On May 24, 2022, the Federal Trade Commission ("FTC") unanimously approved a notice of proposed amendments to its "Guides Concerning the Use of Endorsements and Testimonials in Advertising" (the "Endorsement Guides"). The proposed amendments to the Endorsement Guides target, among other things, the fraudulent practice of posting fake positive reviews and suppressing bad reviews in online and social media platform content. The notice also serves as a warning to social media platforms that they must maintain adequate endorsement disclosure tools, or they may be held liable for endorsers' improper disclosures.
Please note that businesses that mislead consumers through use of endorsements and testimonials in advertising may violate the FTC Act and are subject to severe penalties. To avoid such an outcome, businesses need to be aware of and prepare to comply with the changes to the Endorsement Guides should they go into effect.
FTC Endorsement Guides
The FTC Endorsement Guides provide suggestions that marketers and their partners should follow to avoid posting false or misleading endorsements and/or testimonials. The FTC requires that online endorsements clearly and conspicuously disclose unexpected material connections between relevant brands and their endorsers (e.g., social media influencers). In other words, the disclosures must be hard to miss and must use simple and clear language (should be in the same language as the endorsement itself).
To be hard to miss, disclosures should be: (1) placed within the endorsement; (2) close to the beginning of the endorsement and above any "click more" actions; and (3) the first or last hashtags. Disclosures should use clear explanations (e.g., "Thanks to [advertiser] for the free product"), simple terms (e.g., "advertisement" and "sponsored"), and hashtags (e.g. "#ad"). According to the FTC, such disclosures make followers aware of endorsers' potential bias and keep endorsements honest and truthful.
Changes Contemplated by the FTC
In light of the extensive and growing use of social media and product reviews in online marketing, the FTC has proposed the following new changes to its Endorsement Guides, including:
- Clarifying that fake reviews and tags in social media posts are covered under the Guides;
- Changing the definition of "endorsers" to include "virtual influencers" (i.e., computer-generated fictional characters);
- Highlighting that marketers may not distort or misrepresent what consumers think of their products in procuring, suppressing, boosting, organizing, or editing consumer reviews; and
- Adding an example that addresses the microtargeting of discrete customer groups.
In addition, the FTC has found that certain endorsement disclosure tools offered by social media platforms are inadequate and, as such, the FTC has warned (in its notice) that platforms that employ such inadequate tools may open themselves up to liability. The FTC has also proposed the addition of a new Endorsement Guides section covering child-directed advertising, in an effort to protect a class of consumers that may be more vulnerable to misleading marketing practices.
Please note that the FTC will accept comments on the proposed revisions to its Endorsement Guides for 60 days following when the amendments are published in the Federal Register.
Hiring Expert Marketing Attorneys
Given the significant risk, it is best to obtain guidance from experienced marketing attorneys before launching any social media marketing campaigns.
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