During a virtual open meeting, the Federal Trade Commission unanimously approved a request for public comment on proposed amendments to its Guides Concerning the Use of Endorsements and Testimonials in Advertising.
The Endorsement Guides, enacted in 1980 and last amended in 2009, provide guidance to ensure that advertising using endorsements and testimonials is truthful and not misleading. In February 2020, in connection with a routine review of the Guides, the FTC sought input on potential updates and received over 100 comments from individuals, academics, consumer groups, trade associations and other companies. FTC staff reviewed these comments and drafted proposed revisions, which were presented during Thursday’s open meeting.
The FTC is proposing extensive revisions to the Guides, including lots of new examples, and in the coming days and weeks we'll follow up with additional blog posts that get into the specifics in detail. In the meantime, here are some of the highlights:
- Changes to certain definitions. The FTC proposed expanding the definition of “endorser” to encompass the emerging trend of “virtual influencers,” computer-generated avatars or fictional characters, and fabricated endorsements. The FTC also indicated that tagging a brand in a post would be considered an endorsement. The amendments would also define the term “clear and conspicuous” more strictly (stressing the importance of "unavoidability" in social media) and provide specific guidance relating to visual and audio disclosures, including those targeted to particular audiences like older adults.
- Warnings against the distortion or misrepresentation of consumer reviews. This section would provide examples illustrating how certain review-related practices—including deleting or not publishing reviews, buying fake reviews, threatening customers who leave negative reviews and “review gating,” the practice of sending happy and unhappy customers down different paths to encourage positive feedback—may be misleading or unfair. The FTC also cautioned against the use of star ratings that include incentivized reviews. In addition, the FTC included new guidance that paying for positive reviews, including boosted rankings on a review website, would always be deceptive.
- Additional guidance on the disclosure of material connections. Proposed amendments include examples of the types of relationships that may be considered “material connections,” including business, family and personal relationships, providing payment, offering free or discounted products or services (or early access to them), and even providing chances to win a prize. The FTC clarifies that clear and conspicuous disclosure of such material connections need not provide complete details of the relationship, but must clearly communicate the nature of the connection to help consumers evaluate its significance when making purchasing decisions.
- A new section addressing child-directed advertising. This section recognizes that children are at particular risk of being targeted by deceptive advertising, especially in light of the rapid growth of the kid influencer market, now estimated to be as large as $1.7 billion. The FTC plans to hold a virtual public event on October 19, 2022, to gather more information on children’s capacity at different ages and developmental stages to understand advertising content and disclosures.
- Liability of advertisers, endorsers, intermediaries, and social media platforms. The FTC seeks to clarify, including through illustrative examples, when these parties may violate the FTC Act. For example, intermediaries like ad agencies and PR firms may be liable for their own part in disseminating endorsements that they know or should know are deceptive. The FTC did indicate, however, that the FTC didn't expect marketers to take down endorsers' social media posts, even if they're out-of-date.
During the meeting, FTC Chair Lina M. Khan discussed digital platforms’ relationships with influencer marketing and expressed her view that platforms should bear greater responsibility in this area. The FTC supports the development of effective built-in tools by social media platforms through which endorsers can disclose their material connections, and believes that some existing disclosure tools may be inadequate and expose both endorsers and platforms to liability. Chair Khan also highlighted the proposed guidance on consumer reviews—namely fake positive and suppressed negative reviews—and child-directed advertising issues.
The proposed revisions to the Endorsement Guides reflect current advertising realities, including the extent to which advertisers have turned increasingly to the use of social media and consumer reviews to promote their products and services, and modernize the examples in the Guides accordingly. Importantly, they also reflect the FTC’s recent enforcement activity, including against online retailer Fashion Nova, and shed light on future enforcement priorities.
Samuel Levine, the Director of the FTC's Bureau of Consumer Protection, said in a statement, "We're updating the guides to crack down on fake reviews and other forms of misleading marketing, and we're warning marketers on stealth advertising that targets kids. Whether it's fake reviews or influencers who hide that they were paid to post, this kind of deception results in people paying more money for bad products and services, and it hurts honest competitors."
The Commission voted 5-0 to submit the notice detailing the proposed revisions to the Federal Register. Comments must be received within 60 days of publication.
"We're updating the guides to crack down on fake reviews and other forms of misleading marketing, and we're warning marketers on stealth advertising that targets kids" -- Samuel Levine, Director, FTC Bureau of Consumer Protection