Recently the FTC published its guide on endorsements to address the application of Section 5 of the FTC act. This prompted some confusion and questions. Following by way of overview, I attempted to de-mystify the guide.

First, the guide contemplates endorsements and written testimonials. The examples provided in the guide make clear that activity subject to the guidelines must meet one of three criteria:

1. Expression of or appearing to express an opinion by words or acts. This criteria classically applies to the celebrity endorser who appears in a commercial;
2. Compensation to individuals. This criteria applies to the regular Joe who might write a blog post about a product received for free and to blogging services where persons are compensated for posting; or
3. Reviews of products. An independent reviewer who is quoted creates potential applicability if the excerpting of the review does not reflect the substance and thereby distorts the reviewer’s opinion.

Second, the guide generally prohibits the following acts:

1. Presenting an endorsement out of context;
2. Distortion of the original endorsement;
3. Unsubstantiated claims; and
4. Failing to disclose material connections with the endorser.

The specific proscriptions above, notwithstanding liability, accrues where there is an attempt to mislead by presenting as an independent endorsement, or in the alternative, the endorser’s statement is untrue. Note too than an advertiser can be liable for unsubstantiated, unprompted claims (if it does not attempt to refute and halt such claims) made by a paid endorser.

Third, consumer endorsements are scrutinized:

1. Claims made must be substantiated (including where applicable with scientific evidence); and
2. Where the depiction in advertisement implies actual consumers, actual consumers must be used or otherwise there must be a conspicuous disclaimer.

The guide gives attention to consumer endorsements because consumer endorsements are powerful and a significant opportunity for misdirection. Bottom line conspicuous disclaimers where applicable and substantiated claims (results of the endorser must set reasonable expectations) are required.

Fourth, expert endorsements by individuals or organizations require special care:

1. The endorser must have the expertise with respect to the endorsement;
2. The expert endorser must have credibly evaluated the product and the findings must be consistent with the endorsement (e.g. when claiming superiority).

Finally, when there is a connection between endorser and seller of the advertised product that might materially affect the weight and credibility of the endorsement, such connection must be fully disclosed.

The blogosphere has been uproarious in its critique of the guide requirements, so in closing I note instances where the guidelines do not apply:

1. Employees posting on a company website or blog;
2. Bloggers who post personal opinions without remuneration or connection;
3. Person’s using a clearly demarcated company sponsored Twitter account;
4. Posts to any social network site Facebook, Myspace, LinkedIn where the post is associated clearly with a company’s attempt to self-promote.

In the end, the guidelines serve to clarify allowed and disallowed activity and, regardless of where you come down on their efficacy, are intended to promote forthrightness in company promotion to the consuming public. I for one commend the FTC for their attempt.

Hayden Creque, VP and General Counsel, W3i Holdings, LLC
Hayden counsels W3i on intellectual property, Internet law, privacy, and employment law issues. W3i strives to meet or exceed industry best practices. To learn more, click here.

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[ Friday, October 23rd, 2009 | 9:27 am ] by Hayden Creque
Categories: Application Marketing Trends, Article, W3i
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