The Federal Trade Commission (FTC) has recently implemented, effective December 1, 2009, revised guidelines on the use of endorsements and testimonials in advertising.  The much-anticipated Guides Concerning the Use of Endorsements and Testimonials in Advertising are the first revision to the Guides in nearly 30 years and provide important insights on the FTC’s position on endorsements by consumers, experts, organizations, and celebrities, as well as required disclosures of important connections between advertisers and endorsers.  See generally 15 CFR §§ 255.0-255.5. 

Arent Fox had been monitoring the developments regarding the revised Guides and previously reported on them.

There are two key aspects of the revised Guides that advertisers should take note of: first, there are the changes pertaining to consumer endorsements, which eliminate the “results not typical” safe harbor; and second, the “material connections” provisions, in which the FTC offers new illustrations of the well-settled principle that unexpected connections between advertisers and endorsers must be clearly disclosed.  The revised Guides also make clear that the application of these rules is not limited to traditional media, but also apply to new media as well, including blogs and social networking sites. 

Consumer Testimonials:  Elimination of the “Results Not Typical” Safe Harbor

Under the 1980 version of the Guides, an advertiser was permitted to present consumer testimonials describing unusual results as long as the advertiser included a disclaimer, such as “results not typical.”  Under the revised Guides, however, the FTC takes the position that consumers will likely interpret such testimonials as representative of the results that can generally be expected with a given product or service.  The advertiser must therefore possess and rely upon adequate evidence to substantiate these claims. If the advertiser does not have substantiation that the endorser’s experience is representative, then “the advertisement should clearly and conspicuously disclose the generally expected performance in the depicted circumstances.”  The generally expected performance must also be supported with adequate substantiation. 

To illustrate this principle, the FTC cites the example of an advertisement for heat pumps in which three individuals describe their heating bills as having decreased by $100, $125 and $150, respectively.  The advertiser cannot substantiate this number as representative, because only 20 percent of consumers will save a $100 or more.  As consumers will interpret these savings as representative, a disclosure of “Results not typical” or “These testimonials are based on the experiences of a few people and you are not likely to have similar results” would be insufficient to prevent such an advertisement from being deceptive.  The advertisement could be remedied, however, by clearly and conspicuously disclosing generally expected savings – e.g., “the average homeowner saves $35 per month” or “the typical family saves $50 per month during cold months and $20 per month in warm months” – if these claims can be substantiated by the advertiser.

The FTC acknowledges that there may be cases where a “strong disclaimer of typicality could be effective in the context of a particular advertisement” -- for example, if an advertiser possesses “reliable empirical testing demonstrating that the net impression of its advertisement with such a disclaimer is non-deceptive [to consumers]. . . .”  This would seem to be the exception, however, rather than the rule. 

Required Disclosure of “Material Connections” – Applications in New Media

The revised Guides retain the FTC’s long-standing position that “material connections” between advertisers and endorsers – ones that consumers would not expect – must be fully disclosed.  Such connections may involve payments or free products, or any other benefit that might “materially affect the weight or credibility of the endorsement.”  What the revised Guides provide, however, are new examples demonstrating the potential application of this rule, including circumstances involving social networking sites and blogs. 

The FTC cites an example of a celebrity who endorses a particular food product in a commercial.  The endorsement properly reflects the celebrity’s honest, subjective opinion about the product.  Regardless of the compensation paid for the endorsement, the advertiser would not need to disclose it, as a consumer would expect the celebrity to be compensated under these circumstances. 

Change the venue, however, and the FTC may reach a different conclusion.  If a celebrity is compensated to tout a product on a television talk show, then a clear and conspicuous disclosure indicating that he or she is a paid spokesperson would be required, as the consumer would not anticipate the star was compensated in that instance, and the information might affect the weight a consumer gives to the endorsement.  Interestingly, the FTC also makes clear that a disclaimer would also be needed if the celebrity touted the product on a social networking site as well. 

The rule has implications for bloggers and other content producers in cyberspace as well.  Take, for example, a college student who maintains a blog that reviews new software.  A software manufacturer provides a free copy of a new game on the condition that the blogger reviews it.  That fact would need to be disclosed, as the blogger’s relationship to the advertiser is not inherently obvious, and readers are unlikely to know that bloggers may receive free software in exchange for his review of the product. 

Interestingly, the rule also appears to place some obligation on the sponsoring party to counsel the blogger under these circumstances – specifically, the advertiser “should advise him at the time it provides the [product] that this connection should be disclosed, and it should have procedures in place to try to monitor his postings for compliance.” 
Under the revised Guides, advertisers are also obligated to monitor paid bloggers’ Web sites to ensure that any statements made about its products are true and substantiated.  Advertisers must “take steps necessary to halt the continued publication of deceptive representations when they are discovered.”  Both the blogger and the advertiser may be liable for any misleading or unsubstantiated statements made in a paid endorsement.  

As these new Guides make clear, advertisers need to carefully review remarks about its products made by endorsers, regardless of celebrity status, and regardless of whether they appear in conventional advertising or in new media, such as a social networking site or blogs. 

Arent Fox has considerable experience counseling advertisers to ensure that they are in compliance with the law and to identify and assess potential risks. For further information, please contact:

Pamela Deese
deese.pamela@arentfox.com
202.828.3431

Henry Huffnagle
huffnagle.henry@arentfox.com
202.857.6302