Advertisers Beware: New FTC Guidance Signals Tough Stance on Endorsements
The Federal Trade Commission (FTC) recently released new guidance regarding the use of endorsements in advertising. The new guidance is a “must read” for marketers that feature endorsements from celebrities or consumers in their advertising, as well as for any companies that operate contests or sweepstakes on social media.
What is an Endorsement?
An “endorsement” is an advertising message (including verbal statements, demonstrations, or depictions) that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser. Under the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising (Endorsement Guides), endorsements must reflect the honest opinion of the endorser and can’t be used to make a claim that the product’s marketer could not legally make on their own.
Moreover, the FTC has long held that if an endorser has been paid to endorse a product or if there is some other “material connection” between the endorser and advertiser, then the connection should be fully disclosed unless the material connection would be expected or apparent to consumers. For example, although it may be obvious to consumers that a famous athlete has been paid to wear a particular brand of athletic clothing, consumers may not expect the athlete to have been paid to endorse products or services such as vitamins or laser eye surgery, particularly if the endorsement occurs on the athlete’s social media page or during a television interview.
The FTC’s new guidance is intended to supplement and clarify the FTC’s Endorsement Guides. The new guidance, entitled The FTC’s Endorsement Guides: What People Are Asking, essentially provides answers to frequently asked questions about the Endorsement Guides. Most notably, however, the new guidance underscores the FTC’s fairly strict interpretation of what constitutes an endorsement.
The new guidance covers several critical points for marketers:
The Medium Doesn’t Matter: The guidance clarifies that the Endorsement Guides apply to social media just as they do to television or print advertising. Thus, all of the disclosure requirements apply on space-constrained Twitter just as much as they do in an infomercial.
Social Media Contests and Sweepstakes: The guidance reaffirms the FTC’s position that social media contests or sweepstakes have certain disclosure requirements under the Endorsement Guides. As the FTC initially stated in a guidance letter to Cole Haan regarding a Pinterest contest, the Commission takes the view that consumers who are required to endorse a company or their products or services in order to enter a contest or sweepstakes must disclose that they are participating in a contest or sweepstakes. For example, if a marketer requires consumers to post a photo of their products on Instagram for a chance to win a prize, then they must require the consumer to include a hashtag such as #sweepstakes. Allowing consumers to abbreviate the word (i.e. #sweeps) is not sufficient because, according to the FTC, consumers do not understand what the shortened version means.
Celebrity Endorsements on Social Media: Material connections must be disclosed unless the connection would be obvious to consumers. Sometimes a gray area can arise on social media. Many celebrities tout their favorite products from their Twitter or Facebook accounts. Some of them are paid to do so. According to the FTC’s new guidance, whether a disclosure is required depends on consumer expectation. Whereas a celebrity who is a well-known spokesperson for a particular product may not have to disclose that she is being paid every time she tweets about the product, a celebrity who gets paid to endorse a variety of products on her Twitter account may need to disclose to consumers that each tweet is a paid endorsement. The disclosure requirement all depends on whether the celebrity’s Twitter followers are aware of the relationship between endorser and advertiser. Given that such a relationship may not always be apparent, it is important for marketers and endorsers to carefully craft their social media messages to avoid violating the Endorsement Guides.
It’s Not All About Money: The Endorsement Guides require advertisers to disclose when there is a material connection between the endorser and the advertiser. A material connection is essentially anything that could affect the credibility of the endorsement. The new guidance notes that even an incentive with no financial value might affect the credibility of an endorsement. For example, according to the FTC, the opportunity to appear on television likely constitutes a material connection that should be disclosed. Thus, if an advertiser told a consumer that they might be featured in the advertiser’s upcoming television commercial if they agree to endorse the advertiser’s product on camera, then the advertiser should disclose the connection between the advertiser and consumer. The key is whether the advertiser is influencing what the endorser has to say.
Consider the Employer-Employee Relationship: In some circumstances, the relationship between an employer and employee constitutes a material connection that must be disclosed if an employee is going to endorse their company or its products or services. For example, if employees decide to post glowing reviews of their company’s new products on their personal Twitter or Facebook pages, the employer must make sure that the employees are clearly disclosing their relationship to their employer. For situations like this, it is helpful for companies to have social media guidelines in place to inform employees of the need for such disclosures.
The above examples provide just a few of the key takeaways in the FTC’s new guidance. Marketers should be sure to read the full document, available here, before launching any new advertising programs that feature consumer or celebrity endorsements, as the guidance is likely to have a significant impact on FTC enforcement decisions over the coming months and years.
For additional questions about the FTC’s new endorsement guidance, or advertising issues more generally, please contact Sarah Bruno, Anthony Lupo, Eva Pulliam, Matt Mills or Dan Jasnow.