On May 19, 2022, the Federal Trade Commission (FTC) unanimously voted to publish for public comment in the Federal Register proposed changes to the Guides Concerning the Use of Endorsements and Testimonials in Advertising (the Guides). The proposal makes a number of changes to the Guides, which were first enacted in 1980 and later updated in 2009. The main areas of proposed amendments address (1) changes to definitions, (2) fake and suppressed consumer reviews, (3) advertising directly to children, and (4) liability of advertisers, endorsers, and intermediaries.
Changes to definitions and guidance about material connections
First, the FTC has proposed changes to some of the definitions in the Guides, including expanding the definition of “endorser” to cover anyone that could be or appears to be an individual, group or institution, in order to capture virtual influencers, such as computer-generated advertisers, and fake endorsements or reviews. Additionally, the proposed revised definition of “endorser” would clarify that marketing and promotional messaging can be considered an endorsement, as can tags in social media posts. The FTC would also add a definition of “clear and conspicuous” as something that is “difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers.” In recent years, there has been confusion over what “clear and conspicuous” truly means in advertising. Importantly, the definition notes that for a communication made through visual and audio means, a disclosure presented simultaneously in both visual and audible portions of the communication is more likely to be clear and conspicuous. The proposed definition also notes that when an endorsement targets a specific audience, such as older adults, its effectiveness will be evaluated from the perspective of members of that group. The proposed revisions to the Guides also provide examples of what is considered a material connection and states that material connections require disclosure regardless of whether an advertiser requires an endorsement in return.
Fake and suppressed consumer reviews
In light of recent cases, where online sellers suppressed or did not publish product reviews based upon certain star ratings or negative reviews, the FTC proposes a new section of the Guides regarding consumer review transparency. This includes guidance concerning buying fake reviews, threatening customers with negative reviews, deleting negative reviews, and disclosing material connections when providing reviews.
Advertising to children
The FTC has paid particular attention to highlighting children-directed advertising and has stated that this is of special concern to the Commission. In particular, the FTC has proposed an additional section to the Guides to address children targeted advertising, noting that “Endorsements in advertisements addressed to children may be of special concern because of the character of the audience. Practices which would not ordinarily be questioned in advertisements addressed to adults might be questioned in such cases.” The FTC acknowledged that it would benefit from more evidence to develop specific guidance in this area, but also indicated that there is ample basis to recognize that children may react differently than adults to endorsements in advertising or to related disclosures. As such, the FTC will be holding a virtual event on October 19, 2022. The objective of the event is to gather research and expert opinion on: (a) children’s capacities at different ages and developmental stages to recognize and understand advertising content and distinguish it from other content; (b) the need for and efficacy of disclosures as a solution to the problem facing children of different ages; and (c) if disclosures can be efficacious, the special challenges presented by advertising to children, and the most effective format, wording, and placement for disclosures.
Liability of advertisers, endorsers, and intermediaries
Finally, the FTC provided more guidance on who may be subject to liability for misleading and unsubstantiated statements made through endorsers. The proposed revisions to the Guides provide examples of how advertisers, endorsers, and intermediaries (such as advertising agencies) may be liable depending on a variety of situations, including for failing to disclose material connections and disseminating what one knows or should have known was a deceptive endorsement. Social media platforms may also be liable for representations concerning built-in disclosure tools, as some tools are inadequate for making clear and conspicuous disclosures. The FTC stated that this would encourage social media platforms to evaluate their tools to avoid liability.
The proposed revisions to the Guides are an outcome of the FTC’s February 2020 request for public comment. The revisions reflect the FTC’s recent enforcement activity as well as the realities of the increased use by advertisers of social media, influencers, and consumer reviews. Although the Guides are not law, they provide insight into the FTC’s interpretation and application of section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices. Advertisers, advertising agencies, endorsers, and platforms that disseminate and monetize endorsements should review the proposed revisions and their own policies and practices to ensure they align with the FTC’s proposed guidance. In addition, those who advertise products directed to children should attend the FTC’s virtual event on October 19.