The FTC's Guides
The Guides' core principles remain unchanged:
- Endorsements and testimonials must reflect the honest opinions, findings, beliefs or experience of the endorser;
- Endorsements and testimonials may not contain deceptive representations or unsubstantiated claims by the advertiser about the efficacy of the product;
- Advertisers must disclose connections—especially financial connections—between the advertiser and the endorsers that might materially affect the weight or credibility of the endorsement.
- As discussed below, the new Guides strengthen these principles and apply them to nontraditional media.
Disclosing Material Connections Between Endorser and Advertiser
The Guides now apply explicitly to bloggers and other informal "word-of-mouth" endorsers. Bloggers who are compensated to test and endorse products must disclose that fact in the endorsement. According to the Guides, compensation may be as simple as getting an expensive product for free if the blogger is well known in the product user community and regularly reviews new products.
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 Guides state 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 may be unlikely to expect that he has received a free video game system in exchange for his review, the disclosure could materially affect the credibility the readers attach to Joe’s endorsement.
Advertiser and Endorser May Both Be Liable
Under the Guides, advertisers and endorsers may 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 "10 times faster than any other game system out there") or for failing to disclose that the manufacturer gave Joe a free system. The fact that the advertiser does not control what Joe says is not a defense.
Smoothie Skin, Inc. gives Julie, a popular blogger who often writes reviews about consumer products, its expensive 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. The advertiser is aware of Julie's blog posting but does not ask Julie to take it down. Sales of the product soar.
Under the Guides, 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.
The key to the Guide's approach in these cases is that the advertiser initiated the review by contacting a well-known blogger, offering a free sample of a relatively expensive product and requesting a review. The Guides might not apply if the blogger had prepared the review on his or her own initiative, even if the blogger had done so after receiving an unsolicited free sample in the mail.
"Typical" Consumer Endorsements
For product efficacy claims—whether the product will do what the advertiser says it will do—the FTC has always required advertisers to have adequate substantiation for any claim, including, where appropriate, valid scientific evidence. Such evidence may consist of user surveys or clinical trials. The "adequate substantiation" rule applies to efficacy claims made through consumer endorsements.
But claims about typicality—whether the typical consumer will have an experience like that of the endorser—were treated differently. Where an advertiser did not have adequate substantiation that, for example, consumers generally would "lose 50 pounds a month without exercising" or "earn $2 million a year without working," the advertiser could comply with the Guides by providing with the endorsement a clear and conspicuous "waiver of typicality"— for example, a statement that "results may vary." This is no longer the case.
Based on surveys showing that consumers do not pay attention to such disclaimers, the FTC has amended the Guides to require advertisers who employ "nonrepresentative endorsements" (for example, a true statement by Julie that "I used it twice and all my wrinkles disappeared!") to also state clearly and conspicuously the product's generally expected performance. The advertiser must have adequate substantiation for such statements, including, in appropriate cases, valid scientific evidence, such as user surveys and clinical tests.
But the validity of such evidence will likely turn on difficult questions, including who is the "average" or "typical" consumer? For weight loss claims, is it the public at large, or just people interested in weight loss? If the latter, is it a 200-pound man or a 140-pound woman? Someone who exercises regularly or not at all? Rather than shoulder the costs attendant to designing and carrying out a survey or test, can the advertiser direct the endorser to avoid quantifiable statements and instead state only, "I lost weight and feel great"?
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 an advertising 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 substantiating evidence that it will work equally well for most consumers? If not, are you willing to develop it before you use the endorsement in an ad campaign?
Finally, has the relationship between you and the endorser—however informal—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. 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.