Overview
The Federal Trade Commission (FTC) made a splash in its May 2022 open meeting when all five commissioners—including newly confirmed Commissioner Alvaro Bedoya—unanimously voted to publish and seek public comments on its proposed changes to its Guides Concerning the Use of Endorsements and Testimonials in Advertising (Endorsement Guides).
The commission’s proposed changes, described below, would build on and expand previous guidance in numerous ways, including by: 1) expanding the definitions of and extending liability for endorsers, intermediaries, and platforms; 2) addressing the ways in which companies incentivize and compile consumer reviews; 3) offering new examples for disclosing sponsored endorsements; and 4) demonstrating the FTC’s interest in addressing advertising that targets the elderly and children.
Retailers and their advertisers, agencies, platforms, influencers, and endorsers should review their current practices to ensure they align with the proposed updates to the Endorsement Guides, and also consider submitting public comments to help inform the final version. Once the Federal Register formally publishes the proposal and the FTC opens the public comment period—which should happen shortly—interested parties will have 60 days to submit feedback, suggested edits, and any other comments for the commission’s consideration.
A History of the FTC’s Interest in Sponsored Endorsements
Since their original publication in 1980, the Endorsement Guides have warned against publishing sponsored reviews or endorsements that might mislead consumers into believing they are unbiased. The Endorsement Guides were last updated in 2009 to include examples of how this core principle might apply in the internet era and to then-new forms of digital media, such as blogs and online message boards. In 2010, the FTC also published “What People are Asking,” an informal staff publication companion to the Endorsement Guides focused on answering advertisers’ frequently asked questions about endorsements. The FTC updated these FAQs again in May 2015 and September 2017 to specifically address how the Endorsement Guides apply to sponsored content on social media and other practical concerns in the evolving digital marketing landscape. The FTC has also taken numerous enforcement actions—mostly against advertisers, but also against agencies and those it considers ‘endorsers’—for their roles in disseminating misleading sponsored content. We have discussed some of those actions in prior alerts, dated October 14, 2021, November 1, 2021, and December 8, 2021.
With the advent of influencer marketing on social media, the FTC sought initial comments in February 2020 on if and how the Endorsement Guides should account for the proliferation of this advertising practice. Over 100 individuals, academics, trade associations, and companies submitted comments (our team prepared a detailed response on behalf of a prominent industry group). The FTC’s new proposed updates to the Endorsement Guides will incorporate and respond to those comments.
The Upcoming Request for Additional Public Comments
Many of the proposed updates have long been foreshadowed by the FAQs and the FTC’s numerous enforcement actions. Others simply apply long-standing principles to new modern digital contexts. Some, however, are novel and warrant special attention.
Heightened Standard for “Clear and Conspicuous” Disclosures: The FTC’s proposed revisions would define “clear and conspicuous” disclosures to mean, “a disclosure that is difficult to miss and easily understood by ordinary people.” The proposed revised Endorsement Guides would also require qualifying disclosures to appear through the same means as the claim itself (i.e., if the triggering claim is made both visually and audibly, then the disclosure must also appear both ways); should be clear and conspicuous across viewing platforms (including smart phones and computer monitors); and that advertisers should consider whether any targeted audiences (such as children or older adults) would understand the disclosure.
Tagging Qualifies as an Endorsement: The Endorsement Guides currently define “endorsement” to include any advertising message that consumers are likely to believe as reflecting the independent, unbiased, opinions, beliefs, findings or experience of a party other than the sponsoring advertiser. The proposed revisions would clarify the commission’s position that “marketing” and “promotional” messages are endorsements. The FTC’s proposals would also expand the definition to specifically identify tags in social media as a form of endorsement.
Bots and Fake Reviews May Be Endorsers: The FTC’s proposed updates to the Endorsement Guides would also expand the definition of “endorser” to include anyone who could be or appears to be an individual, group or institution, in order to include computer-generated avatars and fictional characters (which are not real people) and fake endorsements or reviews.
Additional Guidance Concerning Free Products: The proposed Endorsement Guides provide new guidance concerning “seeded” product reviews, i.e. reviews from influencers or other social media users who received the product for free. In a newly added practical application example, the FTC considered a hypothetical scenario where a consumer received a coupon for a free trial product from a manufacturer simply based upon her purchase history. The FTC explained that if the manufacturer did not ask coupon recipients for reviews, then the consumer’s unsolicited review would not be an endorsement because it cannot be attributed to the manufacturer.
Notably, the FTC distinguished a seemingly similar example in its proposed draft: “Assume now that the consumer joins a marketing program under which participants periodically receive free products from various manufacturers and can write reviews if they want to do so. If the consumer receives a free bag of the new dog food through this program, their positive review would be considered an endorsement under the Guides because of their connection to the manufacturer through the marketing program.”
Endorsements Directed to Children: The FTC has proposed adding a new section to the Endorsement Guides specifically addressing marketing directed at children. This new proposed addition, the first of its kind since the Endorsement Guides’ original publication, is based on its position that “[p]ractices which would not ordinarily be questioned in advertisements addressed to adults might be questioned in such cases.” In order to provide further guidance and collect more information on the issue, the FTC announced that a public eventthat will be held on October 19, 2022. The event will focus on children of different ages and developmental stages, and their respective capacities to recognize, understand, and distinguish advertising content. The event will also cover the need for and effectiveness of disclosures to children.
Expand Liability to Advertisers, Endorsers, Intermediaries, and Platforms: The proposed Endorsement Guides would clarify that all parties in an advertising transaction may be liable for their role in misleading endorsements. While past FTC actions and guidance have made clear that brands and endorsers may be liable for misleading statements, the proposed update would expand the enforcement scope to include advertising agencies and public relations firms, on the theory that they may also be liable for helping disseminate what they knew or should have known were deceptive endorsements.
Additionally, the FTC warns social media platforms that they may “be exposing themselves to liability depending on the representations they make” about built-in tools they offer for disclosing material connections. Specifically, “Given that platforms play a major role in disseminating and monetizing endorsements, and actively encourage endorsers to promote and amplify their posts, the commission believes they should carefully evaluate their tools and what they say about them to ensure they are not exposing themselves or their users to liability.” At the FTC’s May 19, 2022 meeting, Chairwoman Lena Kahn specifically praised the proposed new guidance as it relates to social media platforms, noting that because they profit from influencer marketing, they should carry more responsibility.
More Detailed Guidance on Consumer Reviews: One of the most significant proposed changes to the Endorsement Guides is a new section on consumer reviews. This is the latest in a series of movements by the FTC to demonstrate its focus on deceptive review practices, including new guidance and enforcement actions, like the commission’s $4.2 million settlement with fast-retail giant Fashion Nova LLC, and the new guidance issued in conjunction, both announced on January 25, 2022.
The proposed new section states that “[i]n procuring, suppressing, boosting, organizing, or editing consumer reviews of their products, advertisers should not take actions that have the effect of distorting or otherwise misrepresenting what consumers think of their products, regardless of whether the reviews are considered endorsements under the Guides.” Proposed examples of misleading conduct include deleting or not publishing negative reviews, buying “fake” reviews, and review gating (i.e., encouraging positive reviews and avoiding negative reviews). The FTC specifically warned that including incentivized reviews’ star ratings in an average star rating for a product could be deceptive even if adequate disclosures appear in each incentivized review.
The FTC did acknowledge in a footnote, however, that removing certain reviews may be appropriate in some instances, such as where they: (1) “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, so long as the criteria for withholding reviews are applied uniformly to all reviews submitted,” or (2) “are unrelated to their products or services.” As to this second point, the FTC noted that reviews relating to “customer service, delivery, returns, and exchanges” are relevant and should not be deleted.
Next Steps
While no firm date has been set, the authors anticipate the commission publishing the proposed revisions in the Federal Register and opening the public comments period shortly. Once the proposed Endorsement Guides are published, the public comments period will remain open for 60 days. Anyone is free to submit comments, all of which will be publicly posted on Regulations.gov. The FTC will then review the comments, respond as appropriate, and will issue the finalized and updated Endorsement Guides.
The public comments period provides retailers with a unique opportunity to shape the next iteration of the Endorsement Guides, which, if the Fashion Nova settlement is any indication, are likely to be aggressively enforced. Retailers can, and should, consider accepting the FTC’s invitation to make their opinions known and educate the commission on the realities, practical constraints, and business considerations affecting their approach to endorsements and reviews, especially when it relates to online marketing.
