United States: FTC Announces Updated Endorsement Guides To Combat Deceptive Reviews And Endorsements

On June 29, 2023, the Federal Trade Commission (FTC) announced the publication of long-awaited updates to its Endorsement Guides (Guides), which provide the agency's official guidance to businesses and other advertisers on how to ensure advertisements making use of reviews or endorsements are truthful. These updates aim to provide a significant refresh to the Guides, last revised in 2009, and bring them current with the many new ways advertisers reach consumers in today's online marketplace emphasizing the need for "unavoidable" disclosures to consumers when they are engaging with advertising content and expanding the FTC's view of what constitutes an endorsement under the Guides.

Background

The Guides set forth general principles for evaluating endorsements and testimonials in advertising, and include definitions as well as illustrative examples that apply to real-world scenarios an advertiser may encounter. The FTC's 2023 updates to the Guides are critically important because the agency has provided very detailed guidance on their approach to reviewing whether an advertisement using endorsements, customer reviews or other testimonials is deceptive or misleading. Given the ubiquity of online advertising and the use of social media and influencers in marketing, these updates serve as an important reference for advertisers and their legal counsel to help avoid becoming the target of agency enforcement actions or consumer lawsuits.

In particular, the Guides have been updated in the following key respects:

Definitions and Scope

• Expanded the scope of what is considered an "endorsement" to clarify that it can include tagging in social media as well as fake reviews.
• Explained that if a significant minority of consumers would not expect or understand the connection, it must be disclosed.
• Expanded the scope of "endorsers" to explicitly include both virtual and fake reviewers (including nonexistent entities) and those who appear to be an individual, group or institution that purport to give endorsements. Moreover, in a commercial setting, it is considered deceptive to use fake followers to provide social influence.
  • The day after the publication of the updated Guides was announced, the FTC also announced the proposal of a new rule that would spell out prohibited practices involving fake reviews, review suppression, review hijacking and other deceptive practices involving consumer reviews. This announcement comes as no surprise as it follows an Advance Notice of Proposed Rulemaking back in October 2022.
• Added a definition for "clear and conspicuous" – which means difficult to miss and easily understandable by ordinary consumers or the targeted audience. The updated Guides state that in the case of internet or social media ads, clear and conspicuous means unavoidable, and that even using a platform's built-in disclosure tools may not be adequate under this standard.
  • In the companion FAQs, which were simultaneously updated alongside the Guides, the FTC uses an example of a video game being streamed by a paid reviewer. Including a prominent disclosure in the description and at the beginning of the stream is simply not good enough, and the FAQ states that the disclosure should be continuous and appear throughout the entire stream in case viewers tune in at a later point than the start.
  • In the Guides, the FTC also gives the example of a social media platform with a built-in "sponsored" disclosure that appears in white font on the video/image of the post itself. This disclosure would not be clear and conspicuous if, for instance, the image or video had a white backdrop in the same place the disclosure appears, since it would not be easy to see at a glance.

Clarification of Liability

• Liability of advertisers: Clarified that an advertiser may be subject to liability for misleading, atypical or unsubstantiated statements made through endorsements (whether the underlying statement is true or false) even where there is not a material connection between an advertiser and the endorser, and in scenarios where the endorser isn't liable for their own deceptive endorsements emphasizing that "retweets" or "reposts" by marketers require substantiation. Further clarified that advertisers should educate and monitor their endorsers to ensure they do not make misleading or deceptive statements, and even undertake remedial or corrective action as necessary.
• Liability of endorsers: Expanded on the ways in which an endorser may be liable, including for statements that are false or misleading, representations inconsistent with or beyond their own experience with the product, and failure to disclose an unexpected material connection with the advertiser/product.
• Liability of intermediaries: Replaced the unidentified term of "intermediaries" with specific entities the FTC intended to address, including advertising agencies, public relations firms, review brokers, reputation management companies and other similar intermediaries, all of whom may be liable for participating in or facilitating misleading ads involving endorsement or review practices outlined in the Guides.

Updates to Consumer Reviews Section

• Added additional guidance to the Guides regarding consumer reviews, going beyond issues of disclosing a material connection between the review and product. For example, if a product is reformulated and an advertiser wants to share or repost an old ad, the advertiser needs confirmation from the endorser that their views are still consistent with the new product. However, there is no obligation to delete an old ad as long as the date is clear and conspicuous.
• Advertisers should not take actions that have the effect of distorting or otherwise misrepresenting what consumers think of their products through "cherry-picking", procuring, suppressing, boosting, organizing, publishing, upvoting, downvoting, reporting or editing consumer reviews of their products.
• Some of the examples added to this section identify several practices that the FTC considers false or misleading when it comes to consumer review practices, including but not limited to:
  • Sorting reviews by favorability, such as putting highest star reviews at the top;
  • Hiding, deleting or otherwise suppressing unfavorable reviews, sometimes known as review hijacking;
  • Labeling reviews as "the most helpful" when the advertiser, not other consumers, makes that determination;
  • Buying or otherwise incentivizing positive reviews, especially fake reviews; and
  • Threatening reviewers who publish negative reviews.

Endorsements Directed to Children

The Guides have also been updated to include a cautionary note that endorsements in ads directed at children may be subject to additional scrutiny, such that practices that would not be considered misleading in the context of adults may be misleading when the target audience is children.

Key Takeaways

While the FTC has made significant changes to bring the Guides up to date in the modern world of the internet and social media, the general principles previously articulated by the FTC remain the same. Advertisers should not take actions that would mislead consumers regarding the quality or characteristics of their products, such as with sleight of hand involving consumer reviews or influencer campaigns on social media. Social media is a powerful tool that businesses can leverage to reach new customers or bring news to existing ones, but these updates reflect the fact that the FTC is not elevating form over substance and does not intend to allow new technology and marketplaces to be used as a way to avoid liability for misleading advertising practices.

Our recommendation for businesses that want to utilize endorsements and other testimonials in their online ads without running afoul of the rules set out in the newly updated Guides is to:

• Read the updated Guides (the examples, in particular) and assess their application to your business practices;
• Revise your current advertising and social media/influencer marketing policies as needed, or develop and implement them if you do not already have any in place;
• Review all disclosures you use to ensure they are unavoidable to consumers;
• Monitor your influencers' actions to confirm they are in compliance with the updated Guides;
• Seek guidance when you are unsure about how you, your influencers or your intermediaries should comply with the updated Guides; and
• Disclose, disclose, disclose your relationships with talent, influencers and other ambassadors at all times in a clear and conspicuous manner.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.