DMN3 Blog

You may or may not have noticed that last October the Federal Trade Commission (FTC) published its latest revision to guides governing endorsements and testimonials in advertising. The last revision dates back to 1980.  If you have not revised your use of endorsements and testimonials in both online and offline advertising based on the new Guide, you could find yourself in violation of federal law!

The new Guide makes dramatic changes to the previous revision and addresses the online world as well as other advertising mediums. It treats both endorsements and testimonials the same. As such, the Commission uses the term “endorsements” to cover both “endorsements and testimonials” and situations in their use, FYI. 

The Commission defines endorsement as any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser. Endorsers may be an individual, group or institution.

It should be noted that the new Guides are administrative interpretations of the law intended to help advertisers comply with the FTC Act. They are not binding law, but represent the general principles that the FTC will use in evaluating endorsements and testimonials. The Commission would still have the burden of proving that the use of specific testimonials or endorsements was deceptive and violated the FTC Act.

The FTC is saying that endorsements must reflect the honest opinions, findings, beliefs, or experiences of the person, group or organization providing the endorsement. The endorser cannot convey any deceptive representation any more than the advertiser can.  It also states that any material connections between the advertiser and endorser (payments or free merchandise) must be disclosed. Advertisers are liable for false or unsubstantiated claims and for failure to disclose any material connections between them and the endorser. It should also be noted that the endorser may also be held liable for fraudulent claims made in their endorsements.

The new Guides attempts to define consumer, expert and organization endorsements and the circumstances that guide their use.  Expert is defined as an individual, group, or institution whose knowledge is superior to what an ordinary individual generally acquires. Under this interpretation, a race car driver would be defined as an expert about cars and car parts, etc. and would be bound to use the guidelines concerning expert endorsements when endorsing a brand of tires, for example. The same could be said of a computer technician who endorses a brand of computer products.

The last time these Guides were revised was 1980, long before today's Internet, blogs, social media, Web sites, etc. While the Guides are generic in the sense that they govern all advertising as defined above, they are creating rules for what has been, up to now, a no rules environment for the online arenas. It is no secret to those in the business that advertisers exchange payments or free products for endorsements without stating so to consumers, especially those endorsers with Twitter and Facebook accounts.

Celebrities are often paid as representatives for their endorsements outside of traditional advertising, e.g., talk shows, social media, etc. This too must be disclosed under these guidelines. This resulting transparency could impact the consumer’s view of endorsements derived from material connection.

 A cold, hard look at some of the new guidelines: 

• Creating advertising endorsements out of context. Endorsements must reflect the actual substance of the original content. We have all seen movie advertising that takes a few positive words out of critical review when the overall nature of the review was negative.
• Using “Results Not Typical” for those endorsements of making millions in real estate or losing lots of weight using the advertised product, etc. Now the advertiser must provide the “typical or average” results along with the claims in the endorsement.
• Using consumer endorsements for products that they never used. Advertisements that depict endorsements by actual consumers must use actual consumers, or disclose that the endorser is not an actual user of the product.
• Using implied or so called "Experts" whose expertise represented does not match their actual expertise. Such experts must actually evaluate the features or characteristics of the product in their area of expertise, including such things as an examination or testing as extensive as other experts would have carried out before endorsing the product. The use of generic “doctors” implying substantial experience in the product area would likely be deceptive under the guidelines if they actually did not possess that expertise.
• Using seals of approval by third party organizations unless such endorsements reflect that it did conduct valid scientific tests that support the endorsement message. In other words third party credibility indicators must reflect accurately what they are implying in their use by advertisers.
• Providing undisclosed benefits for endorsements and links in blogs and social media to the person posting them. Such benefits go beyond payments, but also to include receiving free products or services for possible endorsements.

If you are a consumer, these revisions will create greater transparency and make it much more difficult for advertisers to use misleading or fraudulent endorsements or testimonials to push their product or service. 

If you are an advertiser or someone materially connected to one, you probably feel that your message is being muzzled by the government and leaning to ascribe to the defense of “free speech" and "buyer beware."  But, if the endorsement or testimonial is on the up and up, you probably don’t need to fear the FTC or consumer complaints.

Nonetheless, all advertisers and communicators should be aware of the Guides' revisions and make sure to educate those providing you testimonials and endorsements, and who in turn, are receiving a material benefit from you for them.

You can find the guides on the FTC Web site and as part of the Code of Federal Regulations (16 CRF Part 255).  You can also view them here: Guides Concerning the Use of Endorsements and Testimonials in Advertising.

 Based on my own observations, it appears that the new Guides are largely being ignored. Advertisers are probably counting on the FTC not having enough resources to target and convict all but the most egregious offenders.

In my next post I will discuss how companies are countering negative online comments or reviews as part of their “Reputation Management” efforts. The FTC Guides covering endorsements or testimonials in advertising are being ignored or so liberally interpreted so as to be misleading to consumers targeted by these online reputation management efforts.

Stay tuned…