FTC’s New Endorsement Guidelines: 6 Key Areas to Examine

The Federal Trade Commission this month released an updated version of its Guides Concerning the Use of Endorsements and Testimonials in advertising. Marketers who use testimonials or social media should read them closely with their attorneys.

The Guides become effective Dec. 1, and while they are not laws, they explain how to avoid an investigation by the FTC for deceptive advertising.

"There is never going to be something like this that is perfect. I can almost guarantee you that [the Guides] will continue to evolve," says Paul Rand, President-Elect, Word of Mouth Marketing Association.

We read the Guides and interviewed several industry experts to understand what this information means for your marketing. Below, we dig into the key areas that deserve the most attention.

Please note: We are not lawyers. Any changes you make to your use of testimonials should not be based on this article alone. Be sure to speak with your attorney.

Key area #1. Overall impression

The FTC uses a"net impression" approach when judging whether an advertisement is deceptive. Every ad is considered on a case-by-case basis. The key to compliance is to focus on the overall impression of the ad, rather than its details.

Key area #2. Typical results in testimonials

The Guides specify that testimonials that discuss specific results in ads should either:
o Express the typical results that a consumer could expect
o Be accompanied by a disclosure of the typical results

Advertisers can no longer safely use best-case scenario testimonial claims with the disclaimer "results may vary."

- Provide more detail

"The advertiser may be able to limit the scope of the disclosure by limiting the circumstances depicted in the advertisement. For example, if all the testimonials used in an ad are clearly identified as persons who have been members of a weight loss clinic for at least one year, the disclosure can be based on the performance data of that group," according to the Guides.

- Clear and conspicuous disclaimers

Ads should "clearly and conspicuously" disclose a product’s generally expected performance when using a testimonial with atypical results.

"'Clearly and conspicuously’ does not mean fine print," says Todd Harrison, Partner, Venable LLP. "It must be noticeable so the average consumer who is watching a commercial or reading a print ad would notice the disclaimer and see it."

- General testimonials

The Guides do not require general testimonials such as "It tastes great," and "This is my favorite movie" to be accompanied by a typical results disclaimer.

Key area #3. Disclosure policies

Anything that might affect the weight or credibility of an endorsement or testimonial should be disclosed in the ad. These factors include:
o Research that is funded by the company and quoted in an ad
o Whether individuals providing testimonials received, or were expecting to receive compensation

The last point has broad implications, suggesting disclosures for:
o "Street team" marketing that gives "points" to consumers for promoting a brand when the points are redeemable for products
o Online forum posts written by company agents promoting their products
o Testimonials given for pay
o Testimonials from actors

- The celebrity exemption

In advertisements, a celebrity’s material connection to the company is assumed and does not need to be disclosed. However, celebrities need to make disclosures when discussing a product outside of formal advertisements (see more below).

Key area #4. Blogger relations

The Guides’ potential impact on blogger/marketer relations has caused considerable debate. The crux is whether a blogger writing about a product is an "endorser" and is therefore subject to the rules of disclosure.

- Payment = endorsement

Without question, bloggers who are paid to write about products are considered endorsers in the guidelines. This connection should be disclosed in the blog post.

- Even low cost freebies could be considered endorsements

If a marketer sends a high-priced product (such as a car) to a blogger, it will likely be considered a "material connection" that should be disclosed in a review post.

What’s less clear is whether a blogger who receives an inexpensive product for free and writes a post praising it, qualifies as an endorser.

The Guides offer scenarios in which a one-time distribution of a free product to a blogger might not create "material connections." However, until you’ve consulted your attorney, the safest route is to require bloggers to whom you’ve sent free products to disclose such a connection in reviews.

If you’re using a third party to send products and/or money to bloggers to write about your products, obtain assurances from its operators that the bloggers will make the necessary disclosures.

"I don’t think that there’s any damage that could be done by saying 'I received a bag of stuff from this company, let me tell you what I think about it,'" Rand says.

- Unsolicited reviews are not endorsements

Bloggers who buy products and write reviews about them will not be considered endorsers. Likewise, if a company sends a customer a coupon for a free product, and that customer happens to be a blogger, any subsequent review of the product would not be considered an endorsement.

- Marketers might be responsible for claims

When a blogger is deemed an "endorser" of your product, you may be liable for claims the blogger makes about the product, according to the Guides. But this is another gray area. To be safe, monitor any blog media generated with payment or free products for misstatements about your product, and strive to resolve any issues.

Key area #5. Celebrity endorsements

Most people expect celebrities who appear in commercials to be paid, so no disclosure is necessary in these circumstances. However, when celebrities talk about the products they have endorsed outside of an ad -- such as in blogs or on talk shows -- they need to disclose the material connections.

"[This is] where I think people might get into trouble. I see people on Twitter talking about a product, and you know from other reading that they have relationships with the product’s manufacturer," says Bill McClellan, VP, Government Affairs, Electronic Retailing Association.

Marketers who use celebrity endorsers should advise them to make disclosures whenever necessary. Also, they should prevent celebrity endorsers from making false claims about products, because they may be liable for those claims.

Key area #6. Expert testimonials

Expert endorsers should have expertise in topics relevant to their product(s), according to the Guides. For example, a toothpaste ad should not use a testimonial from a podiatrist referred to as a "physician."

Using relevant expertise, these experts must review products they’re endorsing to a degree that is at least equal to what most other experts in their field would deem adequate.

Marketers can best avoid issues in this area by:
o Choosing quality, relevant experts to review products
o Asking experts to conduct thorough reviews
o Ensuring that experts provide their honest opinions

Useful links related to this article:

FTC: Guides Concerning the Use of Endorsements and Testimonials in Advertising
http://www.ftc.gov/os/2009/10/091005endorsementguidesfnnotice.pdf

Word of Mouth Marketing Association
http://womma.org/main/

Electronic Retailing Association
http://www.retailing.org/

Venable LLP
http://www.venable.com/