FTC Request for Public Comments on Endorsement Guides in Advertising
The Federal Trade Commission is considering whether to make changes to its “Guides Concerning the Use of Endorsements and Testimonials in Advertising” (aka the Endorsement Guides) and they want to hear from you.
As the name suggests, the Endorsement Guides are guidelines for businesses and marketers using endorsements in advertising. Their purpose is to help advertisers in complying with the FTC Act’s prohibition of unfair and deceptive practices in advertising. The Guides were originally enacted in 1980 and later amended in 2009. Citing the massive change that social media and social media influencers have had on the way businesses interact with consumers, the FTC issued additional guidance in 2017 with their release of “The FTC’s Endorsement Guides: What People Are Asking”. This guidance sought to apply the principles of the Endorsement Guides to the booming world of new media marketing – influencer marketing in particular. At the end of 2019, after complaints that the new guidance lacked clarity, the FTC published its Disclosures 101 for Social Media Influencers brochure (which we wrote a piece about).
According to a press release issued by the FTC on February 12, it would now like to know whether or not the public thinks its guidance has been effective and what additional steps, if any, it should take to protect consumers from deceptive practices in the age of the influencer.
In a separate statement issued on the same day, Commissioner Rohit Chopra suggested that the guidelines, along with recent no-fault, no-penalty enforcement actions have done little to deter companies and influencers from failing to disclose sponsored content. Chopra expressed concern that there have been no meaningful penalties to brands that pay for undisclosed influencer endorsements, emphasizing that “when companies launder advertising by paying someone for a seemingly authentic endorsement or review, this is illegal payola.”
He suggests it’s time for the FTC to hold companies more accountable by:
- creating requirements for social networking platforms like YouTube, Instagram, and TikTok;
- codifying FTC guidance so that violators can be held liable for civil penalties and damages; and
- specifying required terms for companies to include in their contracts with influencers.
More importantly, since the announcement of the Endorsement Guides being open for comments, the FTC has imposed a $15.2 million judgment against detox tea marketer, Teami, LLC.
The judgment stated that Teami’s paid influencers weren’t adequately disclosing their relationship with the brand, and that they were making health claims about its products without reliable scientific evidence backing them up. Contrary to the FTC’s guidance for influencers, which among other things states that disclosures should be early and explicit in the post, these influencers were repeatedly making their disclosures after the “read more” link. The Guides also forbid endorsement posts which make claims about a product that would require proof the advertiser doesn’t have. Influencers posting for Teami made unsubstantiated claims that the Teami teas could do everything from helping people lose weight to fighting cancer. The judgement comes almost two years after Teami received a warning letter from the FTC for these very practices.
The FTC’s present call for public comment appears to be an effort to gauge whether the Endorsement Guides should have more teeth to them. Previous FTC enforcement actions involving influencer disclosures (Sony and CSGO Lotto for example) have resulted in relatively minor fines. However, Chopra’s statement indicates that the FTC may soon be aiming to go after companies on a bigger scale.
Comments officially close on April 21st, 2020.