The FTC Cares About Five-Star Ratings and Education Claims

The Federal Trade Commission has warned hundreds of consumer product companies and for-profit schools that they may be engaging in unfair or deceptive behaviors that could result in future enforcement action if these behaviors do not change. The FTC was focused on two issues: 1) deceptive testimonials and endorsements, and 2) performance claims. The warnings signal the FTC’s intent to increase enforcement in these areas. Businesses should review their own policies and procedures to ensure they are not unintentionally violating federal laws.

Endorsements and Testimonials

The warning to consumer products companies was that endorsements and testimonials must not be unfair or deceptive by:

• claiming – directly or by implication – that a third party has endorsed a product or its performance when that’s not the case (this includes fake reviews);
• misrepresenting that an endorsement reflects the experience, views, or opinions of users or purported users;
• misrepresenting an endorser as an actual, current, or recent user of a product;
• continuing to advertise an endorsement unless the advertiser has good reason to believe the endorser continues to subscribe to the views presented in the endorsement;
• using testimonials to make unsubstantiated or otherwise deceptive performance claims – even if the testimonial is genuine;
• failing to disclose a connection between an endorser and seller of a product if that connection might materially affect the weight or credibility of the endorsement or review and if consumers wouldn’t reasonably expect that connection; and
• misrepresenting – explicitly or implicitly – that the experience of an endorser represents the typical or ordinary experience of users of the product.

The FTC has provided complete guidelines in its Guide Concerning Use of Endorsements and Testimonials in Advertising.

The FTC also enforces the Consumer Review Protection Act, which prohibits form contracts or other actions that restrict a consumer’s ability to give a review by:

• prohibiting or restricting individuals from reviewing sellers’ goods, services, or conduct;
• imposing penalties or fees on individuals for such reviews; or
• requiring individuals to transfer intellectual property rights in such reviews.

With regard to for-profit colleges, the FTC issued Notice of Penalty Offenses to the largest 70 for-profits, warning them that they may be making false or misleading claims, including ones related to the career or earning prospects of their graduates, the percentage of graduates that get jobs in their chosen field, and whether the school can help a graduate get a job.

The FTC’s actions are a reminder that it’s important to review your company’s policies and procedures for compliance with state and federal regulations. For more information about compliance audits, see Get the Most from your Compliance Audit: Four Tips from an Experienced Compliance Attorney.