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FTC Compliance in Advertising

Lawrence Stanley July 17, 2011

Blogger and Consumer Endorsements of Commercial Goods: Is Your Company in Compliance with FTC Guidelines?

Whether on your company’s website, Facebook, Twitter or third party blogs, endorsements of your products are subject to FTC guidelines issued in 2009.

General Considerations, 16 CFR § 255.1

FTC rule and guidelines require that before a company publishes an advertisement of a product — and this applies to all advertising, online or off — it must have a “reasonable basis” for each claim being made about the product. Both advertisements which make claims about the efficacy of a product (e.g., “you will achieve noticeable results in a few weeks”), and statements by bloggers and consumers attesting to that efficacy (e.g., “I used the product and felt results within a few days!”) are subject to the rule.

“Reasonable basis” means that the company must have objective evidence to support each claim. For medicine, remedies, vitamins, food supplements, reparative cosmetics and diets, “objective evidence” means “competent and reliable scientific evidence,” i.e., studies conducted by qualified persons, using methods that are generally accepted as scientifically valid. Furthermore, any claim regarding the results of using a product must be based on what consumers may generally expect. The matter obviously gets quite tricky when, for example, a study reveals a wide range of outcomes, particularly with regard to varying body types, skin types, ages, etc. But the FTC guidelines provide no further guidance on what will pass the test. The onus, if the FTC comes knocking, will be on the company.

If a claim is not supported by “objective evidence,” the company must conspicuously (i.e., not in fine print) state what the “generally expected results” of the product are, but even these generally expected results must, according to the FTC, be supported by objective evidence. Testimonials from satisfied customers are not considered objective or adequate evidence to support a claim about a product. Moreover, the FTC does not distinguish between claims made (1) directly by your company; (2) via consumer testimonials which appear on your company’s websites, blogs, Facebook pages, etc., or any other website at your company’s behest; and (3) by bloggers if the blogger has been provided with the product by the company, or reviews the product at the company’s request, or receives any kind of compensation, monetary or otherwise. In all three cases, the claims must be supported by objective evidence. Claims which are not supported by objective evidence may be considered “deceptive” by the FTC.

Rules Applicable to Consumer Endorsements, § 255.2

As noted above, the FTC makes no distinction between consumer and blogger endorsements. They carry the same burdens and are treated as statements by the company whose product is being endorsed. Where a blogger makes a claim about the efficacy or curative properties of a product, the Company may be held responsible by the FTC even if the claim appears only on the blogger’s blog. Companies must therefore be aware of what bloggers (with whom they have been in contact) write and must take steps to correct claims which are not what consumers will generally achieve and are not supported by objective evidence. The FTC, by the way, disfavors the use of disclaimers such as “the results attested to by [the endorser] are not typical” or “may not be achieved by you.” FTC cites research on these disclaimers demonstrating that they have no effect on consumer expectations. However, the FTC doesn’t rule out the possibility that such a disclaimer might be sufficient in some circumstances. It just doesn’t say what those circumstances are.

There is a further rule which companies must heed for advertisements which contain consumer endorsements. Whenever an endorser represents that s/he uses a product, the company may run the advertisement only during the time the endorser actually uses, and continues to use, that product and to have the same opinion about it. (Companies have the obligation to contact the endorser from time to time to find out.) Dated testimonials in a section devoted to consumer comments is likely the best way to sidestep this potential problem —that is, where endorsement are conspicuously dated, there is no implication that product use is either current or ongoing. Videoclips with endorsements should also be conspicuously dated. Companies should ensure that the bloggers they contact also conspicuously date their product reviews.

§§ 255.1 and 255.2 contain several examples which are useful in understanding how the rules are applied:

A brochure for a baldness treatment consists entirely of testimonials from satisfied customers who say that after using the product, they had amazing hair growth and their hair is as thick and strong as it was when they were teenagers. The advertiser must have competent and reliable scientific evidence that its product is effective in producing new hair growth. The ad will also likely communicate that the endorsers’ experiences are representative of what new users of the product can generally expect. Therefore, even if the advertiser includes a disclaimer such as, “Notice: These testimonials do not prove our product works. You should not expect to have similar results,” the ad is likely to be deceptive unless the advertiser has adequate substantiation that new users typically will experience results similar to those experienced by the testimonialists.
An advertisement for a cholesterol-lowering product features an individual who claims that his serum cholesterol went down by 120 points and does not mention having made any lifestyle changes. A well-conducted clinical study shows that the product reduces the cholesterol levels of individuals with elevated cholesterol by an average of 15% and the advertisement clearly and conspicuously discloses this fact. Despite the presence of this disclosure, the advertisement would be deceptive if the advertiser does not have adequate substantiation that the product can produce the specific results claimed by the endorser ( i.e. , a 120-point drop in serum cholesterol without any lifestyle changes).
An advertisement for a weight-loss product features a formerly obese woman. She says in the ad, “Every day, I drank 2 WeightAway shakes, ate only raw vegetables, and exercised vigorously for six hours at the gym. By the end of six months, I had gone from 250 pounds to 140 pounds.”The advertisement accurately describes the woman’s experience, and such a result is within the range that would be generally experienced by an extremely overweight individual who consumed WeightAway shakes, only ate raw vegetables, and exercised as the endorser did. Because the endorser clearly describes the limited and truly exceptional circumstances under which she achieved her results, the ad is not likely to convey that consumers who weigh substantially less or use WeightAway under less extreme circumstances will lose 110 pounds in six months. (If the advertisement simply says that the endorser lost 110 pounds in six months using WeightAway together with diet and exercise, however, this description would not adequately alert consumers to the truly remarkable circumstances leading to her weight loss.)The advertiser must have substantiation, however, for any performance claims conveyed by the endorsement (e.g., that WeightAway is an effective weight loss product).

If, in the alternative, the advertisement simply features “before” and “after” pictures of a woman who says “I lost 50 pounds in 6 months with WeightAway,” the ad is likely to convey that her experience is representative of what consumers will generally achieve. Therefore, 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 WeightAway for six months lose at least 15 pounds”).
If the ad features the same pictures but the testimonialist simply says, “I lost 50 pounds with WeightAway,” and WeightAway users generally do not lose 50 pounds, the ad should disclose what results they do generally achieve ( e.g., “most women who use WeightAway lose 15 pounds”).

A skin care products advertiser participates in a blog advertising service. The service matches up advertisers with bloggers who will promote the advertiser’s products on their personal blogs. The advertiser requests that a blogger try a new body lotion and write a review of the product on her blog. Although the advertiser does not make any specific claims about the lotion’s ability to cure skin conditions and the blogger does not ask the advertiser whether there is substantiation for the claim, in her review the blogger writes that the lotion cures eczema and recommends the product to her blog readers who suffer from this condition. The advertiser is subject to liability for misleading or unsubstantiated representations made through the blogger’s endorsement. The blogger also is subject to liability for misleading or unsubstantiated representations made in the course of her endorsement.

Material Connections, § 255.5

This section of the regulations requires that companies disclose any material fact that might influence a blogger’s opinion about the product. This applies both to compensation, the promise of compensation, employment by the company (as when an employee posts on a board anonymously, touting his company’s products) and claims that an opinion is candid when it isn’t. “Compensation,” in this context, does not need to be monetary for the disclosure requirement to be triggered. The promise of publicity or some non-monetary reward for a favorable review is also “compensation.”

Again, the FTC provides some nuanced examples:

An actual patron of a restaurant, who is neither known to the public nor presented as an expert, is shown seated at the counter. He is asked for his “spontaneous” opinion of a new food product served in the restaurant. Assume, first, that the advertiser had posted a sign on the door of the restaurant informing all who entered that day that patrons would be interviewed by the advertiser as part of its TV promotion of its new soy protein “steak.” This notification would materially affect the weight or credibility of the patron’s endorsement, and, therefore, viewers of the advertisement should be clearly and conspicuously informed of the circumstances under which the endorsement was obtained.

Assume, in the alternative, that the advertiser had not posted a sign on the door of the restaurant, but had informed all interviewed customers of the “hidden camera” only after interviews were completed and the customers had no reason to know or believe that their response was being recorded for use in an advertisement. Even if patrons were also told that they would be paid for allowing the use of their opinions in advertising, these facts need not be disclosed.

An infomercial producer wants to include consumer endorsements for an automotive additive product featured in her commercial, but because the product has not yet been sold, there are no consumer users. The producer’s staff reviews the profiles of individuals interested in working as “extras” in commercials and identifies several who are interested in automobiles. The extras are asked to use the product for several weeks and then report back to the producer. They are told that if they are selected to endorse the product in the producer’s infomercial, they will receive a small payment. Viewers would not expect that these “consumer endorsers” are actors who were asked to use the product so that they could appear in the commercial or that they were compensated. Because the advertisement fails to disclose these facts, it is deceptive.

A college student who has earned a reputation as a video game expert maintains a personal weblog or “blog” where he posts entries about his gaming experiences. Readers of his blog frequently seek his opinions about video game hardware and software. As it has done in the past, the manufacturer of a newly released video game system sends the student a free copy of the system and asks him to write about it on his blog. He tests the new gaming system and writes a favorable review. Because his review is disseminated via a form of consumer-generated media in which his relationship to the advertiser is not inherently obvious, readers are unlikely to know that he has received the video game system free of charge in exchange for his review of the product, and given the value of the video game system, this fact likely would materially affect the credibility they attach to his endorsement. Accordingly, the blogger should clearly and conspicuously disclose that he received the gaming system free of charge. The manufacturer should advise him at the time it provides the gaming system that this connection should be disclosed, and it should have procedures in place to try to monitor his postings for compliance. An online message board designated for discussions of new music download technology is frequented by MP3 player enthusiasts. They exchange information about new products, utilities, and the functionality of numerous playback devices. Unbeknownst to the message board community, an employee of a leading playback device manufacturer has been posting messages on the discussion board promoting the manufacturer’s product. Knowledge of this poster’s employment likely would affect the weight or credibility of her endorsement. Therefore, the poster should clearly and conspicuously disclose her relationship to the manufacturer to members and readers of the message board.

FTC Enforcement

The FTC can subpoena companies and hold them accountable for violating FTC guidelines. It can issue cease and desist orders, require corrective advertising and impose civil penalties. By all accounts, FTC enforcement is focused on products which are ingested (particularly supplements) and products which claim to cure conditions or diseases (especially cancer). The use of consumer and blogger endorsements which make claims not substantiated by objective evidence is common practice in the health supplements and cosmetics industries, but “everybody does it” is not a defense to an FTC action.

The FTC is not particularly proactive, but responds primarily to consumer complaints. Still, any proceeding — administrative or civil — can be an expensive process and is best avoided by following the guidelines carefully and in good faith.