As we previously reported, the Federal Trade Commission recently entered into a settlement agreement with Sunday Riley Modern Skincare to resolve charges that the company misled consumers by posting fake reviews of its products online and failing to disclose that the reviewers were company employees. This is yet another in a long line of cases where the FTC is saying that if the brand has a material connection with the influencer that is not reasonably expected by the audience, the influencer must clearly and conspicuously disclose that relationship.
This principle is certainly not new. Almost exactly a decade ago, the FTC revised the Endorsement Guides to make clear what an advertiser's obligations are when using influencers to promote their products online.
When the Sunday River settlement was announced, which prohibits the company from publishing deceptive reviews in the future, Commissioners Rohit Chopra and Rebecca Kelly Slaughter dissented, arguing that the FTC simply isn't doing enough to stop the epidemic of fake reviews online. Commissioners Chopra and Slaughter argued that, because the Sunday River settlement doesn't include restitution for consumers, an admission of liability, or other significant penalties, it is "unlikely to deter other would-be wrongdoers." They explained, "It is difficult to imagine more egregious facts, yet all the Commission is imposing is an order that the company and its CEO not repeat their lawbreaking."
This isn't the first time that Commissioners Chopra and Slaughter have argued that the FTC isn't doing enough to prevent and deter fraudulent conduct. Earlier this year, in cases involving "Made in USA" claims, they also dissented on similar grounds. And, last month, in a case involving "organic" claims, Commissioner Chopra called on the FTC to issue a Policy Statement setting forth the Commission's approach to enforcement in cases involving fraud or dishonesty.
What does this all mean? Typically, in false advertising cases, the FTC tries to get an order preventing the advertiser from engaging in the conduct in the future, but doesn't seek financial penalties or admissions of liability. Now, there are two Commissioners saying, in a range of cases, that it's time for the Commission to take a tougher stance. While at first it may have seemed that Commissioners Chopra and Slaughter were focused primarily on "Made in USA" enforcement, now it's clear that they're troubled by the FTC's overall approach to egregious false advertising cases.
Although it's too soon to tell whether this will lead to big changes in FTC enforcement policy, it does seem like their voices are being heard. Apparently in response to their criticisms over the FTC's handling of "Made in USA" cases, the Commission recently held a workshop to examine the effectiveness of the FTC's "Made in USA" enforcement program. Commissioner Chopra also pointed to the fact that the FTC's settlement with Truly Organic, involving "organic" claims, included almost $2 million in financial penalties. He said, "it reflects a difference in approach compared to other matters inherited over the last year."
"This settlement sends the wrong message to the marketplace" -- FTC Commissioner Rohit Chopra