FTC Endorsement Guides

The FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising
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MARIE SCHEIBERT, ESQ.

Contents:
The Federal Trade Commission (“FTC”) is the federal agency tasked with protecting consumers from unfair or deceptive advertising and marketing practices. The FTC’s revised guides concerning the use of endorsements in advertising went into effect on December 1, 2009.
What is an endorsement?
Endorsements in blogs and social media.
Content of endorsements.
Disclosure of material connections.
Who has the duty of disclosure?
What must be disclosed?
Format of disclosures.
Liability.
Non-compliance risks.
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what is an endorsement?
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An endorsement is a sponsored advertising message that appears to reflect the speaker’s own views.

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Whether a message qualifies as an “endorsement” depends on consumer perception.

“[A]n endorsement means any advertising message…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).
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endorsements in blogs & social media.
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The Guides have traditionally addressed endorsements in
advertiser-generated content.
e.g. print ads, TV commercials
The revised 2009 Guides also address endorsements in
consumer-generated content.
e.g. blogs, facebook, twitter
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Can a consumer-generated message be an endorsement?
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A consumer-generated message is an endorsement if it can be considered to be “sponsored” by the advertiser so that it is an “advertising message.”
Federal Register Notice at 8.
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Factors affecting whether a consumer-generated message qualifies as an “advertising message” include:
whether the speaker is compensated by the advertiser or its agent;
whether the product or service in question was provided for free by the advertiser;
the terms of any agreement;
the length of the relationship;
the previous receipt of products or services from the same or similar advertisers, or the likelihood of future receipt of such products or services;
the value of the items or services received.
Federal Register Notice at 8-9.
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Not an endorsement
A consumer buys dog food with her own money (or obtains it for free after receiving a coupon from a retailer) and praises it on her blog, acting solely independently.
Endorsement
A consumer joins a network marketing program under which she periodically receives various products about which she can write reviews if she wants to do so. She receives a free bag of dog food through this program and writes a positive review on her blog.
§ 255.0 Example 8.
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content of endorsements.
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Endorsements must be honest.
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“Endorsements must reflect the honest opinions, findings, beliefs, or experience of the endorser.” § 255.1(a).

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Endorsements cannot be deceptive or misleading.
“An endorsement may not convey any express or implied representation that would be deceptive if made directly by the advertiser.” § 255.1(a).

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Endorsements must be based on real experiences.
“Where the advertisement represents that the endorser uses the endorsed product, the endorser must have been a bona fide user of it at the time the endorsement was given.” § 255.1(c).

The 2009 Guides effectively eliminate “results not typical” disclaimers. Advertisers must clearly disclose the results consumers can typically expect. This change particularly affects advertisers and endorsers of health and beauty products (e.g. weight loss products).
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Endorsements must be substantiated.

disclosures of material connections.
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Connections that “might materially affect the weight or credibility of the endorsement” must be “clearly and conspicuously” disclosed. § 255.5.
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Whether a connection must be disclosed depends on consumer perception.

Would the average consumer assume that the message was sponsored by an advertiser?
Yes -> no need to disclose.
No -> disclose.
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When in doubt -> disclose.

Advertiser-generated content.
A film star endorses a food product in a commercial. No disclosure is required because consumers assume a celebrity will be paid for this kind of endorsement.
§ 255.5 example 2.
A professional tennis player states on a talk show that she is seeing the ball better since having laser vision surgery at a clinic that she identifies by name. The athlete has a contract with the clinic that pays her for speaking publicly about her surgery. Disclosure is required because consumers might not realize that a celebrity discussing a medical procedure in a television interview was paid for doing so.
§ 255.5 example 3.
Disclosure not required.
Disclosure required.
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A material connection will generally exist as long as a message qualifies as an endorsement.
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Consumer-generated content.
“The Commission recognizes that, as a practical matter, if a consumer’s review…qualifies as an “endorsement”…that consumer will likely also be deemed to have material connections with the sponsoring advertiser that should be disclosed.” Federal Register Notice at 42.

Reviews.
Bloggers are subject to a stricter standard than traditional media.
According to the FTC, consumers understand that reviews published by traditional media outlets are not sponsored advertising messages. Thus, reviews in traditional media are not regulated by the Guides.
Reviews published by bloggers outside traditional media outlets are regulated by the Guides because the blogger’s relationship to an advertiser may not be “inherently obvious.”
Disclosure not required.
Disclosure required.
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Receives a single high-priced item in exchange for a review;
Receives an ongoing stream of free merchandise, even if of minimal value;
Participates in an organized word-of-mouth marketing campaign.
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A blogger probably qualifies as an endorser with material connections to disclose if the blogger:

A manufacturer sends a blogger a free video game system and asks him to write about it. The blogger tests the system and writes a favorable review. Because his relationship to the advertiser is not inherently obvious, readers are unlikely to know that he received the product for free in exchange for his review, and given the value of the product, this fact likely would materially affect the credibility of his endorsement.
The blogger should clearly and conspicuously disclose that he received the gaming system for free. The manufacturer should advise him that this connection should be disclosed, and it should try to monitor his postings.
§ 255.5 Example 7.
blogger disclosure example.
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Employees may also qualify as endorsers with material connections to disclose. Employees cannot be anonymous when posting positive comments about their employer’s products or services.

An online message board is frequented by MP3 player enthusiasts. Unbeknownst to the community, an employee of a leading manufacturer has been posting messages on the discussion board promoting the manufacturer’s product.
Knowledge of this poster’s employment likely would affect the weight or credibility of her endorsement. Therefore, she should clearly and conspicuously disclose her relationship to the manufacturer to readers of the message board.
§ 255.5 Example 8.
Employee disclosure example.
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who has the duty of disclosure?
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“In the context of consumer-generated media, the endorser is the party primarily responsible for disclosing material connections.”
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Advertisers have a duty to educate and monitor endorsers.
“Advertisers who sponsor these endorsers in order to generate 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.” Federal Register Notice at 39.
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Advertisers should also establish disclosure policies for employees, require third party marketing agents to establish similar policies, and monitor for compliance.

what must be disclosed?
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The publisher of the endorsement must disclose all material connections with the advertiser, including:
participation in word-of-mouth marketing programs;
employment or other business relationships;
compensation; and
free samples.
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Direct and indirect connections must be disclosed.
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“Postings by a blogger who is paid to speak about an advertiser’s product will be covered by the Guides, regardless of whether the blogger is paid directly by the marketer itself or by a third party on behalf of the marketer.”

Format of disclosures.
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All disclosures must be “clear and conspicuous.”

Liability.
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Advertisers and endorsers are subject to liability for (1) false or unsubstantiated statements in endorsements; and (2) failing to disclose material connections.
§ 255.1(d).
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Advertisers may be liable even if they have no control over the endorsement.
“In employing this means of marketing, the advertiser has assumed the risk that an endorser may fail to disclose a material connection or misrepresent a product, and the potential liability that accompanies that risk.”
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Endorsers may be liable even though the FTC has stated that it does not intend to target bloggers.
“[T]he Commission’s law enforcement activities will continue to focus on advertisers.”
Federal Register Notice at 39 n.79.

A skin care products advertiser requests that a blogger review a new body lotion on her personal blog. Although the advertiser does not make any specific claims about the lotion, the blogger writes that the lotion cures eczema and recommends the product to her blog readers who suffer from this condition.
The advertiser is subject to liability for misleading or unsubstantiated representations made through the blogger’s endorsement. The blogger is subject to liability for misleading or unsubstantiated representations made in the course of her endorsement. The blogger is also liable if she fails to disclose clearly and conspicuously that she is being paid for her services.
§ 255.1 example 5.
liability example.
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Non-compliance risks.
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The FTC Act, a federal statute, prohibits “unfair or deceptive acts or practices” in commerce.
All states have “little FTC Acts” that likewise prohibit unfair or deceptive acts or practices.

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The Guides are not binding law. They can be used to define what constitutes “unfair or deceptive acts or practices” under the FTC Act or under a state law “little FTC Act.”

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The National Advertising Division, the advertising industry’s self-regulatory body, may also look to the Guides in resolving advertising disputes between competitors.

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Whether a particular endorsement or advertising practice is “unfair or deceptive” will always depend on the specific facts and circumstances.

Credits
Page 4: Mall Girls Riding on the Escalator - by D Sharon Pruitt
http://www.flickr.com/photos/pinksherbet/2967810431/
Page 20: Mall of America – by MattiMattila
http://www.flickr.com/photos/mattimattila/2456453620/
Page 22: Television – by dailyinvention
http://www.flickr.com/photos/dailyinvention/497294952/
Page 23: Hand drawn doodle icons – by spoongraphics
http://www.blog.spoongraphics.co.uk/freebies/free-hand-drawn-doodle-icon-set-for-bloggers
Page 26: Xbox 360 Controller – by mawel
http://www.flickr.com/photos/mawel/865770336/
Page 28: iPod lineup – by dantaylor
http://www.flickr.com/photos/dantaylor/58703002/
Page 37: Lance - by TheArtGuy
http://www.flickr.com/photos/theartguy/2915614296/
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DISCLAIMER
© marie scheibert
Twitter: @MarieScheibert
Blog: www.internetlawbits.com
Email: marie@internetlawbits.com
resources:
FTC Endorsement Guides (16 C.F.R. Part 255) available at:
http://ftc.gov/os/2009/10/091005revisedendorsementguides.pdf
Federal Register Notice available at:
http://www.ftc.gov/os/2009/10/091005endorsementguidesfnnotice.pdf
FTC website:
http://www.ftc.gov/opa/2009/10/endortest.shtm
This slide show is for informational purposes only and is not legal advice. Please consult an attorney licensed in your state regarding your particular situation.
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FTC Endorsement Guides

by Marie Scheibert on Dec 23, 2009

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FTC Endorsement Guides — Presentation Transcript

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