FTC Issues Notice Of Penalty Offenses For Endorsement And Testimonial Marketing – Media, Telecoms, IT, Entertainment


On October 13, 2021, the Federal Trade Commission (FTC) despatched a
Notice of Penalty Offenses to greater than 700 companies, together with
prime client manufacturers, retailers, e-commerce platforms and
promoting companies, concerning practices involving buyer
endorsements, testimonials, opinions, influencer advertising and marketing and
native promoting that it considers to be misleading. The Notice
didn’t allege that any of the recipients had engaged in
wrongdoing. Instead, its objective is to determine a foundation for the
FTC to hunt penalties if the recipients are discovered to have engaged
in these allegedly misleading practices after receiving it.

The FTC’s guidelines require that each one endorsements and
testimonials mirror the precise experiences of the endorser. The
guidelines additionally require entrepreneurs and their companions to reveal any
materials connections between an endorser and the marketer, in order that
shoppers can depend on correct opinions and different testimonials, and
simply differentiate between paid ads and different
statements made in change for a profit offered by the corporate,
and natural statements or opinions made by people.

The FTC issued up to date pointers on endorsements and
testimonials in 2009 and extra native promoting steering in 2015 to handle social media
influencers and promoting on social platforms the place it might be
troublesome to tell apart promoting content material from editorial
content material, and genuine opinions or endorsements from paid opinions or
paid endorsements. The FTC has since introduced quite a few enforcement
actions in opposition to promoting companies, manufacturers, sport firms, sport
networks, and even influencers and expertise who’ve flouted the

The current warning to prime manufacturers, social or different e-commerce
platforms and companies is the most recent warning shot by the regulators
who warned particular person expertise and influencers of those pointers in
2017. Such notices are normally adopted by a number of enforcement
actions, which can now embrace financial penalties.

The FTC’s focus on this newest warning is on the regulatory
requirement that each one endorsements and opinions should be correct when
made by the endorser and proceed to be the sincere and real
expertise the endorser had with the marketer’s product,
whether or not such endorser is paid or not. Where an endorser is
“paid,” the FTC’s pointers require a transparent and
conspicuous disclosure (corresponding to “paid testimonial,” or in
the influencer context a disclosure made by the influencer on
social media corresponding to “#advert,” “#paid,” or
“#model title ambassador”). One essential consideration
for entrepreneurs to know is that “paid” can imply many
various things, together with that the endorser was given a free
product to attempt, was paid money, fairness or different monetary
consideration, or is an worker, contractor, investor or different
agent of the marketer.

The FTC has in quite a lot of its enforcement circumstances, together with
actions in opposition to Lord & Taylor and Warner Brothers, targeted on
the model or marketer itself, who the FTC notes has management over
the assorted contributors in a advertising and marketing marketing campaign and is subsequently
primarily accountable to make sure that opinions and endorsements of
their merchandise are genuine and disclosures are being made by the
numerous influencers or different contributors within the advertising and marketing
marketing campaign. The FTC has particularly required entrepreneurs to not solely
make sure that influencers or different paid endorsers are contractually
required to make disclosures, but in addition to fairly monitor that
disclosures are being made in a transparent and conspicuous method, and
terminate non-compliant influencers or endorsers. The marketer or
platform can be accountable the place practicable to take away faux or
inaccurate opinions from their owned and operated channels, and
guarantee if the marketer is selling a assessment, together with boosting a
social submit by way of paid media, that the services or products is
according to the claims or experiences of the endorser and
correct as to the attributes of the services or products itself.

Companies, whether or not or not they acquired the Notice, ought to see
these letters as a warning to assessment their advertising and marketing actions and
implement practices which can be compliant with FTC guidelines on
endorsements and testimonials. This is particularly essential given
that FTC penalties for violation of its guidelines concerning unfair or
misleading promoting will be as much as $43,792 per violation.
Multiplied by every non-compliant testimonial, Instagram submit or
native weblog submit, this penalty can shortly grow to be very vital
and a serious threat to companies.

Key Recommendations

In gentle of this warning shot from the FTC, what ought to
companies who use influencers or who solicit buyer
endorsements, case research, or testimonials do now? At a minimal,
they need to do the next:

Understand how they’re sourcing and utilizing third-occasion
content material, together with opinions, to market their model. Companies ought to
establish the contributors of their advertising and marketing ecosystem which may be
working with them, together with companies, publishers and influencer
companions, and perceive their respective practices round
endorsement and testimonial advertising and marketing.

Work with their advertising and marketing groups to create a normal set of
promoting disclosures and advertising and marketing agreements and insurance policies for
third-occasion companions, corresponding to influencers.

Review their phrases of service to make sure that they correctly
deal with endorsement and testimonial advertising and marketing to their prospects or

Review inner social media insurance policies and practices to
guarantee workers and different contractors or brokers are compliant with
the FTC pointers.

Enact a course of to watch compliance (or outsource
monitoring) and terminate non-compliant companions.


Digital advertising and marketing typically strikes at a breakneck tempo, but
transparency is ever extra crucial each to regulators and
shoppers. Once firms higher perceive how they’re partaking
third events to market their services, it’s
essential for the advertising and marketing, enterprise and authorized groups to work
collectively to develop a course of to make sure compliant advertising and marketing
practices, together with disclosures which can be FTC compliant, and
advertising and marketing agreements and operational practices that appropriately
defend the enterprise.

The FTC’s guidelines concerning endorsement and testimonials cowl
a variety of selling actions and embrace detailed steering,
together with when acceptable disclosure is required. The Notice
reinforces the truth that the FTC continues to actively implement
non-compliance. We suggest visiting the FTC’s on-line “Business Center,” a useful useful resource for
companies to know these guidelines with no authorized background.
The FTC additionally developed a really useful FAQ as a useful resource and has issued disclosure pointers on the right way to clarify and
conspicuous disclosures.

Fenwick is out there to offer kinds, steering, coaching
supplies or in any other case advise on how these guidelines could apply to
particular person firms, and establish one of the best subsequent steps for decreasing
threat of non-compliance.

The content material of this text is meant to offer a basic
information to the subject material. Specialist recommendation must be sought
about your particular circumstances.

https://www.mondaq.com/unitedstates/promoting-advertising and marketing-branding/1124406/ftc-points-discover-of-penalty-offenses-for-endorsement-and-testimonial-advertising and marketing

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