Breaking down the latest from the FTC on endorsements and consumer reviews

Modified definition of “endorsers”: The updated Guides revised the definition of “endorsers” to include virtual, fictional influencers, such as computer-generated fictional characters. 

Clear and conspicuous disclosure: FTC clarified that “clear and conspicuous disclosure” should include a disclosure that “is difficult to miss (i.e., easily noticeable) and easily understandable by ordinary customers. The Guides now state that “If a communication’s representation necessitating a disclosure is made through visual means, the disclosure should be made in at least the communication’s visual portion; if the representation is made through audible means, the disclosure should be made in at least the communication’s audible portion; and if the representation is made through both visual and audible means, the disclosure should be made in the communication’s visual and audible portions.” Section 255.0(f). 

FTC considers a review an endorsement when it can be attributed to the product’s manufacturer via a program: If a consumer receives a free product as part of a marketing program that periodically provides free products from various manufacturers, where the consumer has the option of writing a review, the consumer’s review would be an endorsement because of his or her connection to the manufacturer through the marketing program. Section 255.0, Example 7.

Marketers may become responsible for claims made in unsolicited consumer reviews: Where there is no connection between a manufacturer and an ordinary purchaser leaving a review, the content of the review posted to social media, or an independent review website, cannot be attributed to the manufacturer. However, if the review is posted to the manufacturer’s website and the manufacturer chooses to highlight the review on the homepage of its website, then the review becomes an endorsement even if there is no connection to the consumer, and the manufacturer is responsible for ensuring all claims are substantiated. Section 255.0, Example 7.

Endorsers and intermediaries like ad agencies and PR firms may face liability for deceptive endorsements: Endorsers are responsible for representations made in endorsements if they knew or should have known that the representations were unsubstantiated. The level of due diligence required by the endorsers will depend on their level of expertise and knowledge, among other factors. Likewise, advertising agencies and public relations firms can face liability for their roles in disseminating what they knew or should have known were deceptive endorsements. This liability includes false claims as well as disseminating ads without necessary disclosures of material connections. Section 255.1(e) and (f)

FTC cautions that built-in disclosure tools may not be good enough: FTC cautions marketers and influencers that built-in disclosure tools on social media platforms may be inadequate to disclose a material connection. For example, they may not be sufficiently clear and conspicuous. Section 255.0, Example 9.

Disclosures must be tailored if a discrete group is targeted: If an advertiser micro targets a discrete group of consumers, any necessary disclosures will be based on the needs of that discrete group. For example, if the group targeted speaks a specific language, the disclosure needs to be in that language. Section 255.0, Example 11.

Endorsements with the image or likeness of a person: An endorsement with the image or likeness of a person other than the actual endorser is deceptive if it misrepresents a material attribute of the endorser. Section 255.1(g).

Responsibility for old social media posts: FTC clarified that endorsers and advertisers are not required to go back and modify or delete past social media posts as long as the posts were not misleading in the first place, and the dates of the posts are clear and conspicuous to viewers. However, if the posts were later reposted or shared, it is implied that the endorser continues to hold the same views expressed in the old post. Section 255.1, Example 1.

“Generally expected performance” disclosures: When the advertiser does not have substantiation that the endorser’s experience is representative of what consumers will generally achieve, not only should the ad clearly and conspicuously disclose the generally expected performance in the depicted circumstances, the disclosure of the generally expected performance should be presented in a manner that does not itself misrepresent what consumers can expect. The Guides clarify the disclosure must alter the net impression of the ad so that it is not misleading. Section 255.2(b).

Advertisers cannot distort or manipulate reviews: FTC added a new section (Section 255.2(d)) focused on consumer reviews, stating advertisers are forbidden to make any change to consumer reviews of their products that have the effect of distorting or otherwise misrepresenting what consumers think of their products. Additionally, example 8 in Section 255.2 states an advertiser highlighting only glowing reviews and labeling them as “most helpful” where consumers had not actually voted them most helpful is deceptive.

Disclosures of “generally expected performance” can be misleading: The agency now clarifies that a “generally expected performance” disclosure may be misleading if the results are only true under limited circumstances that are not clearly stated in the ad. For example, where outliers can substantially affect the average results, a disclosure of generally expected results based on computing the mean would be considered misleading. In such circumstances, the disclosure should be based on median results. Section 255.2, Example 4.

Advertisers are liable for fake reviews: Marketers are liable for procuring reviews that are not from bona fide users and are also liable for any unsubstantiated claims made in those fake reviews. Section 255.2, Example 4. Additionally, FTC now states that paying purchasers to write only positive product reviews is deceptive regardless of any disclosure of the payment. Section 255.2, Example 9.

Advertisers must avoid “review gating”: The agency states that “review gating”—a practice in which an advertiser seeks customer feedback but sends satisfied and dissatisfied customers down different paths in order to encourage positive reviews and avoid the public posting negative reviews—may be considered an unfair or deceptive practice if it results in the posted reviews being substantially more positive than if the marketer had not engaged in the practice. Section 255.2, Example 11.

Manufacturers must clearly disclose if they operate review websites: If a manufacturer sets up a review website that reviews the manufacturer’s own products and competing products, the manufacturer must clearly disclose the association between the manufacturer and the website so that it does not appear to be independent. Section 255.4

Both manufacturers and third-party review websites can be liable for misleading consumers:  It is inherently deceptive for a website operator to accept money from a manufacturer in exchange for higher rankings of the manufacturer’s products, whether or not the website makes express claims of objectivity or independence. If a manufacturer makes payments to the review site (e.g., affiliate link referrals) but not for higher rankings, there should be a clear and conspicuous disclosure regarding the payments. Section 255.4, Examples 2-3.

Disclosures of endorsements by famous influencers: FTC revised the Guides to state that an endorser’s material connection needs to be disclosed “when a significant minority of the audience for an endorsement does not understand or expect the connection.” This is a factual question that might require empirical testing and is thus likely to be a tough standard to meet—even for influencers like Kim Kardashian! Section 255.5

Employees must disclose their employment relationship: FTC added an example stating that employees who discuss their employer’s products or services on discussion boards, retail websites, review platforms and the like must clearly and conspicuously disclose their employment relationship. It’s not enough for the disclosure to be in their bios. To limit liability, employers should appropriately train employees. However, the agency also states that if the employer has directed the endorsements or otherwise has reason to know about them, the employer is required to monitor employees to ensure compliance.

Disclosures need to sufficiently communicate the nature of the connection: FTC makes clear that complete details do not need to be included in the disclosure (e.g., the payment amount). However, the disclosure must clearly communicate the nature of the connection so that consumers can evaluate its significance. FTC added new Example 13, which explains that a disclosure that a reviewer received an app for free in order to review it would be deceptive if the consumer also received payment for the review. Section 255.5

FTC added an entirely new section to address endorsements directed to children: The Guides now state that practices that would not ordinarily be questioned in advertisements addressed to adults might be questioned in advertising to children because of the character of the audience.

The rule would prohibit a business from writing, creating, selling, purchasing, or procuring a consumer review, or consumer or celebrity testimonial (1) by a reviewer or endorser that does not exist, (2) by a reviewer or endorser who did not use or have experience with the product, service or business that is the subject of the review, or (3) that materially misrepresents expressly or by implication the reviewer’s or endorser’s experience with the product, service or business. 

The rule would prohibit repurposing a consumer review written for one product so that it appears to be a review written for a substantially different product.

The rule would prohibit a business from providing compensation or other incentives in exchange for, or conditioned on, the writing or creation of consumer reviews expressing a particular sentiment, whether positive or negative. This contemplates purchasing negative reviews about a competitor.

The rule would prohibit an officer or manager of a business from writing or creating a consumer review or consumer testimonial about the business or one of its products or services that does not have a clear and conspicuous disclosure of the officer’s relationship to the business. Additionally, it is also would violate the rule to solicit reviews from employees without instructing them to clearly and conspicuously disclose the employment relationship.

It would be a rule violation to represent, expressly or by implication, that a website, organization, or entity that a business controls, owns or operates, provides independent reviews or opinions about a category of businesses, products, or services, including the business or one or more of its products or services.

It would be a rule violation to use an unjustified legal or physical threat to prevent a consumer from posting a review or to get a consumer to remove a review. Additionally, it would also prohibit a business from falsely conveying consumer reviews of one or more of its products or services displayed on its website or platform as representing most or all the reviews submitted to the website or platform when reviews are being suppressed (i.e., not displayed) based upon their ratings or their negativity. The rule does allow for reasonable monitoring of reviews, as long as the criteria for withholding reviews are applied to all reviews submitted without regard to the favorability of the review.

 The rule prohibits selling, distributing, purchasing, or procuring fake indicators of social media influence.