Ftc Basics Webinar by 3 Green Angels

FTC Blogging Basics The FTC Toolbox for Bloggers and Companies

3 Green Angels: About the Webinar Housekeeping • Only presenters will be speaking, so no need to worry about muting yourself • Q&A at end of session. Submit your questions via the “Questions” section on the control panel • Webinar will be available on Vimeo

3 Green Angels: About the Webinar IMPORTANT NOTICE This webinar is meant to bring to awareness to the topic and is not intended to be used as legal advice. If you have questions about any of the info or related matters, please contact an attorney in your state.

3 Green Angels: About the Webinar Agenda 1) Why disclosure is important 2) Comments from Jennifer Taggart about the FTC 3) Endorsement Guidelines 4) Questions submitted in advance 5) Open Q&A (time permitting)

3 Green Angels: About the Webinar Presented by Jennifer Taggart • Partner in Los Angeles law firm – Specialize in consumer and environmental law • 15 years experience • Eco Consultant – CPSIA expert – XRF testing – Blogger, social media user • Co-founder, 3 Green Angels • Former environmental engineer

Federal Trade Commission (http://www.ftc.gov) 3 Green Angels: What is the FTC? Federal Trade Commission (http://www.ftc.gov) • Independent agency established in 1914 by Federal Trade Commission Act (FTC Act) • Basically, 3 bureaus: • FTC Bureau of Consumer Protection: protects consumers against unfair, deceptive or fraudulent practices • FTC Bureau of Competition: Prevents anticompetitive mergers and other anticompetitive business practices in the marketplace • FTC Bureau of Economics: Evaluates economic impact of FTC's actions

3 Green Angels: What is the FTC? FTC Bureau of Consumer Protection • Advertising and marketing • Financial products and practices • Telemarketing fraud • Privacy and identity protection

3 Green Angels: FTC Act Functions of the FTC Act • FTC Act, Section 5, declares unlawful unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce • The FTC issues rules pursuant to the FTC Act when the FTC believes that certain unfair or deceptive acts or practices are prevalent in an industry

3 Green Angels: FTC Act FTC Act & Guides • FTC regulates advertising • The revised Endorsement Guides - Guides Concerning the Use of Endorsements and Testimonials in Advertising (published on 10/5/09 and effective 12/1/09) represent administrative interpretations concerning the application of Section 5 of the FTC Act (15 USC 45) to the use of endorsements and testimonials in advertising • In other words, the Guides are intended to help advertisers comply with Section 5 of the FTC Act

3 Green Angels: FTC Act Principles of Advertising Law • Advertising must be truthful and not misleading • Advertisers must have evidence to back up their claims (substantiation) • Advertisements must not be unfair

3 Green Angels: FTC Act What are the Endorsement Guides? • Endorsement Guides deal with aspects of advertising - use of testimonials and endorsements • The Endorsement Guides adopted in 1972 • Have always required that endorsers disclose relationships with advertisers • Revised Endorsement Guides extend requirements to social media

3 Green Angels: FTC Act Effect of Endorsement Guides • Endorsement Guides are NOT actually binding as law • Endorsement Guides are administrative interpretations of the laws administered by the FTC • To establish violation, FTC must show violation of the FTC Act • Violations of Section 5 of the FTC Act are subject to civil penalties of up to $11,000 per violation • But, the FTC may bring an enforcement action if a person or company fails to comply with the Endorsement Guides if FTC can establish that represents an unfair or deceptive practice in violation of the FTC Act

3 Green Angels: FTC Act What Do Endorsement Guides Require? • Prohibits deceptive or unsubstantiated representations in endorsements • As explained by David Vladeck, Director of FTC Bureau of Consumer Protection - endorsements cannot constitute an end run around the substantiation requirements • Requires disclosure of material connections between seller and endorser • Requirements for “celebrity endorsers” • Requirements for “experts”

3 Green Angels: FTC Act Who is liable? • Advertiser: • Subject to liability for false or unsubstantiated statements made by endorsers ( 255.1(d)) • Subject to liability for failure to disclose material connections between themselves and their endorsers ( 255.1(d)) • Endorser: •Liable for statements made in course of endorsements ( 255.1(d))

3 Green Angels: FTC Act What do endorsements have to do? • Endorsements must reflect endorser’s honest opinions, findings, beliefs or experience. • Endorsements may not convey any express or implied representation that would be deceptive if made directly by the advertiser • If advertisement represents that the endorsers uses the endorsed product, endorser must have been a bona fide user of it at the time the endorsement was given

3 Green Angels: FTC Act What is an endorsement? Guidelines define an endorsement to mean “any advertising message (including verbal statements, demonstrations, or depictions of name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) 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.” ( 255.0(b))

3 Green Angels: FTC Act What is an endorsement? Example 4 in Guidelines: Professional auto racing driver hired by tire manufacturer & talks about smooth ride, strength, and long life of tires. Is this an endorsement? Yes because most consumers will recognize individual as a race car driver, not merely a spokesperson or announcer of the advertiser. So consumers would believe that the advertising message reflects the driver’s personal views.

3 Green Angels: FTC Act What is an endorsement? Example 8 in Guidelines: Blogger purchases new dog food and talks about how it improved her dog’s fur – not an endorsement. Same blogger gets same new dog food for free because she receives a coupon from the store based upon her purchasing habits – not an endorsement. Same blogger joins network marketing program and, as a result, periodically gets free products about which can write reviews if she wants. The new dog food came from that program – endorsement.

3 Green Angels: FTC Act So what does this mean? Looking at 255.1 Example 5 in Guidelines: Skin care company participates in blog advertising service that matches advertisers with bloggers to review products. Advertiser asks blogger to try new body lotion and write review of product on blog. Advertiser does not make any specific claims about lotion’s ability to cure skin conditions. In review, blogger writes that lotion cures eczema.

3 Green Angels: FTC Act What is potential liability in Example 5? Example 5 in Guidelines: Advertiser potentially liable for blogger’s misleading/ unsubstantiated statements. Blogger potentially liable for misleading/ unsubstantiated representation. Blogger could also be liable if fails to disclose clearly and conspicuously that she is being paid for services.

3 Green Angels: FTC Act Endorsements must have substantiation Endorsement about performance of an advertised product or service will be interpreted as representing that product or service is effective for purpose depicted. (Guidelines 255.2(a).) Advertiser must possess and rely upon adequate substantiation to support such claims.

3 Green Angels: FTC Act Relevance of substantiation requirement? Example 2 in Guidelines: Company’s advertisement talks about cost savings from installing heat pump. 3 different consumers give different savings in monthly utility bills, but fewer than 20% of purchasers will save anything close. “Results not typical” insufficient to save ad from being deceptive. Could be saved by clearly and conspicuously disclosing average monthly savings or what most families will save.

3 Green Angels: FTC Act Expert endorsement If endorsement represents, directly or by implication, that endorser is expert with respect to endorsement message, endorser’s qualifications must in fact give the endorser the expertise that he is representing as possessing with respect to endorsement. ( 255.3(a)) Endorsement must be supported by actual exercise of expertise by that expert in evaluating features or characteristics, although other factors can be taken into account. ( 255.3(b))

3 Green Angels: FTC Act Can bloggers be experts? Of course. Expertise can be based upon education or experience. Perhaps blogger is a tech expert, beauty expert or a cleaning expert based upon experience.

3 Green Angels: FTC Act 255.3 Example 3 Ramifications particularly in “green”: • Manufacturer advertises its auto parts approved by “American Institute of Science.” From name, consumers believe “AIS” is a bona fide independent testing organization & would not approve auto part w/o first testing by valid scientific methods. • If AIS is not bona fide independent testing organization (e.g., established and operated by an auto parts manufacturer), the endorsement is deceptive.

3 Green Angels: FTC Act Disclosure obligations 255.5 requires when a connection exists between seller (sponsor) and endorser that might materially affect weight or credibility of endorsement (connection is not reasonably expected by the consumer), such connection must be fully disclosed. Includes disclosure of funded research (Ex. 1), “sponsored” speaking, including Twitter (Ex. 3) and online message board posting (Ex. 8)

3 Green Angels: FTC Act Complying with disclosure obligations • Will reader/audience understand relationship between reviewer and company whose products are being reviewed? •If not clear from the context, reviewer should disclose connection.

Ftc Basics Webinar by 3 Green Angels

by 3 Green Angels on Nov 19, 2009

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