New Proposed FTC Guidelines for Endorsements and Testimonials: Traditional Advertising and now…..Blogs

12.23.2008

The Federal Trade Commission recently proposed changes to the agency’s Guides Concerning the Use of Endorsements and Testimonials in Advertising. The Guides will now explicitly apply to advertising through nontraditional media, such as blogs. Additionally, advertisers ("on" or "offline") who use product endorsements will no longer be able to qualify the endorsement just by telling the viewer the endorser's results "may not be typical." Instead, the advertiser will be required to provide information about the product's generally expected performance. Finally, the Commission will hold both the advertiser and the endorser liable for false statements in an endorsement.

The FTC's Current Guides

Endorsements and testimonials must reflect the honest opinions, findings, beliefs or experience of the endorser. They may not contain deceptive representations or unsubstantiated claims by the advertiser.
An endorser’s claims must be both true and representative of what consumers will achieve. If the advertiser does not have adequate substantiation — scientifically valid data – of "representativeness," the advertisement must clearly and conspicuously disclose the limited character of the endorser’s experience.
Advertisers must disclose connections – especially financial connections– between the advertiser and the endorsers that might materially affect the weight or credibility of the endorsement.

The FTC’s New Guides and Examples

The FTC is proposing and seeking comments on the following additions and modifications:

Disclosure of material connections between an endorser and an advertiser. The agency proposes to apply the Endorsement Guides to bloggers and other informal “word-of-mouth” endorsers. Bloggers who are compensated to test and endorse products must disclose that in the endorsement. According to the agency, compensation may be as simple as getting a free sample of the for testing purposes.

For example:

Joe Jones, a blogger well known in the video games community, receives a free video game system worth $1,000 from a manufacturer. As in the past, the manufacturer asks him to write about it on his blog. Joe writes a favorable review of the game.

The FTC states that Joe must clearly and conspicuously disclose in his review that he got a free copy of the system from the manufacturer. Since readers of Joe’s blog maybe deemed unlikely to expect that he has received a free video game system in exchange for his review, the disclosure could materially affect the credibility readers attach to Joe’s endorsement.

Advertiser and Endorser May Both Be Liable. The Commission is proposing that advertisers and endorsers be jointly liable for false or unsubstantiated statements in endorsements. Thus, in our example of Joe the Blogger, both the manufacturer and Joe may be liable for false or deceptive statements in the blog (such as "ten times faster than any other system out there") or for failing to disclose that the manufacturer gave Joe a free system.

Another example:

Smoothie Skin, Inc. gives Julie, a popular blogger who frequently writes reviews about consumer products, its new line of skin lotion and asks her to try it out. Smoothie Skin does not make any specific claims about the lotion and only asks Julie to write a review of the product on her blog. Julie writes that the lotion cures eczema and recommends the product to her blog readers. In fact, as Smoothie Skin knows, the product does not cure eczema despite this knowledge. But the advertiser does not ask Julie to take down her review. Sales of the product soar.

The FTC states that both Smoothie Skin and Julie are liable for false or unsubstantiated statements made in Julie’s endorsement. They are also liable if Julie fails to disclose clearly and conspicuously that she was compensated for her review.

Consumer Endorsements. As discussed above, the FTC has traditionally taken the position that an explicit disclaimer in a consumer endorsement (e.g. “results may vary” or “results not typical”) is sufficient to correct any misimpression that the endorser’s results are typical. Based on copy studies showing that consumers do not pay attention to such disclaimers, however, the FTC is now proposing amending the Rule to require advertisers who employ “nonrepresentative endorsements” (for example, a true statement by Julie that "I used it twice and all my wrinkles disappeared!") must also disclose clearly and conspicuously the product's generally expected performance for typical consumers.

Difficult False Advertising Questions

Does your advertising violate the Guides? First, determine whether a statement or online product posting is "advertising" for FTC purposes. Is it an explicit or implicit claim by an advertiser or its agent about the qualities, characteristics or efficacy of a product or service designed to promote sales? Julie's blog statement that Smoothie Skin cures eczema is an advertising claim. But simply posting on her blog a picture of Julie applying Smoothie Skin is not a claim.

Next, consider the truth of the consumer endorsement (such as “I used Smoothie Skin twice and all my wrinkles disappeared!”). Ask yourself: Is the endorsement factually true? Did Julie actually use the product twice? And did it eliminate all of her wrinkles? If so, do you have scientifically valid evidence that it will work equally well for most consumers?

Finally, has the relationship between you and the endorser been adequately disclosed?

These questions are fact specific, and the law in this area is still developing. Mistakes by advertisers in the design of their campaigns can lead to government investigations and consumer class actions. Perkins Coie will keep you informed of continued developments and will help you ensure compliance under the FTC’s new Guides. For more information or to discuss your concerns about the FTC Guides or other false advertising issues, please contact the Perkins Coie attorney with whom you generally work or any of the attorneys listed below.