November 3, 2009
Previously published on October 16, 2009
In an effort to stem false or misleading endorsements, the Federal Trade Commission (“FTC”) revised its Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Guides”) on October 5, 2009. When the Guides were last updated in 1980, the internet was in its infancy. By contrast, today’s blogs, Twitter® and Facebook® offer a fertile platform for endorsements as celebrities and bloggers announce their favorite restaurants, brands, and travel plans.
Among other revisions, the Guides now address endorsements in emerging online communication channels where paid endorsements might falsely come off as gratuitous praise. Such endorsements or testimonials are commonplace and perfectly appropriate in paid advertising where the relationship between the advertiser and endorser is overt and disclosed. However, the fast-evolving world of social media has led to increasing instances where seemingly unsolicited recommendations are made in exchange for clandestine freebies. The new Guides acknowledge, and attempt to cure, the difficulty for consumers in distinguishing between spontaneous accolades and quid pro quo marketing purchased for money, gifts or favors.
According to Guides that become effective on December 1, 2009, bloggers and other word-of-mouth endorsers must disclose any material connections between themselves and an advertiser. The FTC intends to cover all active representations and all material connections. For example, the new Guides require a celebrity to disclose a hotel’s provision of a free stay in exchange for the celebrity’s endorsement in a blog or a Tweet. Even a seemingly de minimus act like becoming a fan of the hotel on Facebook® would require a disclosure of gifts or freebies that prompted it. Additionally, Twitter’s limit of 140 characters provides no safe haven for celebrity endorsements. Richard Cleland, Associate Director for the FTC’s advertising division, recommends abbreviating a disclosure if necessary, but states that “if you can't make the disclosure, you can’t make the ad.” The FTC believes that transparency in these “behind the scenes” connections based on payments, free products, or other benefits will enable consumers to appropriately judge the endorser’s credibility. Notably, and of particular concern to advertisers, the advertiser as well as the endorser may be liable for the endorser’s false or unsubstantiated advertising claims and failures to make proper disclosures. While the enforcement mechanism has yet to be fully announced or analyzed, the new Guides call for penalties as high as $11,000 per violation.
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