An Overview of the FTC’s “Guides Concerning the Use of Endorsements and Testimonials in Advertising”
The U.S. Federal Trade Commission (FTC) has released a PDF document “Guides Concerning the Use of Endorsements and Testimonials in Advertising” that describes changes to the rules of disclosure for advertising endorsements and testimonials. These guides update existing rules regarding advertising disclosure to incorporate social media and go into effect tomorrow, Dec 1, 2009. I hope that a brief overview of the Guides will be a useful reference.
I do not work for the Federal Trade Commission, have no connection to the organization to disclose, and since this article is not an endorsement in the first place, I guess I didn’t even need to say that, but… given the topic I figured it couldn’t hurt!
Actually, my important disclaimer is I wrote this post with my understanding of the rules, from reading source documents and walking through the “Guides” PDF document linked above. I am not a lawyer. Nothing I say here should be construed as legal advice. Nothing. At all. In the least. Did I remember to mention that I am not a lawyer?
I am hoping that an overview of the new disclosure rules will be helpful. Please feel free to comment on anything I’ve gotten wrong, right or anything else important that got missed!
Is Every Product or Service Description an Endorsement?
All descriptions of products and consumer experiences in “consumer-generated media” are not considered to be endorsements by the Commission. The Guides state that the rules apply to situations where, “viewed objectively, the relationship between the advertiser and the speaker is such that the speaker’s statement can be considered “sponsored” by the advertiser and thus an “advertising message.”
Why Self-Regulation Did Not Win
Some commenters suggested that the industry should be allowed to self-regulate. The Commission clearly disagreed with this position, stating that “although industry self regulation certainly can play an important role in protecting consumers as these new forms of marketing continue to evolve and new ones are developed, self-regulation works best when it is backed up by a strong law enforcement presence.”
The specifics of such a strong law enforcement presence were not defined clearly in the document, however the intent to back up these rules with potential legal action is clear.
When Are You Not “Sponsored”?
- You are acting solely independently.
- You have no financial interest in the product or service being discussed.
- Your actions and statements are not part of any campaign or project connected to the product or service being discussed.
- You have not received compensation or free or discounted samples, products or services in exchange for your comments, and have no reason to expect same in the future after any commentary is published.
- You have purchased the product or service that you are commenting on favorably with your money (as opposed to a company or organization’s money, or having been reimbursed by a company or organization for the purchase).
- You received the product or service free, but this is ok if and only if you would have received the free product or service due to an existing, public promotion. (You remember I’m not a lawyer and this isn’t legal advice, right? The Guide provides some examples, and if you have any question whether what you’re doing is legit… maybe the right answer is to disclose something, since the appearance of misbehavior may impact your business even with the FTC deciding to “have a discussion” with you?)
When Are You “Sponsored”?
The FTC makes it clear in this document that they will not be providing completely explicit guidance to define sponsorship, since it can be created in many forms. The basic message is that they will look at potential violations on a case by case basis. Here is an interesting quote from p9 about this issue:
“An advertiser’s lack of control over the specific statement made via these new forms of consumer-generated media would not automatically disqualify that statement from being deemed an “endorsement” within the meaning of the Guides. Again, the issue is whether the consumer-generated statement can be considered “sponsored.”
In other words, just because a clearly identified advertiser did not direct you to make a positive statement about a product or service does not automatically mean that comments you make are excluded from being an endorsement.
If any of the below are true, then you are likely to be considered “sponsored” for the purposes of disclosure:
- You are not acting solely independently.
- You have any sort of financial or job interest in the product or service being discussed.
- Your actions and statements are part of a campaign or project connected to the product or service being discussed.
- You have received any compensation, or free or discounted samples, products or services in exchange for your comments, or have a reason to expect same in the future after any commentary is published.
How To Get In Trouble
Here are four of the obvious ways to get yourself in trouble with the new rules:
- Make statements that appear to be endorsements of products or services that you have not really used, or are endorsing features or portions of services with which you have no direct experience. This is illustrated in a quote from p21, describing a situation in which a celebrity is “liable only for statements that he personally made that were clearly contrary to what he observed with his own eyes.”
- Make statements that are determined to be “sponsored” in light of the FTC rules, without disclosing your connection to the sponsoring entity.
- Make an endorsement of a product or service, and assume that a “statement of typicality” such as “results not typical of most users” will protect you (there are pages of discussion explaining that this is not a safe harbor!)
- Make an endorsement of a product or service without appropriate disclosures, in violation of your company’s blogging or publishing policies, assuming that anyone will go after your employer instead of you (explicitly called out in the Guide)
Who Is Responsible For Disclosures?
Before “consumer-generated media”, it was assumed that the advertiser was responsible for disclosures. Now the tables have turned, and both advertisers and endorsers are becoming liable for disclosure of their connections. Here is a quote from p39 on this topic:
“The recent creation of consumer-generated media means that in many instances, endorsements are now disseminated by the endorser, rather than by the sponsoring advertiser. In these contexts, the Commission believes that the endorser is the party primarily responsible for disclosing material connections with the advertiser. However, advertisers who sponsor these endorsers (either by providing free products – directly or through a middleman – or otherwise) in order to generate positive word of mouth and spur sales should establish procedures to advise endorsers that they should make the necessary disclosures and to monitor the conduct of those endorsers.”
What’s a Good Disclosure?
“When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed.”
Although I did not find explicit guidance in the Guide for whether disclosures must be made on a post by post or comment by comment basis, my read of the examples suggest that there is some guidance on this topic.
There is an example on p79, describing a college student who was blogging about video games, and was considered an expert for the purposes of the example. His readers would not necessarily know of his connection to the game system manufacturer, who sends him free copies of the system for review. The guidance provided states:
Accordingly, the blogger should clearly and conspicuously disclose that he received the gaming system free of charge. The manufacturer should advise him at the time it provides the gaming system that this connection should be disclosed, and it should have procedures in place to try to monitor his postings for compliance.
This statement contains a key nugget that clarifies the FTC’s intent in the case of post by post or comment by comment social media disclosures. This statement includes the phrase monitor his postings for compliance, which clearly indicates an expectation that each published posting would include a disclaimer about his connection to the manufacturer.
This disclosure can be easily done, and can be automated by templates in most blogging environment. How to do this effectively within the restricted length micro-blogging or status update sized posting seems to be an open question.
The Bottom Line
The Commission will determine any case on a case by case basis. They’ll be looking for reasonable disclosure and likely have little humor about any hint of evasive attempts to game the intent of the rules. They’ve explained this in more formal language starting on p45:
“All Commission law enforcement decisions are, and will continue to be, made on a case-by-case basis, evaluating the specific facts at hand. Moreover, as noted above, the Guides do not expand the scope of liability under Section 5; they simply provide guidance as to how the Commission intends to apply governing law to various facts. In other words, the Commission could challenge the dissemination of deceptive representations made via these media regardless of whether the Guides contain these examples; thus, not including the new examples would simply deprive advertisers of guidance they otherwise could use in planning their marketing activities.”
I hope this overview is helpful. This all makes more sense having read through the details of the Guide, and I encourage you to read from the source if you can. It’s not too densely written, and gives many interesting examples of potential issues with the FTC’s guidance on how they would handle those hypothetical cases.
Happy reviewing and disclosing!