FTC Endorsement Regulation Updates

Companies marketing to consumers using online reviews, testimonials, or other endorsements should be aware of recent activity by the Federal Trade Commission (“FTC”) in this area.

Background

The FTC has historically targeted so-called fake and deceptive endorsements, such as online consumer reviews, as part of its enforcement against misleading and deceptive advertising.

An endorsement is any advertisement or indication of sponsorship for a product or service by a third party, ranging from a celebrity spokesperson saying, “I endorse this product,” to something as subtle as an Instagram influencer posting a picture of herself with the product. Even before-and-after pictures can serve as a type of endorsement in the form of a user’s testimonial.

Under FTC rules, any endorsement that does not clearly disclose that the third party received something of benefit (e.g., money, commissions, equity, or even free or discounted product) is considered false and misleading and therefore a violation of the FTC Act. Similarly, testimonials that are misleading in any manner—for example, by photoshopping before/after pictures, or attributing a testimonial to a non-customer or even a fake customer—are not compliant. The FTC has issued several endorsement guidelines, which provide tips on disclosing sponsorship or payment when posting testimonials online, including by influencers on social media.

Recent FTC Activity

This week, the FTC sent out more than 700 “Notice of Penalty Offenses” to companies for purported unlawful practices relating to the use of endorsements and testimonials. These Notices claimed that continued misconduct would subject each company to civil penalties of up to $43,792 per violation under 15 U.S.C. §45(m)(1)(B), which authorizes the FTC to commence civil actions in district court after issuing certain cease and desist orders. In other words, the FTC is proceeding with alternative ways to obtain court relief after the Supreme Court ruling in AMG Capital Management, which limited FTC court actions in certain cases.

The recent FTC Notices also outlined these specific things that the FTC considers unlawful:

• falsely claiming an endorsement by a third party;
• misrepresenting that an endorser is an actual user, a current user, or a recent user;
• continuing to use an endorsement without good reason to believe that the endorser continues to subscribe to the views presented;
• misrepresenting that an endorsement represents the experience, views, or opinions of users or purported users;
• using an endorsement to make deceptive performance claims;
• failing to disclose an unexpected material connection with an endorser;
• misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience; and
• using positive reviews that are fake or when a material connection is not adequately disclosed.

This follows FTC press releases announcing its intent to crackdown in this area as well as third-party platform (e.g., Google) enforcement against incentivized reviews that violate website terms.

Thus, it is important for businesses—especially those marketing or advertising using consumer reviews or other endorsements—to seek compliance advice at the outset and, of course, if an action arises. Kronenberger Rosenfeld regularly advises clients with FTC issues, including on endorsement issues, advertising, and disclosures, and defending FTC and related actions.