The Federal Trade Commission (FTC) is seeking comments on proposed broad changes to its Guides Concerning the Use of Endorsements and Testimonials in Advertising (the Guides). Issued in 1972 and last revised in 1980, the Guides are designed to assist businesses conform their endorsement and testimonial advertising practices to the requirements of the FTC Act. While the Guides do not create substantive law, they provide insight into how the FTC interprets existing laws.

The proposed revisions are sweeping, and they would proscribe many endorsement methods currently employed by companies. The key modifications are described below. 

• Liability for Advertisers and Endorsers

The FTC proposes to revise significantly the Guides by adding a new section that states advertisers may be liable for “false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers.” Endorsers also may be liable for their statements. According to the FTC, these principles are consistent with the Commission’s previous enforcement actions against both expert endorsers and well-known personalities, such as celebrities, who have acted as endorsers. Two new examples illustrate scenarios in which the FTC could impose liability on endorsers, while a third illustrates the potential liability of advertisers employing bloggers to promote their products as well as the bloggers themselves.

• Consumer Endorsements

Under the proposed revisions, advertisers using consumer endorsements would have to possess evidence to support efficacy claims. Thus, if an advertiser cannot substantiate that the endorser’s experience represents what consumers will generally achieve, the advertisement must disclose the generally expected results under the depicted circumstances and the advertiser must have the requisite evidence to support this claim.

If the proposed amendments are adopted, most disclaimers of typicality currently used would be rendered ineffective. For example, disclaimers such as “results not typical” and “these testimonials are based on the experiences of a few people and you are not likely to have similar results” would not be permitted. While the FTC has not established a bright-line numerical standard for “typicality,” it has noted that an experience likely to occur less than 20 percent of the time is atypical and thus would likely be misleading. 

• Expert Endorsements

The FTC proposes to revise the Guides in two ways with respect to expert endorsements.  First, an expert endorser is required to possess the level of expertise represented in the advertisement, and the advertisement must clearly identify the limits of the endorser’s experience if necessary. Second, if an endorsement is not from a “bona fide independent” testing organization, e.g., if the organization was created and operated by the advertiser, it would be considered deceptive.

• Disclosure of Connections Between Advertisers and their Endorsers

The FTC proposes to revise the Guides to address expert compensation. The FTC believes that, under certain circumstances, the nature or amount of an expert’s compensation might be relevant to consumers. While consumers likely expect experts to be compensated for rendering their opinions, arrangements other than a flat fee (e.g., a financial stake in the product or a royalty) may require disclosure.

• Blogs, Discussion Boards, and “Street Teams”

Given the dramatic change in the world of consumer endorsements, the proposed revisions to the Guides address the growing influence of blogs, discussion boards, and “street teams” on consumers. The FTC offers examples to illustrate these marketing methods, including the following:

Example 1: A skin care products advertiser uses a blog advertising service that matches advertisers with bloggers who will promote the advertiser’s product on their personal blogs. At the advertiser’s request, the blogger reviews the product. The blogger notes that the product cures eczema, and the blogger recommends the product to his readers. The advertiser did not provide the blogger with any specific product information, and the blogger did not ask the advertiser to substantiate the blogger’s claim. In this case, liability would attach to the advertiser (for false or unsubstantiated statements made through the blogger’s endorsement) and the blogger (for disseminating claims without substantiation and failing to disclose compensation for the review, if applicable). To protect itself, the advertiser should (i) make certain the advertising service trains its bloggers to ensure that statements they make are truthful and substantiated, and (ii) monitor bloggers paid to promote its products and take remedial steps when necessary.

Example 2: A widely recognized video game expert blogs about his gaming experiences.  His readers seek his opinion on gaming hardware and software. A video game manufacturer sends the blogger a complimentary copy of a new game system and asks him to review it. The blogger tests the system and writes a favorable review. In this case, the blogger should disclose that he received the system for free because the value of the system could materially affect his review, and thereby the credibility his readers attribute to the review.

Comments on the FTC’s proposed revisions to its Guides are due January 30, 2009. Please contact any of the individuals below if you have questions regarding the Guides or would like to discuss the possibility of submitting comments.

Georgia Ravitz
ravitz.georgia@arentfox.com
202.857.8939

James R. Ravitz
ravitz.james@arentfox.com
202.857.8903

Amy S. Colvin
colvin.amy@arentfox.com
202.857.6338

Michael D. Sopko*
sopko.michael@arentfox.com
202.857.6351