Marketers Settle Alleged Endorsement Violations

The FTC has announced that a PR firm and publisher have settled FTC allegations that they misrepresented insect repellent product endorsements as independent opinions and disguised commercial advertising as independent editorial content. Respondents are not prohibited from making such misrepresentations going forward, and must clearly and conspicuously disclose material connections with endorsers and implement reasonable monitoring protocols

What the FTC Endorsements Guidelines Do

The policy behind the FTC Endorsement Guides is to ensure truthful advertising. Simply stated, endorsements must not be misleading and reflect the honest opinion of the endorser. Additionally, endorsements cannot be used to make an unsubstantiated claim that the product’s marketer could not make.

As the heart of the Guides is the requirement that “material connections” between endorsers and brands be clearly and conspicuously disclosed. The FTC wants to ensure that consumers are provided with all the information necessary in order to assess how much weight to give the review. Material connections include, without limitation, payments, an employment relationship, a close family relationship and free products.

Additionally, endorsements that have achieved above average, results must clearly and conspicuously disclose what the generally expected results are if the advertiser does not possess proof that the endorser’s experience represents what people will generally achieve using the product as described in the advertisement.

The FTC’s Complaint

The FTC’s administrative complaint alleged that the PR firm proposed promoting the campaign with a magazine publisher that could assist with soliciting athlete endorsers to promote the product. The agency also alleged that some respondents reimbursed employees and friends for purchasing and reviewing the product. The campaign was tied to the mosquito-borne Zika virus and the 2016 Summer Olympics.

According to the Commission, respondents engaged two gold medalists endorsed the product in exchange for payment, and drafted and monitored social media posts that failed to disclose material connections and that were reposted by the publisher. The FTC also alleges that the publisher ran paid ads that were disguised as independent editorial content.

The FTC charged respondents with violating the FTC Act by falsely representing that endorsements reflected the independent, objective opinions and experience of impartial users; failing to disclose material connections; and misrepresented that paid ads were independent opinions.

Recent FTC Warnings

Recently, the Federal Trade Commission has taken a number of affirmative actions with regard to influencer campaigns and educating marketers about proper disclosures. For example, the agency announced its first-ever settlement with social media influencers over a failure to properly disclose a brand endorsement deal. Brands, companies representing influencers and influencers themselves are no fair game.

The FTC has also recently sent rounds of warning letters to influencers regarding Instagram posts that appeared to endorse a brand but insufficiently communicated material connections. The purpose was to educate, establish a baseline and incentivize swift remedial measures.

The agency has also recently provided guidance regarding the sufficiency of social media platform disclosure tools. Facebook, Snapchat, Instagram and YouTube drew attention. Built-in disclosure tools may not always be sufficient. Consult with and FTC lawyer to discuss applicable regulatory standards.

The more diligent that brands are when it comes to implementing contracts and procedures to monitor the activities of its influencers, the more forgiving the FTC will likely be during an investigation or enforcement action.

Terms of the Recent Settlement

The two proposed administrative orders settling the FTC’s allegations prohibit, in part, the respondent from engaging in such activities without making the proper disclosures, including material connections. They are prohibited from expressly or implied representing that an endorser is an ordinary consumer. Respondents are also prohibited from misrepresenting that paid commercial advertising is an independent new source. Lastly, respondents must implement reasonable protocols to ensure that endorsers are notified of their disclosure obligations, monitor the activities of endorsers and take remedial action for those that fail to comply.

Richard B. Newman is an advertising law attorney at Hinch Newman LLP.   Contact him via email at [email protected] or via telephone at 1 (212) 756-8777.

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