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FTC Finalizes Updates to Endorsement Guides, Reflecting Increased Focus on Online Reviews and Social Media Marketing

By Baldassare Vinti, Jeffrey Warshafsky, Jennifer Yang & Anisha Shenai-Khatkhate on July 1, 2023
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This week the FTC announced that it finalized its revisions to the Endorsement Guides, which give advertisers guidance on ensuring that their use of endorsements or testimonials complies with the FTC Act. At the same time, the FTC also announced an updated accompanying guidance document, “FTC’s Endorsement Guides: What People are Asking.” While the revised Endorsement Guides still require advertisers to comply with the requirements we previously discussed in our On Notice series, they feature several key additions addressing technological changes in how advertising is conducted, and advertisers’ increased reliance on online reviews, social media, and influencer endorsements.

Some key updates to the Endorsement Guides are described below.

Increased Focus on Online Consumer Reviews

The updated Endorsement Guides specify that advertisers should refrain from “procuring, suppressing, boosting, organizing, publishing, upvoting, downvoting, or editing” consumer reviews of their products in a way that distorts or otherwise misrepresents their products. They also include new guidance on the use of incentivized consumer ratings or reviews. Specifically, the updated Endorsement Guides state that even if an incentivized review is accompanied by a sufficiently clear and conspicuous disclosure, “the practice could still be deceptive if the solicited reviews contain star ratings that are included in an average star rating for the product and including the incentivized reviews materially increases that average star rating.” In such cases, the average star rating would also need to include a clear and conspicuous disclosure.

These additions reflect the FTC’s increased focus on combating deceptive online reviews – a focus it has made clear in recent years through guides for businesses publishing online reviews (Guide for Marketers, Guide for Platforms) and actions against advertisers alleging they posted false positive reviews or suppressed negative reviews. For example, earlier this month, the FTC reached a $4.2M settlement with Fashion Nova, an online fashion retailer, in a case alleging that Fashion Nova suppressed negative reviews from its website.

Based on the FTC’s past guidance, when soliciting and paying for online reviews, companies should avoid:

(1) asking “for reviews from people who haven’t used or experienced the product or services”;

(2) asking “your staff to write reviews for your business”;

(3) asking family and friends for reviews; and

(4) conditioning any incentive to submit a review on the review being positive.

Further, advertisers should not impose additional barriers to reviews or discourage consumers from submitting a negative review instead of a positive one.  For example, if an advertiser does not require a consumer posting a positive review to include their date of purchase, the advertiser should not require a consumer posting a negative review to include their date of purchase either.

Expanded Definitions of “Endorser” and “Endorsement”

The revised Endorsement Guides update the definition of “endorser” to include virtual influencers, such as avatars or digital characters, and update the definition of “endorsement” to include fake reviews, statements by virtual influencers, and tags in social media.

These expanded definitions reflect the rapidly changing technological landscape in which advertising is taking place. The FTC’s inclusion of virtual influencers, in particular, will likely become increasingly important as brands continue to explore the use of AI in marketing. While virtual influencers are not all that common yet, many believe this trend may be the future of social media advertising. One particularly famous virtual influencer, Lil Miquela (a brand ambassador for teen retailer PacSun) currently has almost 3 million followers on Instagram, and was named one of Time Magazine’s “25 Most Influential People on the Internet.”

New Definition for “Clear and Conspicuous”

As in past versions of the Endorsement Guides, the updated Guides also require that material connections be “clearly and conspicuously” disclosed. But unlike in past versions, the updated Guides include a definition for what does (and does not) constitute a “clear and conspicuous” disclosure. Specifically, the updated Guides clarify that for a disclosure to be “clear and conspicuous” it must be “difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers.” On social media or the internet, the disclosure must be “unavoidable.” The FTC further explains that the disclosure must match the format of the accompanying endorsement. If the endorsement is made visually, the accompanying disclosure must also be made visually; if the endorsement is made audibly, the disclosure must be made audibly. And if the endorsement is made both audibly and visually, the disclosure must be made in the ad’s visual and audio portions.

The new Endorsement Guides also instruct that for a visual disclosure to be “clear and conspicuous,” it must stand out from accompanying text or other visual elements “by its size, contrast, location, the length of time it appears, and other characteristics,” so that it is “easily noticed, read, and understood.” For an audio disclosure to be “clear and conspicuous,” it must be “delivered in a volume, speed, and cadence sufficient for ordinary consumers to easily hear and understand it.”

The new Endorsement Guides further clarify that advertisers may not simply rely on a social media platform’s built-in disclosure tool, if the disclosure provided by that tool is not “clear and conspicuous.”

All these requirements are consistent with the FTC’s past guidance on the use of endorsements on social media. For further discussion of what constitutes a “clear and conspicuous” disclosure under FTC guidance, see our past post on this topic.

Liability for Endorsers and Intermediaries

Though the previous version of the Endorsement Guides made it clear that advertisers could be liable for deceptive advertising by their endorsers or influencers, the updated Guides clarify that the endorsers or influencers, themselves, and intermediaries (like ad agencies and PR firms) may also be liable for making deceptive endorsements. For instance, the FTC added an example in which an influencer who did not limit their statements to their personal experience using a product and did not have a reasonable basis for their broad claim about a product’s efficacy would be subject to liability for the misleading or unsubstantiated representation in the endorsement.

This addition perhaps does not come as a surprise, in light of the FTC’s recent warning letters to individual influencers accused of making deceptive endorsements, which stated that “[i]ndividual influencers who fail to make adequate disclosures about their connections to marketers are subject to legal enforcement action by the FTC.” Nonetheless, it’s an important reminder that everyone involved in the creation of an ad (marketers, agencies, and influencers, alike) has a responsibility to make sure that material connections have been disclosed, and that the endorsement is not otherwise deceptive or misleading.

Special Guidance for Endorsements Directed at Children

The updated Endorsement Guides contain a new section aimed specifically at endorsements in advertisements addressed to children. The Guides state that such endorsements may be of “special concern,” due to the “character of the audience.” As a result, “[p]ractices that would not ordinarily be questioned in advertisements addressed to adults might be questioned in such cases.”

This addition seems to echo recent concerns about the potential effects of social media and influencer advertising on children and teenagers. Marketers whose ads may be aimed at children (or even if not expressly or solely aimed at children, may appeal to children) should be particularly careful with respect to the use of endorsements, reviews, and testimonials.

***

While the modernized Endorsement Guides do include many key changes, none are all that surprising in light of the past FTC guidance, warning letters, and actions we have discussed on this blog. Watch this space for best practices on using endorsements and testimonials in advertising, and for updates on actions brought under the new Endorsement Guides.

***

Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at bvinti@proskauer.com /212-969-3249

 

Photo of Baldassare Vinti Baldassare Vinti

Baldassare Vinti is a partner in the Patent Law and Intellectual Property Groups.

Baldo’s practice focuses on litigating patent, false advertising, trade secret, trademark and contractual matters in federal and state courts and before the International Trade Commission. He is a skilled intellectual…

Baldassare Vinti is a partner in the Patent Law and Intellectual Property Groups.

Baldo’s practice focuses on litigating patent, false advertising, trade secret, trademark and contractual matters in federal and state courts and before the International Trade Commission. He is a skilled intellectual property litigator with extensive experience in all aspects of litigation, including trials (jury and bench), Markman hearings, appeals before the Federal Circuit, case preparation and strategy, depositions, motion practice, and settlement negotiations. In the area of patent litigation, he has worked on cases involving a broad range of technologies, including medical devices, diagnostics, immunoassays, orthotics and prosthetics, proton pump inhibitor pharmaceuticals, dental implants, electronic medical records systems, wound dressings, pharmaceutical capsules, digital video compression, electronic book delivery and security systems, mobile phones and mobile media technologies, ATSC digital television standard, navigation, location-based services, bandwidth management, bar code scanning, irrigation equipment, waste management systems, laser inscription devices, and other related technologies. Baldo has represented numerous major corporations in patent litigations, including British Telecommunications PLC, Church & Dwight Co., Inc., Henry Schein, Inc., Maidenform Brands Inc., Mitsubishi Electric Corp., Ossur North America Inc., Panasonic Corp., Sony Corp., U.S. Philips Corp. and Zenith Electronics LLC.

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Photo of Jeffrey Warshafsky Jeffrey Warshafsky

Jeffrey H. Warshafsky is an associate in the Litigation Department. He is a commercial litigator with a particular emphasis on false advertising, trademark, and counterfeiting disputes. Jeff also advises clients on trademark portfolio management, anti-counterfeiting strategies, cybersquatting prevention, and other Internet-related trademark infringement…

Jeffrey H. Warshafsky is an associate in the Litigation Department. He is a commercial litigator with a particular emphasis on false advertising, trademark, and counterfeiting disputes. Jeff also advises clients on trademark portfolio management, anti-counterfeiting strategies, cybersquatting prevention, and other Internet-related trademark infringement matters.

Jeff is also a litigation department representative to the firm’s Associate Council.

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Photo of Jennifer Yang Jennifer Yang

Jennifer Yang is an associate in the Litigation Department. She has experience in a variety of commercial litigation matters, with an emphasis on false advertising and other intellectual property disputes.

While at Columbia University School of Law, Jennifer served as an editor of…

Jennifer Yang is an associate in the Litigation Department. She has experience in a variety of commercial litigation matters, with an emphasis on false advertising and other intellectual property disputes.

While at Columbia University School of Law, Jennifer served as an editor of the Jailhouse Lawyers’ Manual, and was on the staff of the Journal of Law & the Arts and the Journal of Gender and Law. She also was involved with the Sanctuary for Families Courtroom Advocates Project, working with victims of domestic violence to obtain temporary orders of protection. She continues to work with domestic violence victims through Proskauer’s pro bono partnership with Her Justice.

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Photo of Anisha Shenai-Khatkhate Anisha Shenai-Khatkhate

Anisha Shenai-Khatkhate is an associate in the Litigation Department. She is a commercial litigator with a particular emphasis on false advertising and consumer class actions, copyright disputes, and related intellectual property litigation. Anisha has experience representing and advising clients in a wide array…

Anisha Shenai-Khatkhate is an associate in the Litigation Department. She is a commercial litigator with a particular emphasis on false advertising and consumer class actions, copyright disputes, and related intellectual property litigation. Anisha has experience representing and advising clients in a wide array of industries including consumer products, music and entertainment, publishing, telecommunications, fashion and sports.

Anisha is an editor of and a frequent author for Proskauer’s advertising law blog, Proskauer on Advertising.

Prior to joining Proskauer, Anisha earned a B.A. in Neurobiology from Harvard University, and J.D. from Columbia Law School. While at Columbia, Anisha interned at Volunteer Lawyers for the Arts, helping to provide pro bono legal services to New York artists and arts organizations. She also served as an articles editor of the Columbia Science and Technology Law Review, and was the recipient of Columbia Law School’s Emil Schlesinger Labor Law Prize, awarded annually to the student most proficient in the subject of labor law.

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  • Posted in:
    Communications, Media & Entertainment
  • Blog:
    Proskauer on Advertising Law
  • Organization:
    Proskauer Rose LLP
  • Article: View Original Source

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