Stay ADvised: What's New This Week, May 30
The Proposed FTC Endorsement Guides: Changes Are in the WorksIn response to the Federal Trade Commission's (FTC) continued spotlight on problematic endorsements and the increasing importance of influencer and social media content as well as consumer and expert reviews, the FTC has proposed significant changes to its Guides Concerning the Use of Endorsements and Testimonials in Advertising. Some of the proposals come from prior FAQs or FTC cases so they are not unexpected, but they do address key portions of the guides. They shed additional light, for example, on: What constitutes an endorsement? Or an Endorser? What does "clear and conspicuous" really mean? And how about those material connections…?
Among many notable changes, the proposed revised Guides clarify that tagging a brand in social media posts can be an endorsement and expand the definition of "endorser" to include virtual endorsers—those computer-generated influencers that aren't real people but who may and do sway real consumers (what the FTC calls "fabricated endorsers").
Under a proposed new definition of "clear and conspicuous," disclosures should be "unavoidable" – including, for example, if the triggering claim is visual, the disclosure must at least be visual; if the triggering claim is audible, the disclosure must at least be audible, etc. The proposed Guides would clarify that the FTC will evaluate the adequacy of a disclosure "from the perspective of the targeted individuals."
The guides would explicitly update "material connections" to include early access to a product, and the possibility of winning a prize, being paid, or of appearing in promotions, and that something can constitute a material connection "regardless of whether the advertiser requires an endorsement in return." The FTC continues to acknowledge that some connections "may be immaterial because they are too insignificant to affect the weight or credibility given to endorsements" but did not provide examples. The FTC proposed to revise its stance on disclosure of material connections with celebrity endorsers (and to address social-media-famous influencers) to state that "material connections do not need to be disclosed when they are understood or expected by all but an insignificant portion of the audience for an endorsement."
The FTC reiterated that advertisers may be liable for endorser's statements even if the endorser is not liable and provided guidance to advertisers on the actions they can take to inform endorsers of their obligations. While encouraging social media companies to standardize and use built-in tools for disclosures, the FTC also warned that representations they make about those endorser disclosure tools may open the social media companies up to liability if such mechanisms facilitate inadequate endorser disclosures.
The proposed revised Guides expressly state that intermediaries – e.g., advertising agencies and public relations firms – may be liable for their actions or inactions related to endorsements.
Further, advertisers may not alter or distort consumer reviews in any way—whether by editing, boosting, procuring, or not posting reviews. This ban on review suppression would apply regardless of whether the reviews are considered endorsements under the Guides. Advertisers may suppress reviews that contain "unlawful, harassing, abusive, obscene, vulgar, or sexually explicit content; or content that is inappropriate with respect to race, gender, sexuality, or ethnicity; or reviews that the seller reasonably believes are fake," as long as the criteria for not posting those reviews is uniformly applied to all reviews. The FTC noted that an advertiser is not required to post reviews that are unrelated to its products or services but interprets "services" to include things like customer service, delivery, returns, and exchanges.
The FTC also proposed clarifying that fake reviews are covered in the Guides and that advertiser liability would extend to procuring fake reviews on third-party review sites.
The FTC proposed adding a section to the Guides dealing specifically with child-directed advertising, which it said "may be of special concern because of the character of the audience." Though the FTC hasn't yet offered much substance on what that would look like and is currently gathering information, the revised Guides are likely to have stricter rules for advertisers and endorsers targeting kids.
The FTC voted unanimously to submit the proposed changes to the Guides, noting it is considering these changes in light of "the extent to which advertisers have turned increasingly to the use of social media and product reviews to market their products." If adopted, this would be the first time the Guides have been amended since they were last revised in 2009.
These proposed revised Guides would tighten and clarify the rules governing endorsements. Notably, the FTC has said the proposed addition of a principle explicitly forbidding review suppression would codify the Fashion Nova settlement that challenged the company's failure to post negative reviews.