The Federal Trade Commission (FTC or Commission) issued the a lot anticipated ultimate revisions to its Guides Concerning the Use of Endorsements and Testimonials in Advertising (the Endorsement Guides) simply earlier than the July 4th weekend. The trade already had a glimpse of these revisions when the FTC issued its proposed updates in May 2022, however after its evaluate of the public feedback submitted in response to the proposed updates, the Commission additional refined the textual content and examples in issuing the ultimate revised Endorsement Guides and likewise offered extra particular steerage in an up to date model of its accompanying doc to the Endorsement Guides, FTC’s Endorsement Guides: What People Are Asking (FAQs).
This article is Part 2 of our two-part sequence analyzing the revised Endorsement Guides and the up to date FAQs, primarily as in contrast to the proposed updates in May 2022. See Part 1 for a dialogue on client evaluations, pretend evaluations and pretend customers and an expanded definition of “endorsement.”
Clear and Conspicuous Definition
The FTC adopted its beforehand proposed definition of “clear and conspicuous” in Section 255.0(f) of the Endorsement Guides. The phrase “clear and conspicuous” is mostly utilized in the Endorsement Guides in reference to the requirement to disclose any materials connection between the endorser and the vendor of the endorsed product (generally referred to as a “materials connection disclosure”). The new “clear and conspicuous” definition consists of the following key ideas:
A “clear and conspicuous” disclosure is “troublesome to miss (i.e., simply noticeable) and simply comprehensible by peculiar shoppers.” If an endorsement targets a specific viewers, similar to older adults, then “peculiar shoppers” embrace such focused viewers.
If an endorsement is made visually, then the disclosure ought to be visible; if an endorsement is made audibly, then the disclosure ought to be audible; if the endorsement is made each visually and audibly, then the disclosure ought to be visible and audible.
If the endorsement is made on an “interactive digital medium, similar to social media or the Internet, the disclosure ought to be unavoidable.”
The disclosure shouldn’t be inconsistent with something in the endorsement.
These ideas should not solely new and comply with the Commission’s place on disclosures typically, however the ultimate revisions to the Endorsement Guides and the up to date FAQs present extra particular steerage on how disclosures ought to be made and delineate the FTC’s views on efficient disclosures. For instance, the up to date FAQs present the following steerage:
“Ad,” “Paid advert,” or “#advert” are nonetheless acceptable for paid posts in addition to receipt of a free product.
“#endorsement” shouldn’t be clear sufficient.
“#ambassador,” “#consumer,” “#advisor,” “#advisor” and “#associate” are all problematic as a result of they’re ambiguous and complicated, however including the model title (e.g., “#XYZ_Partner” or “#XYZ_Client”) is likely to be clear sufficient.
“Sponsored” and “Promotion” at the starting is likely to be advantageous, however “Sponsored by XYZ” or “Promotion by XYZ” could be clearer.
Disclosures in TikTookay movies ought to be superimposed over the movies as a substitute of in the textual content description.
Disclosures in the feedback to Facebook posts should not clear and conspicuous.
“#freeproduct” or “I obtained free tickets” shouldn’t be clear as a free product disclosure as a result of it doesn’t establish who gave the endorser the product; however, stating that “I used to be given a free [name of product] to evaluate” could be clearer.
“#comped” or “#hosted” for nonpaid endorsements of occasions shouldn’t be clear sufficient with out additionally together with the model that offered the free tickets/invitation and an outline of what the model offered free of charge.
Notably, opposite to the normal trade observe on social media sweepstakes disclosures, the Commission acknowledged in the up to date FAQs that “#sweepstakes” alone shouldn’t be a sufficiently clear disclosure to point out a submit that’s incentivized by a sweepstakes. For the disclosure to be clearer, the FTC advisable that the title of the model or product be included in the disclosure additionally (e.g., “#XYZ_sweepstakes”). Previously, the FTC had solely disfavored abbreviations like “#sweeps.”
Disclosures of a Material Connection
The FTC made a number of clarifications in the Endorsement Guides and the up to date FAQs on the circumstances underneath which a cloth connection disclosure ought to be made in addition to the scope of the disclosure. Acknowledging that not all connections are materials sufficient to warrant a disclosure as a result of some connections are “too insignificant to have an effect on the weight or credibility given to endorsements,” the FTC established a brand new commonplace for figuring out whether or not a disclosure is important based mostly on the idea of “important minority.” Section 255.5(a) of the Endorsement Guides now states {that a} disclosure is required when “a major minority of the viewers for an endorsement doesn’t perceive or count on the connection” (emphasis added). While the time period “important minority” was referenced in the prior model of the FAQs, the FTC had not used that as a typical to differentiate between a connection that requires a disclosure and a connection that doesn’t.
The dedication of what a “important minority” of the shoppers means was left unclear in the Endorsement Guides. In the Supplementary Information part of the Endorsement Guides, the FTC famous that whether or not a connection is insignificant to the viewers’s analysis of the endorsement is a “extremely fact-specific” query that in some circumstances “would possibly require empirical testing.” However, Section 255.5(a) lists a number of examples of what the FTC considers to be a cloth connection: financial cost, provision of free or discounted services or products, early entry to a product and the risk to win a prize, be paid, or seem on tv or in different media promotions.
In addition to importing the time period “important minority” from the FAQs into the revised Endorsement Guides, the FTC additionally added a clause in Section 255.5(a) articulating its place from the FAQs on what ought to be disclosed in the materials connection disclosure. The revised Section 255.5(a) states {that a} materials connection disclosure “doesn’t require the full particulars of the connection, however it should clearly talk the nature of the connection sufficiently for shoppers to consider its significance.” While the FTC refined the present examples illustrating this precept, the fundamental steerage stays the similar, together with that (i) an endorsement doesn’t want to disclose how a lot the endorser was paid and a easy “paid” disclosure is adequate, however such “paid” disclosure shouldn’t be ok if the endorser is an worker or co-owner; and (ii) if an endorser obtained a product free of charge plus a further cost, then a disclosure solely stating that the endorser obtained a free product shouldn’t be adequate.
Affiliate Marketing
The FTC added further steerage on disclosure of internet online affiliate marketing relationships in each the revised Endorsement Guides and the up to date FAQs. In a brand new instance added to Section 255.5(b) (Example 11), a blogger writes an unbiased evaluate of coffeemakers with hyperlinks to web sites the place the merchandise might be bought and receives a cost when a client who clicks on one of these affiliate hyperlinks buys the product. In such an occasion, the FTC notes that the evaluate ought to “clearly and conspicuously disclose the compensation.” Further illustrating this level, the up to date FAQs describe a product evaluate channel on YouTube the place the reviewer receives the merchandise free of charge and will get an affiliate fee for purchases made by shoppers who click on on an affiliate hyperlink included in the description of the movies. The FTC recommends together with a disclosure of the affiliate relationship in the movies in addition to in the description close to the hyperlinks. According to the up to date FAQs, “affiliate hyperlink” by itself or a “purchase now” button shouldn’t be an satisfactory disclosure, however “paid hyperlink” subsequent to an affiliate hyperlink is sweet sufficient if made clearly and conspicuously and the reader can see each the evaluate containing that disclosure and the hyperlink at the similar time. The FTC doesn’t, nonetheless, take into account “commissionable hyperlink” to be a transparent disclosure.
Liability of Advertisers
It has been properly established, each expressly in the prior variations of the Endorsement Guides and in the FTC’s enforcement actions, that advertisers might be responsible for the statements made by endorsers in addition to for the failure of endorsers to make a cloth connection disclosure. In the revised Endorsement Guides, the FTC additional clarified in Section 255.1(d) that an advertiser’s legal responsibility extends to “misleading endorsements” even when the endorser shouldn’t be liable. To mitigate such legal responsibility threat, the FTC recommends that advertisers present steerage to their endorsers, monitor the endorsers’ exercise and take remedial motion. Although the FTC states in the up to date FAQs that it doesn’t count on advertisers to monitor each social media submit by endorsers, the FTC additionally states that an advertiser is accountable for what its endorsers submit “for an inexpensive time, similar to a couple of months” after the contractual relationship ends. Additionally, the FTC recommends that advertisers set up a preapproval course of for endorsement posts, particularly for ephemeral endorsements on Instagram or Snapchat tales, to be sure that endorsers are complying with the Endorsement Guides.
Liability of Endorsers and (*2*)
The revised Endorsement Guides embrace a brand new Section 255.1(e) that expressly states that endorsers are doubtlessly responsible for statements they “know[] or ought to know to be misleading,” similar to falsely representing that they’ve used the product or making unsubstantiated claims about the product’s efficiency which are inconsistent with the endorser’s personal expertise. Endorsers might also be responsible for failing to clearly and conspicuously disclose an “surprising” materials connection between themselves and the advertiser.
Additionally, a brand new Section 255.1(f) identifies promoting businesses, public relations companies, evaluate brokers and popularity administration firms as intermediaries that will even be responsible for creating or disseminating endorsements they know or ought to have identified had been misleading and for endorsements that didn’t disclose surprising materials connections.
Children
The FTC didn’t elaborate additional in the ultimate revised Endorsement Guides concerning endorsements directed to youngsters, explaining in the Supplementary Information part that it doesn’t consider that the specifics of materials connection disclosures directed to youngsters ought to be addressed in the Endorsement Guides. It did, nonetheless, add a press release in the up to date FAQs {that a} disclosure that works with adults might not work with youthful youngsters and that advertisers and endorsers ought to be cautious of their use of endorsements directed to youngsters.
Why It Matters
The many substantial edits to the Endorsement Guides and the FAQs, together with the new and modified examples included in the paperwork, present a fuller image of the FTC’s place on the endorsement practices that it considers to be misleading or unfair in violation of Section 5 of the FTC Act. While the Commission’s steerage that addresses the current developments in social media and digital expertise utilized in advertising and marketing is useful, its perspective on misleading endorsement practices (particularly with respect to what’s a transparent and conspicuous disclosure and when a cloth connection disclosure ought to be made) leaves a lot room for interpretation and debate.
Keep in thoughts that, not like the FTC’s guidelines, similar to the Children’s Online Privacy Protection Rule, the Endorsement Guides are nonetheless simply guides and don’t have the pressure of legislation; nonetheless, firms and endorsers alike would do properly to evaluate their present practices and make any applicable changes in mild of the FTC’s very public declaration of its views on misleading endorsement practices.
We want to thank Summer Associate Annie Nguyen for her contributions to this text.
https://www.jdsupra.com/legalnews/an-in-depth-look-at-the-ftc-s-updates-3908035/
