The FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising (16 CFR Part 255) (“Guides”) was introduced in 2009. The Guides “reflect the basic truth-in-advertising principle that endorsements must be honest and not misleading. An endorsement must reflect the honest opinion of the endorser and can’t be used to make a claim that the product’s marketer couldn’t legally make.
In addition, the Guides establish that if there’s a “material connection” between an endorser and the marketer that consumers would not expect and it would affect how consumers evaluate the endorsement, that connection should be disclosed.” (FTC). For example, if an ad features an endorser who’s a relative or employee of the marketer, the ad is misleading unless the connection is made clear. The same is usually true if the endorser has been paid or given something of value to tout the product. The reason is obvious: knowing about the connection is important information for anyone evaluating the endorsement.” (FTC).
What is a “material connection”?
Under the FTC’s view, endorsers have an obligation to disclose material connections with their sponsoring advertisers. It defines a material connection as a connection “not reasonably expected by the audience.”
What is an endorsement?
An endorsement is “any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness, or other identifying personal characteristics of an individual or the name or seal of an organization) that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser.” (FTC).
Disclosures in Connection with Blogs
The FTC Guides do, in fact, apply to blog posts, and in many cases, “subjects bloggers to stricter disclosure requirements because their readers do not assume that they have been compensated.” For instance, “the FTC would not require disclosure by a newspaper movie critic who attends free critics’ screenings, as it ‘does not consider reviews published in traditional media to be sponsored advertising.’ An independent blogger, however, is required to disclose free tickets.” (FVLD).
In accordance with the FTC, it is not common knowledge that bloggers are paid to push products or that if you click a link on a blogger’s site to buy a product, the blogger will get a commission. As such, “some bloggers who mention products in their posts have no connection to the marketers of those products – they don’t receive anything for their reviews or get a commission. They simply recommend those products to their readers because they believe in them. Moreover, the financial arrangements between some bloggers and advertisers may be apparent to industry insiders, but not to everyone else who reads a particular blog. Under the law, an act or practice is deceptive if it misleads ‘a significant minority’ of consumers. Even if some readers are aware of these deals, many readers aren’t. That’s why disclosure is important.” (FTC).
Endorsements on Social Media
The FTC Guides apply to social media posts. See FTC DotCom Disclosures.
Violations of the FTC Guides
The Guides state that both advertisers and endorsers may be liable for failure to disclose material connections that they share. The Guidelines also make it clear that celebrities have a duty to disclose their relationships with advertisers when making endorsements outside the context of traditional ad campaigns.
While it has been reported that the FTC has no authority to impose civil penalties, in 2011, it charged Nashville, Tennessee-based Legacy Learning Systems with $250,000 in settlement damages, making it the first ever-monetary component for a violation of the blogger endorsement rules.