Advertisers who use testimonials, celebrities with endorsement deals and bloggers who post product reviews should be aware of expanded disclosure guidelines announced by the FTC on October 5, 2009.

The “Guides Concerning the Use of Endorsements and Testimonials in Advertising” (the “Guides”) provide the basis for voluntary compliance by advertisers and endorsers. Failure to comply with the Guides may result in an FTC enforcement action. The FTC will address endorsements and testimonials on a case-by-case basis to determine whether they are misleading or deceptive and, ultimately, actionable. The Guides go into effect on December 1, 2009, revising prior guides last updated in 1980. The FTC stressed the need for guidance as to new social media and consumer-generated content in online blogs in its effort to protect consumers as these forms of marketing continue to evolve and new ones develop.

“Results Not Typical” No Longer Sufficient

Under the Guides, advertisements for weight-loss, hair-growth and other products highlighting atypical results can no longer rely on a “results not typical” disclaimer to escape scrutiny. Rather, such advertisements must clearly disclose the actual results that most consumers can reasonably expect to achieve. The Guides provide an example of an advertisement for a weight-loss product with “before” and “after” pictures of a woman who says she lost 50 pounds in 6 months with the product. The FTC instructs: “if consumers cannot generally expect to achieve such results, the ad should clearly and conspicuously disclose what they can expect to lose in the depicted circumstances (e.g., ‘most women who use [the product] for six months lose at least 15 pounds’).” Advertisers must be prepared to substantiate those expected results.

Broadened Disclosure Requirements for Celebrities (and Those Who Hire Them)

The Guides also have significant implications for celebrities with endorsement deals. For example, a celebrity who touts a product during a talk show or in an online blog may be personally liable if he fails to disclose the fact that he’s been hired to promote the product, or if he makes any false or unsubstantiated claim. A celebrity who blogs about drinking her favorite soda or shopping at a certain store may be doing more than merely updating her fan base; she may be providing an unwitting endorsement subject to the FTC Guides. Furthermore, if the FTC determines that consumers are likely to conclude that the results the celebrity achieved were typical, the advertiser must have substantiation for the celebrity’s claims.

Organizations Must Also Comply

The Guides recognize that product endorsements by organizations are viewed by consumers as especially valuable. Therefore, the Guides require that such product endorsements be reached by a process that ensures the endorsement reflects the collective judgment of the organization. If the organization represents itself as expert in evaluating the advertised product, its endorsement must be supported by recognized experts conducting valid scientific tests of the product. Even if the organization controlled the testing of the product, if the product’s manufacturer pays a substantial portion of the testing costs, the payments should be disclosed.

“Word of Mouth” Marketers Must Disclose Connections

Much of the anticipation attending the Guides centered on their extension to bloggers and other “word of mouth” marketers who opine on products. The Guides oblige those marketers who are paid by companies or who review products provided free of charge to them by companies to clearly and conspicuously disclose this “material connection” between them and the company. Companies sending free products or any type of payment to someone for review of their product bear a burden to alert the potential reviewer of her obligation to disclose the relationship, and, according to the FTC, should also ensure that the reviewer’s blog complies with the requirement. The FTC will take into account a company’s efforts to ensure compliance and to monitor the marketers’ online behavior in determining whether to hold the company accountable for marketer postings.

Implications

The expanded coverage of the Guides will likely lead to increased enforcement by the FTC and the state Attorneys General, who enforce “Little FTC Acts” in their states. Advertisers who sponsor endorsements of their products will be subject to increased inspection of the endorsements themselves — both for the substantiation of claims made and for the disclosure of “material connections” between the advertiser and endorser. Advertisers who previously featured testimonials of people who had drastic results with a “results not typical” disclaimer must now add the actual results a consumer can expect. As a result, advertisers should determine whether this triggering of a requirement to include the specific results consumers can expect counters any benefits advertisers previously saw in using the drastic testimonials in the first place.

Advertisers also will be obliged to adopt monitoring protocols to track the claims of those who endorse their products. Company publicity departments need to know that by providing free products to people for review, they assume responsibility for alerting the potential reviewer of his need to disclose the relationship and they accept a duty to monitor reviewer compliance. On the reviewers’ end, people accustomed to blogging about products now must assess whether to decline free products or payments to review a product to avoid a required disclosure that may cause readers to question the objectivity and value of the blog’s opinions.

The representations of celebrities and organizations who endorse products will also be under increased scrutiny. Celebrities must be mindful of the endorsements they give, even after photo shoots and commercial tapings end, and remain aware of the newly imposed disclosure requirements any time they speak positively about a product or service in the media or even on his or her personal blog. Endorsing organizations must revisit their testing protocols and the necessity of disclosing pecuniary or other support they have received from those for whom they provide endorsements.