Thirteen months after proposing sweeping changes to its Endorsements and Testimonial Guides (Guides), the Federal Trade Commission (FTC) has finalized its revised guidelines and released an updated set of FAQs to help guide the industry with respect to the proper use of customer reviews, influencer marketing, and traditional endorsements and testimonials.
The new Guides are over 80 pages. We will dive into specific sections in greater depth in the coming weeks, but here are some highlights:
- Expanded and clarified definition of “endorsements” and “endorsers.” The revised definitions state that “endorsements” might include tags and “likes,” depending on the circumstances. Bots and nonexistent entities or persons purporting to provide endorsements or reviews are considered endorsers.
- Material connections. The Guides reiterate the FTC’s position that material connections between endorser and advertiser should be disclosed but clarify that a “material connection needs to be disclosed when a significant minority of the audience for an endorsement does not understand or expect the connection.” Per the FTC, certain well-known influencers may be so closely identified with a particular brand that almost everyone knows of the connection. Furthermore, followers of well-known influencers expect that they endorse products only when paid (but the FTC did not identify specific influencers fitting these descriptions). Instead, it states that whether any connection is not expected by an audience is a factual question that might require empirical testing.
- Disclosures. The Guides’ definition of “clear and conspicuous” aligns with the Commission’s guidance in other areas, including that an online disclosure should be “unavoidable.” If users can view an endorsement but must click a link labeled “more” to see the disclosure, the FTC will not consider this disclosure sufficiently clear and conspicuous. This guidance could forecast changes for the FTC’s updates to its Dot Com Disclosures.
- Purchasing “likes.” The Guides state that it is a deceptive practice for advertisers to purchase or create indicators of social media influence and misrepresent these in advertising.
- Liability of intermediaries. Section 255.1 now addresses intermediaries like advertising agencies, public relations firms, review brokers, and reputation management companies. The revisions state that such entities might be liable for their roles in “creating” ads containing endorsements that they know or should know are deceptive.
- Changing the likeness or image of endorser. The Guides state that an endorsement displaying the image or likeness of a person other than the actual endorser is deceptive if it misrepresents an attribute that would be material to consumers, e.g., an endorser’s complexion in an acne treatment ad.
- Reformulated products. The revised Guides clarify that neither the advertiser not the endorser is required to take down or delete historic posts preceding a product’s reformulation. However, if an original post is shared or reposted after the product’s reformulation, the advertiser should confirm that the reformulation does not change the endorser’s views from the original post.
- Customer reviews. The revised Guides address the solicitation, use, and misuse of customer reviews. Interestingly, the Guides were issued one day before the FTC issued a Notice of Proposed Rulemaking Banning Fake Reviews and Testimonials. The Endorsement Guides state:
- The FTC considers it a misleading practice for an advertiser to forward only favorable reviews to a third-party website or omit unfavorable reviews.
- If an advertiser suppresses negative reviews on its website, the FTC would consider the resulting product pages misleading. However, the FTC clarified that it will apply the Guides consistently with the Consumer Review Fairness Act (CRFA), which states that sellers are not required to display customer reviews with unlawful, harassing, abusive, obscene, vulgar, or sexually explicit content; content that is inappropriate with respect to race, gender, sexuality, or ethnicity; reviews that the seller reasonably believes are fake; reviews that “contain the personal information or likeness of another person, or [are] libelous,” content “that is clearly false or misleading,” or “trade secrets or privileged or confidential commercial or financial information.” The FTC stated, however, that a seller should apply its criteria uniformly to all reviews. The Commission also clarified its belief that customer service is related to a seller’s products when provided by that seller’s customer service department.
- The Guides include a new example addressing “review gating,” or asking purchasers to provide feedback but inviting only those with positive feedback to post online reviews. The example states that this “may be unfair or deceptive if it results in the posted reviews being substantially more positive than if the marketer had not engaged in the practice.” But the FTC clarified that nothing prohibits businesses from asking happy customers for reviews.
- Review sites. The Guides provide that the FTC considers review websites deceptive if they appear to be independent when they are not. Similarly, the FTC takes the position that paid rankings on review sites are deceptive even if the site discloses that rankings are impacted by payment. However, if the review site is not paid for higher rankings, and instead receives commissions like affiliate referral fees, the site would not be deceptive, as long as it adequately discloses this payment.
- Endorsements by employees. Employers can limit liability for its employees’ undisclosed material connections by taking steps to ensure compliance, including appropriately training employees and monitoring endorsements. The Guides clarify that an employer need not monitor employees’ reviews or endorsements unless the employer solicits them, or otherwise has reason to know about them.
- Endorsements directed to children. New Section 255.6 states that endorsements in ads directed to children may be of special concern because of the character of the audience. The FTC did not provide additional guidance on disclosures in children’s advertising, but notes that research suggests disclosures will not work for younger children. FTC staff recently held a workshop to learn more about advertising to children in digital media, including endorsements directed to children, and will likely issue more guidance.
Although the Guides do not have the force of law, they reflect the FTC’s position on endorsement practices that are deceptive. Practices inconsistent with the Guides could result in actions by the FTC or a state attorney general alleging Section 5 violations. The proposed rule on reviews will have the force of law if it becomes final.