This post was written by Dan Jaffe.
Last November, the Federal Trade Commission released a Federal Register notice detailing the changes that it plans to make to its guidelines for the use of endorsements and testimonials in advertising. These are the first changes to the guidelines in decades and will dramatically change how marketers can use endorsements and testimonials in advertising.
The deadline for comments was originally January 31, 2009, but the FTC recently extended the comment period to March 2, 2009. We are planning to file comments and need our members’ assistance to effectively respond. If you can offer specific guidance on how the proposed rule will affect your use of endorsements and testimonials, please let us know as this will help us formulate our detailed comments.
The guidelines currently allow marketers to use truthful testimonials that are not generally representative of what consumers can expect from the advertised product so long as the marketers clearly and conspicuously disclose either (1) what the generally expected performance would be in the depicted circumstances, or (2) the limited applicability of the depicted results to what consumers can generally expect to receive; i.e., that the depicted results are not representative or typical. The revised guidelines would require substantiation of results that consumers would generally achieve (“generally expected results”) through use of the product. The FTC states that this change eliminates the existing “safe harbor” which allows advertisers to include non-representative testimonial claims in their ads if they clearly and conspicuously state that the depicted results are “not typical.” The Commission now argues that non-typicality disclaimers alone generally are not sufficient to overcome the false or deceptive impressions of typicality generated by testimonials. The FTC, therefore, is demanding additional substantiation delineating “generally expected results.”
In taking this action, the Commission largely discounted the constitutional arguments made in comments filed in 2007 by both ANA and other groups in response to the FTC’s review of the guidelines. We argued in our comments that the Commission already has sufficient power to penalize false or deceptive claims. We also argued that requiring pre-publication proof of claims is more extensive than necessary to advance the government’s interest. Therefore, it would impose an unconstitutional burden on truthful, nondeceptive speech while providing little benefit to consumers.
In response, the Commission, while making multiple references to our comments, argued that its new guidelines would withstand scrutiny under the U.S. Supreme Court’s Central Hudson test for commercial speech. It argued that its interest in requiring further disclosure is to prevent deception. By requiring pre-publication substantiation, the guidelines would materially advance this interest, and since they would require information to prevent a misleading impression, they are reasonably tailored to meet that objective.
The Commission relied on two consumer surveys in formulating the new guidelines. In our original comments, we argued that these studies had numerous serious methodological and technical flaws. These concerns were dismissed by the FTC, claiming that the studies provided “useful empirical evidence” regarding testimonial messages.
The FTC’s position in regard to this rulemaking could have significant precedential impact on advertising beyond the testimonial and endorsements area. The FTC’s point of view in this rulemaking is that truthful statements, even limited by clear and conspicuous disclaimer information, can prove insufficient to protect reasonable consumers. Clearly, this type of analysis can affect broad categories of advertising.
You may also wish to examine a detailed memorandum put together by Reed Smith which provides further information in regard to this issue. Reed Smith provides representation for the ANA through our general counsel, Doug Wood.
If you have any questions, you can reach me at 202-296-2359 or at email@example.com.