The FTC Comment Period proposed rule regarding the use of endorsements and testimonials in advertising ended on September 26, 2022.

The Request for Comment approved by the Federal Trade Commission in May 2022 seeking public comment on a number of proposed changes to FTC guidance regarding the use of endorsements and testimonials in advertising was published in the Federal Register on July 26, 2022.

For your information, the FTC Endorsement Guides are a roadmap of how the agency views marketing practices that involve FTC Section 5 endorsements and testimonials. To date, practices that do not comply with the guides often attract the attention of regulators, including the issuance of civil investigation requirements and enforcement actions based on alleged deceptive acts or practices.

Endorsements and testimonials are defined by the FTC as “any advertising message…which consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser. “. Endorsements and testimonials should reflect the honest opinions, beliefs or experience of the endorser. They should always be presented in context, should not misrepresent the endorser’s experience, and advertisers should be able to adequately substantiate any express and implied representations, including those of their endorsers. Ads claiming to represent consumers must use actual consumers.

It is important to note that the guides also require endorsers to disclose any hardware connections between them and a mark “which could materially affect the weight or credibility of the endorsement”.

The proposed updates aim to increase the agency’s monetary regulatory and remedial authority over digital advertisers and social media. There are a number of proposed revisions to the guides that should be of great interest to digital marketers, including but not limited to:

  • A requirement that hardware connections be clearly and visibly disclosed (e.g., but not limited to, family, personal, work, business, monetary, early access to products/services, opportunity to win a prize and/or free/discounted products/services) prior to endorsement so that the consumer is able to assess the weight to be attached to the endorsement

  • A new definition of clear and visible (e.g. hard to miss, unavoidable and easily noticeable/understandable by reasonable and ordinary consumers)

  • Accuracy that a the advertiser may be liable for a misleading statement made by an endorsereven when the endorser is not himself liable

  • Precision that pay consumer buyers to write positive reviews is a misleading practice “because the manufacturer required reviews to be positive”

  • Removal or selectively do not post negative reviews will be considered a deceptive act or practice under Section 5 of the FTC Act

  • A ban on “review gating” (“getting customer feedback and then sending satisfied and dissatisfied customers down different channels to encourage positive reviews and avoid negative reviews”) which would be considered an unfair or misleading practice if it resulted in the opinions published being significantly more positive than otherwise

  • Precision that “paid ranking boosts” (i.e., where a third-party review website provides rankings of products/services and accepts payments in exchange for a better ranking) is a deceptive act or practice, “that the website makes an express statement of independence or objectivity” (potential liability of an advertiser paying for higher rankings and stating that if an advertiser pays a review website but not for better ranking, there should be clear and visible disclosure of these payments)

  • A broader definition of “support” that includes virtual influencers and fake endorsements or reviews (not just individuals, groups, and institutions)

  • A broader definition of “product” to include a “brand”

  • Clarification that advertisers, endorsers, intermediaries (e.g. advertising agencies and PR firms that “knew or should have known” about the distribution of misleading endorsements) and platforms hosting advertisements and endorsements are potentially liable under FTC law for deceptive acts or practices

  • Clarification that a remunerated endorser, intermediaries and the company paying the endorser are all potentially responsible for an endorser’s failure to disclose a material connection (i.e. the endorser’s relationship to the advertising company) and/or to hire and manage endorsers who do not make such disclosures

  • Clarified that promotional messages and marketing are covered by the guides as mentions

  • Accuracy that when procure, repress, stimulate, organize or edit consumer product reviewsadvertisers must not misrepresent or otherwise misrepresent how consumers experience products/services, whether or not reviews are considered “endorsements” (sellers would not be obligated to display consumer reviews that are not related to their products/services and/or which contain “unlawful, harassing, abusive, obscene, vulgar or sexually explicit content, or content that is inappropriate with respect to race, gender, sexuality or ethnic origin, or opinion that the seller reasonably believes to be false”, if the removal criteria or hold notices are also applied uniformly to all notices)

  • A new section that the use of an endorsement with the image or likeness of a person other than the actual endorser is considered a misrepresentation of a material attribute of the endorser

  • A new section governing endorsements and testimonials for children with increased requirements and prohibitions

Note, the Federal Trade Commission has civil penalties authority when it alleges rule violations, one of the reasons why this proposed rule receives such attention from industry participants. And, the FTC can ask for more than $40,000 per offense, which in many cases can amount to billions of dollars. Civil penalties are often a lot higher than the income the defendants made from the alleged illegal conduct.

An experienced FTC attorney may be able to assist with a stay of judgment, as well as mitigate potential penalties for rule violations by developing effective arguments and arguing analytically on issues such as degree of guilt, if the defendant knew or should have known that the alleged conduct was misleading, history of such prior conduct, ability to pay, income attributable to the alleged infringing conduct, effect on ability to continue doing business, length of time alleged conduct, remedial action, whether prior similar violations have been addressed by the FTC, and such other matters as justice may require.

About seventy-five reviews were submitted by individual consumers, most of whom were apparently college students completing class assignments. The other commenters were: American Influencer Council, Inc. (“AIC”); American Financial Services Association (“AFSA”); Amazon.com, Inc. (“Amazon”); Association of National Advertisers (“ANA”); BBB National Programs (“BBB”); Shirley Boyd, Esq. (“Boy”); Campaign for a Commercial Free Childhood and Center for Digital Democracy (“CCFC”); Competition and Markets Authority (“CMA”); consumer reports; Council for Responsible Nutrition (“CRN”); Common Sense Media (“CSM”); Consumer World (“CW”); Next Digital Content (“DCN”); Esports Bar Association (“esports bar”); Entertainment Software Association (“ESA”); Professor Chris Jay Hoofnagle (“Hoofnagle”); Interactive Advertising Bureau (“IAB”); Jim Dundovic, Esq. (“Dudukovitch”); IZEA Worldwide, Inc. (“IZEA”); Kleinfeld, Kaplan and Becker LLP (“KK&B”); LEGO Group (“LEGO”); Maastricht University (“Maastricht”); Magazine Media Association (“MPA”); North American Association of Insulation Manufacturers (“NAIMA”); Internet and Television Association (“NCTA”); NetChoice; News Media Alliance (“NMA”); National Retail Federation (“NRF”); Performance Driven Marketing Institute (“PDMI”); Pharmavite LLC (“Pharmavite”); Performance Marketing Association (“PMA”); Researchers from the Center for Information Technology Policy at Princeton University and the Department of Computer Science at the University of Chicago (“Princeton”); Super awesome ; and Truth in Advertising, Inc. (“TINA”).

Several comments are available, here.

This update should be of interest to advertisers, advertising agencies and networks, and publisher affiliates who place or facilitate the placement of endorsements and testimonials, including but not limited to product/service reviews, and rankings. Advertisers, endorsers, intermediaries and platforms hosting advertisements and endorsements should contact a FTC lawyer stay abreast of regulatory compliance and enforcement developments, including best practices relating to the proposed rule.

Takeaway: While the proposed rule focuses on fake reviews, negative review removal, and inadequate disclosures, the threat of crippling civil action is serious stuff. FTCs Recommendation Guides are intended to help advertisers and digital marketers ensure that their recommendations and testimonials are truthful and not misleading, and that all material connections that could influence a consumer’s decisions are clearly and visibly disclosed. The FTC continues to send a strong message to the digital advertising industry that it plans to continue to hold everything those in the course of trade – including, but not limited to, brands that ccommunicate with customers through third-party social media influencers – responsible for using customer recommendations and testimonials that mislead consumers.

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