Product and service endorsement is an effective way to generate consumer interest. As our readers know, this method of advertising must comply with applicable state and federal regulations or business owners risk costly and time-consuming regulatory action. For example, the Federal Trade Commission ("FTC" or "Commission") and multiple state attorneys general recently brought suit against Google LLC and iHeartMedia, Inc. ("Respondents"), for allegedly engaging in an unlawful paid endorsement marketing campaign. The complaint alleges that between 2019 and 2020, Respondents aired virtually 29,000 "deceptive endorsements by radio personalities."
Section 5 of the FTC Act Prohibits Unlawful Paid Endorsement Marketing
Section 5 of the FTC Act (Title 15 USC Section 45) prohibits ''unfair or deceptive acts or practices in or affecting commerce.'' The FTC has described such deceptive activity as that "involving a material representation, omission or practice that is likely to mislead a consumer acting reasonably in the circumstances." In the matter at hand, the FTC alleged that Respondents broadcast "made up testimonials" in violation of the Act. This is a dangerous practice because the FTC may commence a deceptive marketing action to curtail the unlawful paid endorsement campaign.
Specific Allegations of Unlawful Paid Endorsement Marketing
According to the FTC press release, the Respondent's endorsements featured individuals' personal use of, and experience with, the Google Pixel 4 phone. The complaint alleged that despite the radio personalities' on-air endorsements of the product, they were neither given the Pixel 4 phones, nor did they use the items prior to endorsement. As readers of our blog know, it is a clear violation of the FTC Act to deceive consumers through the use of false and misleading testimonials, endorsements, and reviews. In this case, the FTC alleged that Google enlisted "iHeartMedia and 11 other radio networks in 10 major markets" to use on-air personalities to record and broadcast the use of the Pixel 4 phone. Significantly, however, Google provided the on-air personalities with scripts, which indicated that the announcers had personal experience with the Pixel 4. As stated, the FTC alleged that the personalities were not given the Pixel 4s prior to such recordings, and thus, did not own or regularly use the phones. The FTC alleged that such misrepresentations were a clear violation of the FTC Act.
Proposed Orders Settling FTC Charges of Unlawful Paid Endorsement Marketing
The FTC has released proposed consent decrees to settle the charges against Respondents, which will be published in the Federal Register for public comment. After 30 days, the Commission will decide whether to make the orders final. The proposed orders include the following provisions:
- Prohibiting Google from misrepresenting that an endorser has owned or used, or specifics about their experience with, certain products;
- Prohibiting iHeartMedia from misrepresenting that an endorser has owned or used, or specifics about their experience with, any consumer product or service; and
- Requiring Google and iHeartMedia to distribute the order to certain parties, file compliance reports with the Commission, and maintain records to allow the FTC to ensure ongoing compliance.
The FTC will continue to pursue parties that publish phony testimonials, fake reviews, and other methods of unlawful paid endorsement marketing. In fact, the Commission recently updated its Guides Concerning the Use of Endorsements and Testimonials in Advertising, again making clear that fake testimonials are strictly prohibited. Violations of the Act may result in the imposition of civil penalties, including fines of up to $43,792 per offense for willful and knowing violation of the Act.
To avoid regulatory investigation and litigation, businesses must understand the nuances of the laws that apply to their marketing practices. The Google and iHeartMedia action is another example of how businesses that engage in allegedly deceptive and misleading advertising practices may find themselves on the wrong side of the law.
Related Blog Posts:
Facebook Marketing Company Sued By Meta For Fake Reviews
Fake Reviews Violations And Phony Listings Result In FTC Lawsuit
Fake It 'Til You Make It: FTC Brings Down The Hammer On False Reviews
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
