Last week, the Federal Trade Commission and state attorneys general in Arizona, California, Georgia, Illinois, Massachusetts, New York, and Texas settled with advertising giants Google and iHeartMedia for deceptive advertising and endorsements under Section 5 of the FTC Act.
The FTC and states allege that Google paid iHeartMedia to record and broadcast ads featuring "radio personalities" endorsing Google's phone, the Pixel 4. In the ads, the radio personalities lavished praised on the Pixel 4, using first-person language to describe the Pixel 4's functionalities and calling it their favorite phone.
The ads aired over 11,200 times between October and December 2019. The problem? The Pixel 4 had not been released for sale, and Google was unable to provide the phones to the radio personalities before the ads aired. In essence, the radio personalities were extolling the Pixel 4 without ever having used one.
The proposed settlement requires the parties to pay $9.4 million to the states. In addition, the proposed orders for both Google and iHeartMedia would prohibit an endorser from misrepresenting that they have owned or used a consumer product. Interestingly, the FTC and states declined to pursue a case directly against the radio personalities as individuals, despite past threats to do so.
New York Attorney General Letitia James also has signaled an aggressive approach to endorsement cases, saying that "companies big and small have a responsibility to be honest about their products and follow the law, there are no exceptions. Consumers deserve to know the truth about products before making any purchases. My office will not tolerate misleading claims, and outright lies from advertisers, and we will hold them accountable."
Of course, the FTC has been active in cracking down on deceptive endorsements and influencer marketing for years. Last year the FTC took an unprecedented step when it sent Notices of Penalty Offenses to more than 700 companies, including Google and iHeartMedia, warning them that they could incur civil penalties if they use endorsements in ways that run counter to the law, as interpreted by the FTC in prior cases.
We have previously covered how marketers and platforms can avoid running afoul of the FTC's Guides Concerning the Use of Endorsements and Testimonials in Advertising. Although the Guides are advisory, they offer insights into how the FTC might review future endorsement cases. In addition, the FTC is considering whether to codify the Guides into regulations.
Relevant here, the Guides state that:
- When an ad represents that the endorser uses the endorsed product, the endorser must have been a bona fide user of it at the time the endorsement was given
- Advertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers; and endorsers also may be liable for statements made in their endorsements
- Ads presenting endorsements by what are represented to be "actual consumers" should utilize actual consumers, or clearly and conspicuously disclose that the persons are not actual consumers
- An endorsement by an organization must be reached by a process sufficient to ensure that the endorsement fairly reflects the collective judgment of the organization
The authors thank Jay V. Prapaisilp, a law clerk in Venable's Washington, DC office, for his assistance in writing this article.
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