June 28, 2010

FAQs for the FTCs Newly Adopted Revised Endorsement Guides

The FTC’s revised Guides emphasize a focus on social media and in particular the relationship between advertisers and the products being advertised;

“The issue is – and always has been – whether the audience understands the reviewer’s relationship to the company whose products are being reviewed. If the audience gets the relationship, a disclosure isn’t needed.”

The FTC Guides retain a core purpose of protecting consumers from misleading or inaccurate advertisements and while the connection between Subway and Jared may have been readily apparent, “on a personal blog, a social networking page, or in similar media, the reader may not expect the reviewer to have a relationship with the company whose products are mentioned. Disclosure of that relationship helps readers decide how much weight to give the review.”

The FTC recently addressed consumers’ questions regarding its newly adopted Revised Endorsement Guides on its FAQ’s page. This FAQ page can be found here.

Most of the answers that the FTC addressed in its FAQ dealt directly with the questions that average consumers, bloggers, and advertising businesses would have about enforcement and proper compliance with the Guides. Although the newest version of the Revised Endorsement Guides are the first revision the Guides have undergone since 1980, the overarching legal principles remain the same;
  1. Endorsements must be truthful and not misleading;
  2. If the advertiser doesn’t have proof that the endorser’s experience represents what consumers will achieve by using the product, the ad must clearly and conspicuously disclose the generally expected results in the depicted circumstances; and
  3. If there’s a connection between the endorser and the marketer of the product that would affect how people evaluate the endorsement, it should be disclosed.

Straying from the 1980 rendition of the Guides, the newest Guides version accounts for the recent explosion of social media in advertising and business and makes it clear that the FTC regulations apply not only to mainstream advertising but also to these new social mediums. Including; Twitter, Facebook, blogs, personal websites, and other forms of online advertising.

Here are some of the more interesting FTC responses to FAQs:

  1. The most important principle is that an endorsement has to represent the accurate experience and opinion of the endorser:
    1. You can’t talk about your experience with a product if you haven’t tried it.  
    2. If you were paid to try a product and you thought it was terrible, you can’t say it’s terrific.
    3. You can’t make claims about a product that would require proof you don’t have. For example, you can’t say a product will cure a particular disease if there isn’t scientific evidence to prove that’s true.
  2. The Guides cover only endorsements that are made on behalf of a sponsoring advertiser. If you mention a product you paid for yourself, the Guides aren’t an issue.
  3. The FTC evaluates ads from the perspective of reasonable consumers.
  4. Testimonials claiming specific results usually will be interpreted to mean that the endorser’s experience is what others can expect. Statements like “Results not typical” or “Individual results may vary” won’t change that interpretation. That leaves advertisers with two choices:
    1. Have adequate proof to back up the claim that the results shown in the ad are typical, or 
    2. Clearly and conspicuously disclose the generally expected performance in the circumstances shown in the ad
  5. Under FTC law an act or practice is deceptive or misleading if it misleads “a significant minority” of consumers.
  6. Guaranteed right to free speech is not impinged upon by the FTC’s new Guides. If you are acting on behalf of an advertiser, what you are saying is commercial speech – and commercial speech can be regulated under the FTC Act if it’s deceptive.
  7. There is no fine for not complying with an FTC guide. However, the FTC does have available recourse to pursue a legal action against an advertiser whose acts are deemed to be in violation of the Guides.

Importantly, although the FTC did comment that the newly revised Guides do implement new rules into blogging and advertising, the FTC does not and has no plans to monitor bloggers. Rather, the FTC will evaluate possible violations on a case-by-case basis and if law enforcement becomes necessary, the FTC will focus on the advertisers rather than the bloggers (endorsers).  

Where to place a disclosure; a disclosure has to be both clear and conspicuous. For this to happen, the FTC suggests that you place both the disclosure (either textually or clearly indicated in a link) and the product review so that an average consumer will view both on the same page (at roughly the same time).

The full text of the revised Guides (including over 35 examples on how they apply in practical settings) can be found here.

The FTC also has available a number of to-the-point video clips addressing issues from a marketer’s standpoint. That can be found here.

Still more questions? Further questions regarding the Guides can be emailed to endorsements@ftc.gov, the most common questions will be addressed in future FAQ’s.

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