FTC Updates Endorsement Guides: Here’s What You Need to Know
The Federal Trade Commission (FTC) recently announced updates this summer to its Guides Concerning Use of Endorsements and Testimonials in Advertising. The Endorsement Guides, as they are called for short, have provided a critical roadmap during the explosion of internet advertising in the 21st century, particularly in connection with influencer marketing on social media. Principles outlined in the Endorsement Guides have led to the ubiquitous use of disclosures like #ad and #sponsored in connection with sponsored posts on social media. Notwithstanding their importance, the Endorsement Guides were last updated in 2009 and a lot has changed since then.
In addition to adding numerous new and illustrative examples, the FTC made six key changes to the Endorsement Guides, which are described below.
(1) Adding a definition of “clear and conspicuous” – The phrase “clear and conspicuous” appeared throughout the 2009 version of the Endorsement Guides, operating as the gold standard for how obvious an endorser’s disclosure of a material connection with an advertiser must be. Despite its widespread use, the FTC has added a definition for “clear and conspicuous” which provides additional clarity for advertisers and endorsers. Specifically, clear and conspicuous means that “a disclosure is difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers. . . In any communication using an interactive electronic medium, such as social media or the internet, the disclosure should be unavoidable” (emphasis added). The FTC also noted that even though some social media platforms have built-in disclosure tools, the party making the endorsement is still responsible for ensuring the disclosure is in fact difficult to miss, easily understandable, and unavoidable.
(2) Updating the definition of “endorsements” and “endorsers” – As the advertising industry and related technologies have evolved since 2009, so has the who and what of endorsements. To address this, the FTC updated the definitions of endorsements and endorsers in several meaningful ways. For endorsements, rather than relying solely on a simple, broad statement of what constitutes an endorsement, the FTC added a non-exhaustive list of examples of what could be considered an endorsement. This list includes verbal statements, tags in social media posts, demonstrations, depictions of the name, signature, likeness or other identifying personal characteristics of an individual, and the name or seal of an organization. For endorsers, the FTC updated its definition to include anyone who “could be or appear to be an individual, group, or institution” (emphasis added). The FTC explained that this revision was intended to encompass virtual influencers as well as the writers of fake reviews and non-existent entities that purport to give endorsements.
(3) Explaining a new principle regarding the use of consumer reviews – The FTC added a new provision relating to how advertisers may use consumer reviews. In particular, advertisers may not do anything to consumer reviews that would likely distort what consumers will think about the advertised product. This includes editing, upvoting, downvoting, suppressing, procuring, or organizing the reviews in any way. By of example, the FTC shared that if consumers can rate a product on a 5-star scale on an advertiser’s website, the advertiser may not suppress or otherwise not publish any review with fewer than 4 stars as that would be misleading as to the purchasers’ actual opinions of the product.
(4) Addressing incentivized reviews, reviews by employees, and fake negative reviews by competitors – The FTC added several new examples throughout the Endorsement Guides to clarify and provide direction regarding incentivized reviews, reviews by employees, and fake negative reviews by competitors – topics that were not addressed in the 2009 version. These examples emphasize that these statements could be considered deceptive and in violation of the FTC Act if they are not properly disclosed. This update is particularly important with respect to fake negative reviews by competitors because paid or otherwise incentivized negative statements might not have been considered endorsements under the prior version of the Endorsement Guides. Since they could mislead or deceive consumers just like endorsements, the FTC explained they should be subject to the same standards.
(5) Providing a clearer explanation of the potential liability that advertisers, endorsers, and intermediaries face for violating the law – The 2009 version of the Endorsement Guides included a single sentence stating that endorsers may be liable for statements made in the course of their endorsements, with that principle being explained in several examples. The updated Endorsement Guides includes a full paragraph on how endorsers may be liable for statements they make and another full paragraph about how intermediaries (like ad agencies, PR firms, and review brokers) may be liable for their roles in creating or disseminating non-compliant endorsements. Though the principle here is not new, the FTC’s emphasis puts these parties on notice of their potential liability if they are not in compliance.
(6) A new section emphasizing special concerns with child-directed advertising – The updated Endorsement Guide adds an entire new section discussing advertisements directed towards children. The FTC explained that the idea for this section was to establish a general principle related to children and advertising, with the FTC stating that research on children’s cognitive development suggests disclosures will not work for younger children. Advertisers and endorsers who target children will need to keep in mind that practices that would not ordinarily be questioned in advertisements directed at adults, may not be as effective when they are directed towards children.
With all of these updates, it is critical that advertisers and endorsers review their relevant policies to ensure they are following the Endorsement Guides. If you have any questions about compliance with the updated Endorsement Guides, feel free to contact our firm.