Revised Federal Trade Commission Guidelines On Endorsements and Testimonials Change Deceptive Advertising Risks and Will Affect Marketing Efforts
By Steven P. Lipowski
May 14, 2010
For years, the Federal Trade Commission (the FTC) has regulated deceptive advertising under Section 5 of the Federal Trade Commission Act (the Act). This has included the issuance of non-binding, but very important, guidelines outlining the FTC’s views on the proper use of advertisements containing endorsements and testimonials.
On December 1, 2009, these revised guidelines became effective and signaled a stricter view from the FTC of what is and is not deceptive advertising when it comes to testimonials and endorsements.
The guidelines apply to any advertisement of any product or service by any party that contains an endorsement. Under these guidelines, an endorsement is defined as any advertising message that consumers are likely to believe reflects the opinions or findings of any party other than the sponsoring advertiser. This very broad definition means the rules have a broad impact.
While these guidelines have existed for many years, the 2009 revisions are significant. At least one commentator has stated that the guidelines’ view of acceptable advertisements has shifted “from truthful to transparent” – in other words, the literal truth of an advertisement involving an endorsement is not enough, but rather it must also disclose pertinent information to the consumer about any endorsement or endorser.
For example, the guidelines provide that any material connection between an endorser and an advertiser must be disclosed to the consumer. New restrictions on “results not typical” type marketing efforts also have been introduced. Additionally, the rules now more clearly apply to online endorsements, whether through blogs, social media outlets, chat rooms, or other online or electronic forums which are becoming an increasingly popular way for marketing professionals to promote their company’s products or services.
The guidelines even suggest that advertisers and their endorsers (which can be any third party) may bear liability for false statements made about their product through any endorsement – potentially even an endorsement given by a third party the advertiser has no formal connection with. So, for example, a company may bear liability for deceptive advertising when a blogger who is totally unconnected with the company touts the company’s product by using false information in his or her online blog.
Since the revised guidelines are so new, it will be important for companies to monitor developments in this area to determine better how the revised guidelines will be enforced or interpreted by the FTC. However, it is clear that companies are best advised to keep the guidelines and their applicability in mind as they promote their products and services.
A link to the FTC’s new guidelines, including numerous examples of scenarios where they apply as provided by the FTC, can be found online.
If you have questions regarding the above, please contact Steve Lipowski, the author of this article, or any of the attorneys in the Business Transactions Practice Group of Ruder Ware.
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