The Federal Trade Commission recently issued updated guidelines regarding the use of endorsements and testimonials in advertising effective July 26, 2023. The updates are long overdue as the guidelines were last revised in 2009. Although the updates may be in response to the growth of social media influencers and bloggers, the FTC has emphasized that the guidelines apply whenever the relationship between the reviewer and company whose products are being recommended needs to be disclosed – not just on social media.
Notable updates to the guidelines include revisions to the definition of “endorsement,” what “clear and conspicuous” disclosures entail, and additional examples which the FTC has stated do not address every possible issue or principle.
What is an “Endorsement?”
An endorsement is:
any advertising, marketing, or promotional message for a product that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser.
The definition was revised to include that tags in social media posts can be endorsements, thus expanding the scope of endorsements. That is not to say that all social media tags are endorsements, but they will now be subject to scrutiny by the FTC.
The FTC has clarified that disclosure is required if the advertiser has a relationship with the brand and only tags the brand being sponsored. In contrast, tagging a brand simply because you like it without additional connection does not automatically require disclosure. Further, the FTC has said that it treats endorsements and testimonials identically.
What is “Clear and Conspicuous” Disclosure?”
The FTC revised guidelines to include more information as to what constitutes a “clear and conspicuous” disclosure – one that is “difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers.”
Clear and conspicuous disclosure of the relationship between the reviewer and company is one of the most important guideline goals. A relationship can be a material connection whether it is a business, family, or personal relationship. Because the use of videos on social media has grown, it is important for the disclosure to be clear and conspicuous based on the type of media such as including both audio and visual disclosures in videos.
What Are the Consequences for Failure to Disclose?
Failure to clearly and conspicuously disclose material connections between an endorser and seller may subject advertisers to liability including, but not limited to, fines and penalties. Both the endorser and the company may be subject to liability.
If you are a seller who uses endorsers, it is important to provide guidance that statements cannot be misleading and must disclose material connections in addition to monitoring for compliance. If an endorser fails to comply with the provided guidance, the seller is responsible to remedy the noncompliance in good faith.
Other companies such as advertising agencies, public relations firms, review brokers, and reputation management companies may also be subject to liability for deceptive endorsements.
The crux of the FTC guidelines is to provide truth in advertising and avoid deceptive practices. Compliance with these guidelines may include developing internal guidelines for endorsements or reviewing each campaign to ensure compliance. Experienced legal counsel are essential compliance resources and should be utilized as advertising guidelines continue to evolve.
* Jennifer Tran contributed to this post.
A Partner at M&S, Josh advises clients on a range of proactive and responsive matters, helping them achieve their business goals while complying with federal and state privacy and other consumer protection laws.