The Federal Trade Commission (FTC) has recently announced the final version of its updated Endorsement Guides, aimed at providing comprehensive guidance to businesses and individuals to ensure the use of truthful advertising practices.
With the advent of new marketing channels such as social media and online reviews, the revised Guides address emerging market trends and clarify expectations for advertisers. The updated Guides include stricter disclosure requirements, expanded liability for endorsers and intermediaries, enhanced scrutiny of consumer ratings and reviews, and increased focus on atypical results and child-directed endorsements.
Background
In May 2022, the FTC proposed changes to the Endorsement Guides, seeking to address the evolving advertising landscape and its impact on consumer perception. The proposed changes emphasized the need for more explicit disclosure requirements, outlined rules for consumer reviews, and clarified the shared liability of all parties involved in marketing campaigns. Since then, the FTC has analyzed the potential effects of these proposed changes on advertising practices and influencer marketing.
Key Changes in the Updated Endorsement Guides:
- “Clear and Conspicuous” Definition: Unlike the 2009 Guides, the new Guides provide a strict definition of what constitutes a “clear and conspicuous” disclosure. The FTC emphasizes that disclosures should be unavoidable, explicitly stating that disclosures at the bottom of social media posts hidden behind a “more” button do not meet this requirement. Additionally, companies are cautioned against relying solely on social media platform disclosure tools if they are not prominent or legible.
- Express Liability for Endorsers and Intermediaries: The revised Guides clarify that all parties involved in an advertising transaction, including intermediaries like advertising agencies and public relations firms, can be held liable for deceptive endorsement practices. This includes endorsers, such as influencers, who are responsible for their representations and must ensure adherence to endorsement requirements.
- Focus on Consumer Ratings and Reviews: The updated Guides extensively address the practices surrounding consumer ratings and reviews. Companies are prohibited from distorting or misrepresenting consumers’ opinions by deleting or suppressing negative reviews, incentivizing positive reviews, engaging in review gating, or falsely labeling negative reviews as “fake” without evidence. Editing of reviews must be applied uniformly to both positive and negative feedback.
- Expanded Disclosure Requirements for Atypical Results: The new Guides provide additional guidance on disclosing atypical results, emphasizing that the disclosure used to qualify such results should not misrepresent consumers’ expectations. Disclaimers such as “Results not typical” are deemed insufficient unless they effectively communicate what consumers can generally expect. Disclosures must alter the overall impression of an advertisement to prevent misleading claims.
- Expanded Definition of “Endorsement”: The revised Guides expand the definition of an endorsement to include instances where a brand is tagged, acknowledging that such actions can constitute an endorsement. Additionally, a “fake” positive review is now considered an endorsement under the updated Guides.
- Additional Examples for Influencer and Affiliate Marketing: The new Guides provide new examples of material connections that necessitate disclosure, including the provision of free or discounted products, chances to win prizes, or earning money through affiliate links. Non-monetary benefits, such as opportunities for media appearances, may also require disclosure.
- Increased Scrutiny of “Independent” Review Sites: The updated Guides address the issue of “independent review sites” that have connections to companies or employ pay-to-play ranking systems. The FTC clarifies that sites connected to a company cannot be labeled as “independent” and that purportedly objective ranking sites must ensure that payments do not influence product rankings.
- Statement of Special Concern Regarding Child-Directed Endorsements: The revised Guides introduce a new section addressing endorsements in advertisements targeted at children. The FTC recognizes that practices acceptable in advertisements for adults may be questioned in such cases and states its intention to explore further actions in this area.
The revised Guides emphasize stricter disclosure requirements, expanded liability for all parties involved, increased scrutiny of consumer ratings and reviews, and specific considerations for atypical results and child-directed endorsements. Advertisers are encouraged to evaluate their practices in light of these changes to avoid potential enforcement actions by the FTC.
