In late June 2023, the Federal Trade Commission (FTC) announced revised Endorsement Guides to strengthen and clarify guidance for advertisers and address emerging market trends concerning the use of endorsements and testimonials in advertising. The FTC also announced a proposed rule banning fake reviews and testimonials.
Revised Endorsement Guides and FAQs
The FTC’s Endorsement Guides (Guides) provide advice on how to comply with the FTC Act and avoid engaging in unfair and deceptive advertising practices. In May 2022, the FTC requested public comment on proposed updates to the Endorsement Guides to address the way advertisers now reach consumers, including through social media and online reviews.
The FTC’s recent revisions, the first since 2009, include:
- articulating a new principle regarding procuring, suppressing, boosting, organizing, publishing, upvoting, downvoting, or editing consumer reviews so as to distort what consumers think of a product;
- addressing incentivized reviews (including in relation to star ratings), reviews by employees, and fake negative reviews of a competitor;
- adding a definition of “clear and conspicuous” and indicating that a platform’s built-in disclosure tools might not constitute adequate disclosure;
- changing the definition of “endorsements” to clarify the extent to which it includes fake reviews, virtual influencers, and tags in social media; and
- highlighting that child-directed advertising is of special concern and that practices that would not ordinarily be questioned in ads directed to adults might be questioned when directed to children.
See final revised Guides.
Notably, the FTC also expounded on potential liability for advertisers, endorsers, and intermediaries. The FTC made clear that an advertiser’s liability is not limited to merely whether an endorser’s statement is true, but may extend to “deceptive endorsements” as well. For example, an advertiser could be held liable for disseminating a television ad that includes an endorser making a truthful statement but that reflects atypical results with respect to use of the product. In addition, an endorser could be held liable for representing falsely that the endorser personally used a product. The FTC also identified the specific intermediaries that it intends to address, namely, advertising agencies, public relations firms, review brokers, reputation management companies, and “other similar intermediaries,” and revised that section of the Guides to state that such entities may also be liable for their roles in “creating” ads containing endorsements that they know or should know are deceptive.
In addition to revising the Guides, the FTC also updated its guidance document entitled, “What People Are Asking,” which answers frequently asked questions about the Guides. The revised FAQs incorporate 40 additional questions and reflect updates to many prior answers. This document includes input on when and how to disclose material connections, provides views on monitoring of influencers and platform disclosure tools, and offers additional guidance on addressing issues with respect to incentives and treatment of negative feedback with respect to online reviews.
FTC Proposes Rule Banning Fake Reviews and Testimonials
Further underscoring the FTC’s focus on endorsements in an online context, the FTC also announced in late June a proposed rule banning fake reviews and testimonials. See proposed rule.
This proposed rule was influenced by public comments received in response to the FTC’s advance notice of proposed rulemaking issued in November 2022. In its advance notice, the FTC focused on practices that it believes are most clearly and inarguably deceptive or unfair, aspiring to benefit consumers while trying to avoid burdening legitimate marketers.
The newly released proposed rule includes a prohibition on selling or obtaining fake consumer reviews and testimonials, review hijacking (i.e., using or repurposing a consumer review written for one product so that it appears to have been written for a substantially different product), buying positive or negative reviews, using unattributed insider reviews and testimonials, running company-controlled review websites that appear to provide independent opinions, suppressing reviews through threats or intimidation, and selling fake social media indicators. The public will have 60 days from the publication in the Federal Register to comment on the proposed rule. If the rule becomes effective, the FTC will be able to obtain civil penalties for conduct that violates the rule.
Key Takeaways and Best Practices
Advertisers should continue to take extra care in ensuring that their endorsement marketing campaigns comply with the FTC’s updated guidance.
Ensure that influencers who are gifted free products provide adequate disclosures. Notably, the FTC takes the position in the revised Guides that posts by influencers who are gifted free products in the hopes that they’ll post about them may be endorsements requiring disclosures even if the influencer is not obligated to post about the product.
Ensure that disclosures are provided even when an endorsement is implied. In the revised Guides, the FTC clarifies that even if an influencer does not explicitly say something about a product, their use of the product alone may be an endorsement requiring a disclosure. As an example, the FTC suggests that an influencer who is paid to play and live stream a game is implicitly endorsing the game by appearing to enjoy playing it (even if they do not say so explicitly).
Ensure that all disclosures are “clear and conspicuous.” Under the new Guides, the FTC has further clarified that disclosures must be “difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers.” Disclosures should be made through the same means as the underlying communication, whether visual or audible. Where the communication is made through both visual and audible means, the simultaneous inclusion of disclosures in both the visual and audible portions is more likely to be clear and conspicuous. Size, contrast, location, length of appearance, volume, speed, cadence, and other characteristics should be closely considered. The disclosure should be unavoidable in any interactive electronic medium, such as social media or the internet, and cannot be contradicted, mitigated, or convey inconsistencies with any other communications. Reliance solely on a social media platform’s built-in disclosure tool is not sufficient if the resulting disclosure is easy to miss and therefore not clear and conspicuous.
Endorsements must reflect the honest opinions, findings, beliefs, or experience of the endorser. Importantly, an endorser’s statements may not convey any express or implied representation that would be deceptive if made directly by the advertiser. While an advertiser is not required to reproduce the endorser’s message verbatim, endorsements may not be presented out of context or reworded in a manner that would distort the endorser’s opinion or experience, and advertisers must ensure that the endorsement continues to represent the endorser’s current views. Liability may be based on not only actual knowledge, but constructive knowledge as well.
Avoid overly aggressive review tactics. Advertisers should, for example, generally avoid using or repurposing a consumer review for a different product or disseminating insider product reviews (e.g., from company officers or employees). Advertisers should also steer clear of paying consumers to ensure positive reviews and of companies in the business of buying and selling reviews.
Advertisers should proactively manage their endorsers. Advertisers should obligate endorsers to ensure that their statements are not misleading and to disclose material connections. Moreover, advertisers should monitor their endorsers’ compliance and take action sufficient to remedy noncompliance and prevent future noncompliance.
Advertisers must be mindful to avoid distortions or misrepresentations based on context. Whether or not particular reviews would be considered true endorsements, advertisers must avoid procuring, suppressing, boosting, organizing, publishing, upvoting, downvoting, reporting, or editing consumer reviews in such a way as to result in distorting or otherwise misrepresenting consumer opinions.
Ensure that incentivized reviews are adequately disclosed, including any resulting effect on average star ratings. In addition to including adequate disclosures in each incentivized review, an advertiser must also include a clear and conspicuous disclosure to people who see the average star rating if the incentivized reviews materially inflated the average star rating.
Advertisers must be careful to convey sufficiently the generally expected performance. Absent adequate substantiation that an endorser’s experience is representative of what consumers will generally achieve, the communication must clearly and conspicuously disclose the generally expected performance based on adequate substantiation. The revised Guides add that for a disclosure regarding the generally expected performance to be sufficient, the disclosure “must alter the net impression of the advertisement” so that it is not itself misleading. The Guides also note that even with a disclaimer such as: “Notice: These testimonials do not prove our product works. You should not expect to have similar results,” an ad is still likely to be deceptive on a webpage consisting entirely of satisfied testimonials unless the advertiser has adequate substantiation that new users typically will experience results similar to those expressed in the testimonials.
While the Guides caution that good faith and effective guidance, monitoring, and remedial action is not a safe harbor, adopting these best practices should reduce the incidence of deceptive claims, which may reduce the chances of an FTC enforcement action.
For more information or advice concerning the FTC’s revised Endorsement Guides or your endorsement, review, and testimonial compliance efforts more generally, please contact Aaron Hendelman, Maneesha Mithal, Chelsea Carbone, Kelly Singleton, or another attorney in Wilson Sonsini’s advertising or privacy and cybersecurity practices.