Making and Using Endorsements

Some companies are under the impression that if they obtain an endorsement from a consumer (a testimonial) or if they find out that a celebrity uses their products, they are free, without limitation, to use the endorsement or to discuss the celebrity in their advertising, marketing or social media. In fact, use of endorsements from both “ordinary people” and from celebrities has many restrictions, and if a company is not careful in following the rules, it may find itself the target of an FTC investigation or the defendant in a lawsuit brought by the celebrity. FTC also may review the endorsements of bloggers and social media influence campaigns. Indeed, FTC has found liability on the part of an endorser, so they, too, would be well-advised to understand what they are offering and the potential consequences.

FTC regulates product advertising, including that which appears in social media. FTC has published several guides and other information concerning the use of endorsements (such as Guides Concerning the Use of Endorsements and Testimonials in Advertising, The FTC’s Endorsement Guides: What People are Asking and FTC Staff Reminds Influencers and Brands to Clearly Disclose Relationship), and companies, bloggers and influencers considering the use of or making endorsements would be wise to review the guides and consult with competent legal counsel.

FTC has three general principals applicable to endorsements. First, endorsements must be truthful and non-misleading. An endorsement must reflect the endorser’s actual experience and opinion. An endorsement, however, cannot make objective claims for a product that require evidence that the company does not possess. When a company uses an endorsement in advertising, that endorsement is a claim requiring substantiation, not substantiation itself. This is the case even if the claim is absolutely verified as true for the specific endorser. For example, an endorser may write to a company stating that the product relieved menstrual cramps, but if the company does not have scientific data supporting the claim, then the endorsement cannot be used. In addition, FDA views endorsements as “evidence of intended use,” so it would object to any dietary supplement product claim relating to disease or health conditions because that may cause a product intended to be marketed as a dietary supplement to be an unapproved drug.

Second, when making or using endorsements claiming specific results, the results related by the endorser must be typical of what other people using the product should expect. If they are not, it may still be possible to use the endorsement if the results most people can expect when using the product are clearly disclosed. General disclosures, such as “results may vary” are no longer accepted by FTC. The Commission now requires that specific informative disclaimers be used. For example, a person endorsing a weight loss dietary supplement may have verifiably lost 50 pounds in a four-month period. If, however, the company can only substantiate that most people using the product lose 10 pounds in four months, the endorsement must be accompanied by a prominent statement along the lines of “most people who use our product together with diet and exercise may expect to lose 10 pounds in four months.”

Third, if the endorser has any connection that could affect how a person would view the endorsement or has been compensated for an endorsement, that connection or compensation must be disclosed. For example, if a person works for the company or is related to someone who works for the company, that must be disclosed. If the person received any compensation—even as little as a free sample—or is part of a marketing program run by the company, that, too, must be disclosed. Such disclosure may be as simple as, “XYZ Company gave me their product to try, and here is what I think . . ..”

Companies may solicit endorsements from customers. If the customers have no reason to believe that they will be compensated (and they are not), then there would be no need for a disclosure. It should be disclosed if the customers have a reason to expect compensation for the endorsement. According to FTC, “if customers are told in advance that their comments might be used in advertising, they might expect to receive a payment for a positive review, and that could influence what they say, even if you tell them that you want their honest opinion. In fact, even if you tell your customers that you aren’t going to pay them, but that they might be featured in your advertising, that opportunity might be seen as having a value, so the fact that they knew this when they gave the review should be disclosed.”

Let’s review some specifics, starting with bloggers and influencers. Some bloggers and typical consumers comment on products in their social media posts that have no connection to the marketers of the products and do not receive compensation. They are simply advising their readers and friends about products that they like and recommend. These posts generally fall within the scope of First Amendment rights, and FTC should not have any issue with them.

When it comes to bloggers and social media, FTC is primarily concerned about endorsements made on behalf of an advertiser where the blogger is compensated or otherwise connected to the marketer and the compensation or connection is not disclosed. For example, in 2011, in one of the first enforcement actions involving social media, FTC released a letter concerning a blogging campaign intended to build interest in ads that Hyundai Motor America was premiering during Super Bowl XLV. FTC’s concern was whether the bloggers involved in the campaign, some of whom had been given gift certificates as an incentive to include Hyundai links in their posts, were told to disclose that they had received compensation or were told not to. It should be noted that even though Hyundai had hired a public relations (PR) firm to run the campaign, FTC determined that Hyundai could still be held responsible and was, therefore, required to monitor and supervise any PR or advertising firms that it engaged.

If a blogger/reviewer is employed by a television station or newspaper, consumers can be expected to understand that it is the blogger’s job is to provide an opinion on behalf of the newspaper or television station, and that they did not actually purchase the product being reviewed. On the other hand, such compensation or relationship is not generally obvious when a review appears on a personal blog, social networking or similar media. In these instances, FTC requires disclosure of the compensation or relationship because such disclosure helps readers to determine the value to give the recommendation. Imagine being given a free product and asked to “tweet” about it. In that situation, wouldn’t you be more likely to provide positive feedback about its benefits? If you were reviewing social media posts on a product, wouldn’t it influence the weight you might place on the reviews if it were disclosed that the posts came from employees or persons related to the owners of the marketer? What about if you were planning a vacation and reviewing travel sites? Wouldn’t you evaluate the reviews differently If you were informed that the hotel had paid some of the bloggers to write the reviews or had allowed them to stay at the hotel for free?

So, in terms of the marketer, if a company is “organizing” a social media campaign, then it must ensure that the bloggers or other participants are properly disclosing the relationship and/or the compensation.

If a company is considering an influencer campaign, a lesson in what not to do can be learned from reviewing the Lord & Taylor’s 2015 campaign to promote a new collection of women’s clothing.

Lord & Taylor began by arranging for an online fashion magazine to run what appeared to be an “article” and to post a picture of a specific paisley dress. But it was not a true news article, as the retailer reviewed, approved and paid for the “article” (these pieces are sometimes referred to as “advertorials”), but this was not disclosed. Lord & Taylor next “recruited” a team of 50 “fashion influencers,” who were paid between USD$1,000 and $4,000 to post pictures of themselves on Instagram in the paisley dress on the same weekend.

For FTC, the campaign itself was not the issue, but the fact that Lord & Taylor did not disclose that it was behind the coordinated actions of the magazine and provided compensation to the influencers was. FTC charged that the retailer had falsely represented that the 50 Instagram photos and captions were independent statements of impartial fashion “influencers,” when it was really a paid, coordinated campaign. FTC further charged that the retailer had falsely arranged to have the magazine present the initial article in such a way as to have consumers believe that it reflected independent reporting when it was nothing more than paid advertising.

To settle with FTC, Lord & Taylor agreed to disclose material connections, and to further monitor its influencers, which must include obtaining written acknowledgements by influencers of their duty to disclose any material connections. This is, of course, what would be required by any company intending to run a similar influencer campaign. Such disclosures do not need to be complicated, and FTC does not mandate specific disclosure language. Some examples of acceptable disclosures could be: “Company X gave me this product to try,” noting in the post that the blogger was “paid,” that he or she is an employee of the company, or for a platform such as Twitter, that limits characters, perhaps, “paid ad,” “sponsored” or “promotion.” One thing is generally certain: FTC does not believe that a single disclosure on a home page is effective because it may not be seen by all readers. Disclosures should be part of each individual post.

Further, any paid advertising that appears to be an impartial article written by the host magazine or publisher violates FTC’s guide concerning “Native Advertising.” In its Native Advertising Guidance, FTC explains that online advertising must be clearly identified as advertising, and cannot be formatted in a way to confusingly appear to be news, feature articles, product reviews, entertainment or other non-advertising material. Any attempt to fool or mislead readers about the source of the advertising material makes it false and misleading.

Having endorsements from celebrities, such as entertainers or sports figures, can raise additional concerns. In an obvious commercial, a disclosure of a connection would not be required. In such situations, it is generally understood that celebrities are compensated for their endorsements. On social media, however, in many instances, because a significant portion of followers might not realize that a post is a paid endorsement, it is usually best practice to disclose the relationship. A disclosure is also generally a good idea when it may not be obvious that the celebrity has a relationship with the marketer. For example, if a celebrity discusses a product that she is paid to endorse on a talk show, the relationship may not be obvious, and therefore, the connection should be disclosed.

On the other hand, if a celebrity mentions a product or is seen using the product, and the company does not have a relationship with the celebrity, the marketers can’t post about the celebrity on its social media without the celebrity’s permission. Companies are not generally permitted to use people in their marketing without permission. Most celebrities are paid for their endorsements and may not agree to have their name or likeness associated with a product, even if they have talked about it or are seen using it. As a case in point, actress Katherine Heigl sued New York drugstore chain Duane Reade for $6 million after the store posted on its Twitter and Facebook accounts a paparazzi photo of her leaving a store with the chain's shopping bags. The suit was settled under confidential terms, but reportedly with a donation to a charity of the actress’ choosing.

Finally, whenever an advertisement represents that an endorser is an expert or has expert knowledge, the endorser’s qualifications must provide the level of expertise being conveyed. Moreover, the endorsement must be supported by an actual exercise of that expertise in evaluating the product. For example, if a doctor or scientist is represented as endorsing a dietary supplement, her evaluation prior to making the endorsement must have included an examination or testing of the product that would be typical for a person with their level of expertise to support any conclusions offered in the endorsement. For example, it would be insufficient for an “expert” endorsing a dietary supplement to base their conclusions on nothing more than a review of testimonials from satisfied customers in the same way that it would be unacceptable for a company to support product structure/function claims on nothing more than the reports of satisfied customers.

If a company is considering using endorsements in marketing or engaging in social media advertising, it needs to make certain to review the information available on the FTC website and consider consulting with qualified legal counsel.

Steven Shapiro ([email protected], 212-455-9542) is of counsel to Rivkin Radler LLP (rivkinradler.com) and a partner of Ullman, Shapiro & Ullman LLP (usulaw.com). His practice focuses on the dietary supplements/natural products industries with an emphasis on FDA and FTC compliance issues including labels, labeling, marketing and advertising practices.