Today the FTC announced approval of final revisions to the guidance it provides to advertisers on how to maintain compliance with the FTC Act in the area of endorsements and testimonials (See the Endorsement and Testimonial Guides here). The revised Guides appear to have mostly adopted the proposed guides (about which we have previously blogged here and here) with a few tweaks and many more explicit examples. Below is a summary of some of the major changes to the Guides:
- I Lost 23 pounds in 4 weeks - Maybe you did but if that result isn’t typical the advertiser will have to disclose the results that consumers can typically expect. Gone is the disclaimer “results not typical.” Interestingly, in some cases companies may not actually know the “typical” outcome. Someone promoting a method to make money by buying and reselling real estate may feature testimonials from individuals stating their earnings but the promoter may not actually know -- nor be able to readily find out -- what the average earnings are.
- I’m Going to Blog About the Great Brand New Ferrari That Just Showed Up on My Driveway - In one of the more hotly debated changes, the new Guides make clear that bloggers or other types of word-of-mouth marketers can under some circumstances be considered endorsers, meaning that any material connections must be disclosed and that companies could be held liable for any claims the endorsers may make about their products. The FTC states that it will consider a number of factors including (1) whether the speaker was compensated; (2) whether the product was provided for free; (3) the terms of any agreement; (4) the length of any relationship; (5) previous receipt of products or likelihood of future receipt from the same or similar advertisers; and (6) the value of any items received. The revised Guides further state that it may not matter that the advertiser does not control whether the speaker reviews the product positively.
Notwithstanding this lengthy list of factors, the examples provided in the revised Guides suggest that the Commission is likely going to define an “endorser” broadly and companies may be wise to begin inventorying to whom they are, directly or indirectly, providing free product. Bloggers who are contacted by a blog advertising service to try a new product; bloggers who participate in marketing programs where they can receive free products to review if they so choose; a blogger who routinely receives new copies of game software; and members of a street team program who receive prizes for talking to their friends about products are all provided as examples of endorsers. In the one instance the “free” product received is a bag of dog food, suggesting that even products of fairly nominal value may trigger the Guides.
The Guides imply that only positive reviews by bloggers are considered endorsements. It is unclear, however, whether the review as a whole must be positive or whether any positive mention of the product even in a review that otherwise pans it would obligate the blogger to disclose that he or she received the product for free.
The Guides state that enforcement focus will continue to be on the advertiser and not the endorser (this point was reemphasized by an FTC official at the NAD conference earlier this week) but that advertisers can take steps to avoid liability by providing training to bloggers, monitoring their posts and taking steps to remedy any violations.
- We Feel So Confident About Our Product That We Paid for Scientific Research - Ronald Reagan once famously proclaimed in a debate with George Bush that “I paid for this microphone.” Under the new Guides companies that fund research that supports their product’s efficacy will have to disclose that fact even if they did not control the protocol or conduct of the research.
- I Actually Get Paid to Work for the Company That Makes These Great Products - Anonymity on message boards is out under the new Guides. If you promote your employer’s product on a message board, you should disclose the fact of your employment.
- I’m Not a Doctor but I Play One on TV - The revised Guides make clear that liability can extend to endorsers, in particular celebrity endorsers. Celebrity endorsers are cautioned that they must make “reasonable inquiries” that there is an adequate basis for the assertions they are making and may not make claims that are contrary to what they have personally experienced or seen.