April/May 2010

Tougher New FTC Ad Guides for Celebrity Endorsements

Holland & Knight Newsletter
Jerome W. Hoffman

The Federal Trade Commission’s (FTC) revised Endorsement Guides concerning celebrity endorsements and testimonials – the first updates since 1980 – took effect on December 1, 2009. The new Guides include three significant changes affecting bloggers and social media communicators for the first time, in addition to advertisers and marketers.

  1. Social media marketing. The FTC intends to apply the new Guides to consumer-generated media, including bloggers. Additional examples are provided to illustrate the longstanding principle that “material connections” (including payments or free products) between advertisers and endorsers – connections that consumers might not expect – must be disclosed. These examples address what constitutes an endorsement when the message is conveyed by bloggers or other “word-of-mouth” marketers. The Guides now specify that the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make endorsements must disclose the material connections they share with the sellers of the products or services. Similarly, if an advertiser refers to the findings of a research organization that conducted research sponsored by the advertiser, the advertisement must disclose the connection between the advertiser and the research organization. And a paid endorsement – like any other advertisement – is deceptive if it makes false or misleading claims.

Significantly, advertisers as well as endorsers (which include bloggers or other agents of the messaging) can be held individually liable for false or deceptive statements or for failure to disclose material connections. The FTC stated that “advertisers who sponsor these endorsers (either by providing free products – directly or through a middleman – or otherwise) in order to generate a positive word of mouth and spur sales should establish procedures to advise endorsers that they should make the necessary disclosures and to monitor the conduct of those endorsers.”

  1. Celebrity endorsements. The Guides also address celebrity endorsements. With the changes, both advertisers and their celebrity endorsers may be liable for false or unsubstantiated claims made in the celebrity endorsements, or for failure to disclose material connections between the advertisers and celebrity endorser. Furthermore, with the revised Guides, celebrities now have a duty to disclose their relationships with advertisers when making endorsements outside of the context of traditional ads, such as on talk shows or in social media platforms. The new Guides reflect a pro-consumer shift that not only affects the basis for government investigations, but will influence consumer litigation and advertising challenges.
  2. “Results May Vary” disclaimers are no longer valid. The new FTC Guides have eliminated the “safe harbor” that had been in place for almost 30 years and allowed the use of disclaimers describing unusual results, such as “results may vary” or “results not typical.” The Guides now require advertisers to provide the same substantiation that would be required if they made performance claims directly. For performance or typicality claims, the new Guides require a disclosure that describes “the generally expected performance in the depicted circumstances.”

However, in response to criticism from certain industry groups, the Guides provide that “advertisers are not required to identify a ‘typical consumer’ of their product and then determine what result that consumer achieved.” And they “do not prescribe a uniform one-size-fits-all disclaimer.”

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