Who: US Federal Trade Commission (FTC)
Where: United States (US)
When: 29 June 2023
Law stated as at: 7 September 2023
What happened:
The FTC has issued advertisers with Guides Concerning the Use of Endorsements and Testimonials in Advertising, which is guidance to ensure that their use of endorsements or testimonials comply with legal requirements prohibiting deceptive advertising. It specifically advises businesses on how to make sure consumers understand when celebrities, influencers or even regular consumers are compensated to promote or review their products.
The guides were updated on 29 June 2023. The changes include:
- Ensuring online consumer reviews are not misleading to consumers
The guides add a new principle which specifies 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. Companies are therefore advised to refrain from distorting consumer reviews by suppressing or editing them.
- Updated “endorser” and “endorsement” definitions
The updated guides make it clear that tags in social media posts and certain other types of communications “can be” endorsements. The FTC also clarifies that fake positive reviews used to promote a product are “endorsements.”
The definition of “endorser” has been expanded to capture both actual as well as fictious individuals, groups or institutions. An endorser therefore now includes virtual influencers (avatars and digital characters) as well as fake influencers, writers of fake reviews and non-existent entities that purport to give endorsements.
- New definition for “clear and conspicuous” disclosure
The 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.”
Therefore, using disclosure labels such as #ad won’t qualify as proper disclosure if it isn’t clearly visible to all users and both visual disclosures and audible disclosures may be required.
- Explanation of potential liability of advertisers, endorsers and intermediaries
The guides have been updated to clarify that the endorsers or influencers themselves, and intermediaries (like ad agencies and PR firms) may also be liable for making deceptive endorsement, alongside advertisers.
- New section on endorsements aimed at children
The guides contain a new section aimed specifically at endorsements in advertisements addressed to children and state 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” but the FTC hasn’t yet released any further guides. The FTC has stated its intention to explore potential actions for ads in digital media aimed at children.
Why this matters:
The guides feature several key additions addressing technological changes in how advertising is conducted, and advertisers’ increased reliance on online reviews, social media, and influencer endorsements. The updates were also closely followed by the FTC’s proposal of a new endorsement-related rule. As such, these changes serve as the latest signal of a demonstrated focus by the FTC to protect consumers, as well as to address growing trends in the advertising space as a result of new technologies (for example, “fake influencers”).
Businesses will need to take a holistic approach (from user interfaces for online reviews to social media guidelines) in reviewing current practices and processes surrounding endorsements to ensure compliance with the updated rules.
