commission consider to be an unfair ad?
According to the Federal Trade Commission Act and the FTC's Unfairness Policy Statement, an ad or business practice is unfair if: it causes or is likely to cause substantial consumer injury which a consumer could not reasonably avoid; and. it is not outweighed by the benefit to consumers.