In 2009, the FTC issued revised Guides Concerning the Use of Endorsements and Testimonials in Advertising and many expected a rash of enforcement in that area. The FTC also has promised to scrutinize statements made in the context of talk shows, which the FTC believes may constitute advertising. Although the FTC has brought a few cases challenging advertisers failure to disclose a material connection (see Spokeo, Reverb, and Legacy Learning cases) this area has not appeared to be a priority. In some instances the Commission has also opted to essentially issue a “warning,” exercising its discretion to close certain matters without bringing an enforcement action. Now, however, the FTC appears to be pursuing both endorsements and statements made on talk shows in an action announced on March 6, 2014, against ADT, a home security company. The agency alleges that ADT misrepresented the statements of paid endorsers as independent opinions of safety and technology experts.
The Complaint alleges that ADT paid three spokespersons, a child safety expert, a home security expert, and a technology expert, over $300,000 to endorse and promote the ADT Pulse home monitoring system. The endorsers also received a free Pulse system, valued at more than $4,000. The endorsers plugged the products in television interviews, radio interviews, and on blogs, with almost no mention of their connection to ADT. According to the FTC, consumers would interpret the endorsers’ recommendations of the product as the opinion of an independent expert, not an advertisement involving a paid spokesperson.
Under the Consent Order ADT is:
- Prohibited from misrepresenting that a discussion or demonstration of the security or monitoring product or service is an independent review provided by an impartial expert
- Required to clearly and prominently disclose a material connection, if one exists, between an endorser and ADT
- Required to inform endorsers of their responsibility to the disclose material connections with ADT in appearances, postings, and other communications
- Required to monitor the representation and disclosures that their endorsers are making and cease payment to any endorser who does not properly disclose material connections or misrepresents his or her independence or partiality
- Required to maintain records of complaints and inquiries which relate to endorsements.
There was no monetary penalty included in the order, but the FTC gave the company just seven days to comply with the first two requirements. The FTC chose not to name the endorsers, much to the relief of bloggers everywhere.
Whether this is a first step in more rigorous enforcement of the Endorsement Guides and on statements made in the context of talk shows remains to be seen. In the meantime, advertisers would be wise to monitor whether any paid spokespersons (including bloggers) adequately discloses material connections to the advertiser. The failure to do so could lead to alarming results.