FTC Updates Endorsement Guides 2022 Part I
The Federal Trade Commission (“FTC”) approved a request for public comment related to updating its Guides Concerning the Use of Endorsements and Testimonials in Advertising. These are better known as the “Endorsement Guides” or just the “Guides.” The current version of the Guides can be found at 16 CFR part 255. These updates were released in May 2022.
The proposed updates are fairly sweeping and touch many aspects of the Guides. I recently discussed these updates at AM Days as part of Affiliate Summit East in New York. Here are the highlights from responses to the questions I get most frequently.
The updates to the FTC Guides begin with the principles that apply to any message a consumer is likely to believe reflects opinions, beliefs, findings, or experience of a party, other than the advertiser. The FTC reiterated obligations around certain situations:
• Where advertising claims a level of performance, such performance must be an objective measurement of the purpose depicted.
• Where advertising claims a consumer will have a certain experience, it must be representative for all users.
• If claims lack objective substantiation, the advertiser must disclose this lack of support.
• If an advertiser uses an Expert Endorser then the Endorsement must use that Expert’s expertise as demonstrated by experience, field(s) of study, or training.
Advertisers must disclose material connections between themselves and their endorsers. Industry commenters have requested both detailed guidance in the Guides about acceptable and unacceptable language and placement for disclosures of material connections and their use on particular platforms, while others have asked to continue to allow marketers flexibility in the crafting and placement of necessary disclosures. Appropriate disclosures include the following types of connections:
– Bona fide user
– False connection OR failure to disclose material connection
– Financial connection
– Employment connection
– Actual Consumers
Recognizing that Platforms play a major role in disseminating and monetizing endorsements, and actively encourage endorsers to promote and amplify posts, the FTC cautioned that Platforms may be exposing endorsers to liability if users rely solely on a Platform’s tools for their disclosures. Platforms may also be exposing themselves to liability depending on the representations they make about these tools. Advertisers should carefully evaluate third-party tools and what Platforms promise about them to ensure they are not exposing themselves or their users to liability.
The Commission added two footnotes to Section 255.0(b). The first footnote would indicate the availability of detailed staff business guidance while noting that such staff guidance is not approved by or binding. The second footnote addresses an incentivized endorser denigrating a competitor’s product. Paid or otherwise incentivized negative statements about a competitor’s product do not meet the definition of an “endorsement” but engaging in such disparagement can be a deceptive practice. While an endorser’s use of fake indicators of social media influence is not itself an endorsement issue – such indicators do not express an advertising message by their mere presence – it is a deceptive practice for users of social media to purchase or create indicators of social media influence and then use them to misrepresent their influence for a commercial purpose. It is also deceptive to sell or distribute such indicators to such users.
In response to industry comments, the FTC reiterated examples of Endorser liability, indicating that endorsers may be liable for statements that they know or should know to be deceptive. The level of due diligence will depend on their level of expertise and knowledge, among other factors. A non-expert endorser may also be liable for misleading or unsubstantiated representations about performance or efficacy that are inconsistent with personal experience or that go beyond the scope of the endorser’s personal experience.
Recognizing the potential for disclosure responsibility by intermediaries such as marketing and public relations firms, proposed new Section 255.1(f) explaining the potential liability of intermediaries. Intermediaries may be liable for disseminating what they knew or should have known were deceptive endorsements, for their roles with respect to endorsements that fail to disclose unexpected material connections, and for hiring and directing the endorsers who fail to make necessary disclosures.
In light of growing importance of a person’s Name, Image and Likeness, new examples 6 and 7 illustrate the principle in new Section 255.1(g) involving the use of an image or likeness of a person other than the actual endorser to misrepresent a material attribute of the endorser.
The Adler Law Group 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.