In the past, the Federal Trade Commission ("FTC") warned, and subsequently penalized, businesses that publish misleading and false reviews or endorsements. Now, the FTC is taking things up a notch, by utilizing its Penalty Offense Authority to alert businesses of the fact that the Federal Trade Commission Act (the "Act") will be enforced even more aggressively than in the past. Civil penalties per offense can range up to $43,792 if an advertiser is determined to have willfully acted in violation of the Act. Last week, the FTC put over 700 businesses on notice of this crackdown by sending Notices of Penalty Offense which grant it the power to seek the aforementioned civil penalties.
What Falls Within Wrongful Conduct?
The FTC seeks to curtail a number of ill-fated practices by issuing the Notices of Penalty Offense. The laundry list of offenses includes, but is not limited to:
- using an endorsement to make deceptive performance claims;
- misrepresenting whether an endorser is an actual, current, or recent user;
- failing to disclose an unexpected material connection with an endorser;
- falsely claiming an endorsement by a third party; and
- misrepresenting that the experience of endorsers represents consumers' typical or ordinary experience.
In the past, the FTC has levied multi-million dollar judgments against companies that have engaged in these types of practices, so compliance is not to be taken lightly. This latest iteration of FTC action regarding false reviews and phony endorsements is no different. While the more than 700 companies put on notice are not flagged for having committed these types of offenses, the preemptive warning of civil penalties for any such future conduct highlights the FTC's proactivity and commitment to enforcement. For a complete list of businesses that received the Notices of Penalty Offense, visit the FTC's website.
Why Does This Matter for Your Business?
It is imperative that businesses understand the intricacies of the FTC Act and other federal and state laws that restrict how products are advertised to consumers. The most recent Notices of Penalty Offense serve as just another example of how businesses that engage in deceptive practices, such as publishing false reviews, may be subject to civil enforcement action and associated monetary penalties.
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