The US Federal Trade Commission has issued Revised Guides for the Use of Endorsements and Testimonials in Advertising that could have a significant impact on the way testimonials may be used in advertising, particularly advertising through social media networks.
Companies using social media or consumer-generated content, such as blogs, in their marketing and advertising should review their policies and procedures to ensure they comply with the Guides. The Guides took effect on December 1, 2009, and can be found here. They will be codified at 16 C.F.R. §§ 255.0-255.5 (2009).
Eliminating safe harbor for non-typical claims
One of the most significant changes made in the Guides is the elimination of the safe harbor for non-typical testimonials. Prior Guides permitted advertisers to use a non-typical testimonial if it was accompanied by a “results not typical” disclaimer. Now, as a general rule, the Guides require that any testimonial be representative of the results consumers can usually expect from the product or service.
An advertiser must adequately substantiate that the endorsement is representative of what consumers will generally achieve; if the advertiser does not provide such substantiation, the advertiser should clearly and conspicuously disclose the generally expected performance for which it does have adequate substantiation.
Online consumer statements may constitute “endorsement ”
Online statements, such as those made through blogs, may now fall within the provisions of the Guides.
A variety of factors will be considered in determining when an online statement may be considered a “sponsored” endorsement subject to the Guides: (1) whether the speaker is compensated by the advertiser or its agent; (2) whether the product or service was provided free by the advertiser; (3) terms of any agreement; (4) length of the relationship between the speaker and the advertiser; (5) previous receipt of products or services from the advertiser; (6) likelihood of future receipt of such products or services; and (7) value of the items or services received.
The greater the degree of coordination between the consumer and the advertiser, the more likely the consumer’s blog about a product may be considered an endorsement subject to the Guides. For example, “word of mouth” marketing can be considered a sponsored endorsement subject to the Guides if the advertiser causes or induces consumers to spread the word about the advertiser’s product.
An advertiser can be held liable for a sponsored online endorsement
If a consumer’s blog posting is considered a sponsored endorsement, then the advertiser could be held liable for false or unsubstantiated statements in that blog. The FTC provides an example of a skin care products company that participates in a blog advertising campaign matching up advertisers with bloggers who will promote the advertiser’s products on their personal blogs. If, in this situation, the blogger makes a claim that the skin care product cures a particular condition, and the claim is not substantiated, both the blogger and the advertiser are subject to liability for misleading or unsubstantiated representations made through this blogger’s endorsement.
The FTC recommends that advertisers inform bloggers that their endorsements need to be truthful and substantiated. Advertisers also are advised to monitor bloggers who are being paid to promote their products and to halt continued publication of deceptive statements when they are discovered.
Bloggers must disclose “material connections”
Under the Guides, the blogger has primary responsibility for disclosing a “material connection” to the advertiser. A “material connection” is one that might “materially affect the weight and credibility of the endorsement.”
While bloggers have primary responsibility for making disclosures, the FTC emphasizes that advertisers must also institute procedures to ensure company employees and relevant third-party bloggers endorsing their products comply with this disclosure requirement.
When the FTC determines whether to pursue an enforcement action, one factor it will take into account is a company’s failure to institute such procedures. A company is less likely to be found responsible for blogging by a rogue employee or third party if it has established and implemented proper procedures under the revised Guides. Some best practices may include:
Tracking all individuals who post product reviews online at your direction
Making sure each individual understands when he or she needs to disclose the relationship with your company
Implementing a review process to ensure that individuals acting at your direction are posting accurate statements
Taking steps to address statements that don’t comply with the Guides, such as seeking their removal, modification or clarification.
For more information about the FTC Guidelines, please contact Scott W. Pink.