The Federal Trade Commission (“FTC”) recently announced its long awaited proposed changes to its Guides Concerning the Use of Endorsements and Testimonials in Advertising (the “Endorsement Guides”). The Endorsement Guides were first enacted in 1980 and are intended to help businesses ensure that their endorsement and testimonial advertising conforms with Section 5 of the FTC Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce,” including false advertising. Among the proposed changes to the Endorsement Guides, are those related to social media platforms and their users, deceptive endorsements by online “influencers,” businesses’ use of consumer reviews, and the impact of advertising on children.
Revised Definition of “Endorsement”
The FTC notes that “platforms play a major role in disseminating and monetizing endorsements, and actively encourage endorsers to promote and amplify their posts.” As a result, the FTC wants social media platforms to evaluate their built-in disclosure tools and what they say about them to ensure that they are not exposing themselves or their users to liability. According to FTC Chair Lina Khan, the FTC’s proposed changes “come at a time when influencer marketing is becoming increasingly prevalent and as consumers increasingly rely on online consumer reviewers to decide what to buy.” The Chair also specifically stated that paid influencers who are “hoping to appear more authentic to consumers” sometimes fail to disclose their connection to or relationship with a particular brand. FTC Commissioner Rebecca Kelly Slaughter agreed that influencers often have relationships of trust with their followers that are without clear guidelines and are “ripe for commercial exploitation and deception.”
Against this backdrop, the FTC proposed revising the current Endorsement Guides’ definition of “endorsement,” which is: “any advertising message that consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser.” The proposed revision to this definition would clarify that “marketing” and “promotional” messages can be endorsements, such as when a social media user tags a brand in a post. Importantly, the FTC also proposes revisions that would make clear that the Endorsement Guides apply to endorsements by fake or fabricated endorsers, e.g. through the use of bots. The FTC specifically noted that it would be a deceptive practice for a social media user to purchase or create fake indicators of social media influence (such as fake online followers) and then use those fake indicators to misrepresent his or her social media influence to the public for a commercial purpose.
Material Connections and Consumer Reviews
Another proposed change would require the disclosure of an online influencer’s material connection to an advertiser unless the connection is “understood or expected by all but an insignificant portion of the audience.” While such a disclosure need not include the complete details of the connection (such as the specific amount the influencer is being paid for the endorsement), it must clearly communicate the nature of the connection so consumers can evaluate its significance. (This would appear to apply to any endorser, whether the endorser is an “influencer” or not.)
An additional important change would be a new section to the Endorsement Guides addressing consumer reviews. Specifically, the FTC proposes that “in procuring, suppressing, boosting, organizing, or editing consumer reviews of their products,” advertisers are not to distort or misrepresent what consumers actually think of their products. One example of prohibited activity would be an online seller suppressing product reviews based solely on their star ratings or negative sentiments, as this would mislead the public as to purchasers’ actual opinions of the seller’s products. Procuring fake reviews is also prohibited, and a business that procures such reviews would be liable not only for the procurement, but for any unsubstantiated claims made in those fake reviews.
Advertising To Children
The FTC’s proposed changes to the Endorsement Guides conclude with a section concerning the impact of advertising on children. Specifically, the FTC states that “it may not be apparent to [children] when influencers are being paid to promote a product featured in their video and social media posts.” The FTC’s concern stems from its belief that there has been a blurring of the lines between advertisements and entertainment and other content online, much more so than there is with traditional media (such as television). The FTC emphasizes that advertising to children is an area of “special concern,” and noted that practices that would not ordinarily be questioned in advertisements addressed to adults might be questioned when addressed to children. Accordingly, the FTC plans to hold a public event on October 19, 2022 to gather research and expert opinions on children’s capacities at different ages and developmental stages to process advertising content, and whether and which type of disclosures in advertising would be effective as they relate to children.
The FTC’s proposed changes evidence the FTC’s interest in addressing evolving advertising practices and methods of targeting consumers of all ages, especially on the internet and through social media. They also provide insight into the FTC’s interpretation and application of section 5 of the FTC Act. Anyone (advertiser, influencer, marketing agency, endorser) who disseminates and monetizes endorsements should review the proposed revisions and their own policies and practices to ensure that they align with the FTC’s proposed guidance.