As we have previously reported, the FTC continues to be very active in enforcing its Endorsement Guides and in procuring significant penalties. Any company posting reviews or working with influencers will want to consider the updates to the Endorsement Guides. These updates do not necessarily introduce many new principles, but rather include clarifications and more specific application of existing principles to emerging technology and new situations. The general considerations have not changed, namely, that endorsements must reflect the honest opinions, findings, beliefs, or experience of the endorser and that advertisers are subject to liability for misleading or unsubstantiated statements made through endorsements or for failing to disclose unexpected material connections between themselves and their endorsers. However, the updated Endorsement Guides provide further examples. The Business Guidance includes answers to 40 additional questions along with updated answers to some of the prior questions. Given that FTC penalties can be high, and a single marketing promotion may give rise to many individually actionable offenses, marketers and advertisers will want to consider the revised Endorsement Guides as well as the Business Guidance when advertising with influencers, social media, customer testimonials or product review programs.
In July 2022, the FTC proposed updates to the Endorsement Guides and invited public comments. After considering the comments, the FTC has now finalized the updates and made revisions. Of most interest may be the following:
- A new principle regarding procuring, suppressing, boosting, organizing, publishing, upvoting, downvoting, or editing consumer reviews so as to distort what consumers think of a product. Advertisers should take no actions that have the effect of misrepresenting what consumers think of their products.
- Addressing incentivized reviews, reviews by employees, and fake negative reviews of a competitor. A paid, incentivized negative statement about a competitor's product may not be an "endorsement," but it may be a deceptive act in violation of section 5 of the FTC Act.
- A new definition of “clear and conspicuous” and whether a platform’s built-in disclosure tool might not be an adequate disclosure. A disclosure is clear and conspicuous if it "is difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers".
- Clarifying to what extent "Endorsement" includes fake reviews, virtual influencers, and tags in social media. 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 can be endorsements. An “endorser” could be or appear to be an individual, group, or institution.
- Setting out the potential liability of advertisers, endorsers, and intermediaries. Advertising agencies, public relations firms, review brokers, reputation management companies, and other similar intermediaries may be liable for their roles in creating or disseminating endorsements containing representations that they know or should know are deceptive. They may also be liable for their roles with respect to endorsements that fail to disclose unexpected material connections, whether by disseminating advertisements without necessary disclosures or by hiring and directing endorsers who fail to make necessary disclosures.
- Making clear that endorsements directed to children are of special concern. Practices that would not ordinarily be questioned in advertisements addressed to adults might be questioned when directed to children. The comments to the Endorsement Guides explain that research on children’s cognitive development suggests disclosures will not work for younger children.
These updates, as well as recent enforcement activities, show that this is an area of focus for the FTC.