The Endorsement Guides: What’s New and What’s Next
The Federal Trade Commission (FTC) has been actively collecting and processing feedback on the Endorsement Guides — which focus on transparency, truthfulness, and typicality as related to product and service reviews and how they're leveraged in marketing. In the 2022 update of the guides, it has voiced opinions and taken actions that signal heightened expectations from all marketing stakeholders, including those that solicit, collect, and publish consumer reviews. Two legal experts discussed what these opinions are and provided some insight on how to future-proof your business for compliance under these new conditions.
Words of Wisdom
"Everybody can be liable, including intermediaries. If the agency is found liable, that won't necessarily let the advertiser off the hook."
— Jim Dudukovich, counsel at Bryan Cave Leighton Paisner LLP
Key Takeaways
The FTC made several updates when it published its 2022 Endorsement Guides. Some of the most notable changes include the following:
- In certain circumstances, an advertiser can be liable for false statements in an endorsement even if there is no material connection between the advertiser and the endorser. This change means that if a brand shares or highlights a review, even without a business relationship with the reviewer, that brand can still be held accountable if information in that review is false or embellished.
- The FTC acknowledges that an advertiser can't monitor everything, and maintains that good faith efforts to provide guidance, monitor, and take corrective actions will "reduce an advertiser's odds of facing a Commission enforcement action." However, an advertiser must observe some reasonably good faith protocols to monitor how a brand's products or services are being reviewed.
- The FTC undertook a complete overhaul of the guide's FAQs to bring them up to date and introduce current examples.
- The FTC clarified that "Clear and conspicuous" means unavoidable and difficult to miss. Disclosures should be above the fold and easy for the target audience to understand, should mirror the medium, and should travel with content.
The biggest change from the above is the newly proposed rule relating to deceptive reviews. The following seven practices can be considered deceptive under new FTC rules:
- Writing, selling, purchasing, or procuring a review or testimonial — even a negative one — that is "fake" because the reviewer doesn't exist, the reviewer didn't actually use the product, or the review materially misrepresents the reviewer's experience
- Review "hijacking" or flooding a review section with positive or negative reviews
- Incentivizing reviews in exchange for a particular sentiment
- Facilitating reviews by "insiders" that do not include clear and conspicuous disclosure of their material connections to the business
- Setting up what appear to be an independent review site for your brand's services or products
- Suppressing reviews either through intimidation or by only publishing positive ones
- Misusing fake indicators of social influence, such as buying or selling fake followers or like
Action Steps
- Keep consistent records: This step is especially important in documenting your good faith efforts/protocols to monitor and take corrective action when a misleading review is discovered.
- Do your due diligence: Even in instances in which an agency partner is responsible for violating FTC rules, the brand can still be held liable. Ensure you understand your third-party partners' processes for preventing non-compliance. It may even be worthwhile to train your agency partners against your brand's standards for compliance.
- Lose the legalese: When working with an influencer or brand partner, create agreements in plain language that anyone can understand, including explaining how necessary disclosures work.
Q&A with Jim Dudukovich, counsel at Bryan Cave Leighton Paisner LLP; Maria Daatio Perez, director and senior counsel at Mattel, Inc.
Q. Would a brand be a liable for a false review if it doesn't share or highlight the review?
Jim Dudukovich: I would be hesitant to say no. If, as a company, you've got thousands of reviews being posted every day, then maybe. But if you don't get that many reviews and there is a false one that your company knows about, you have to do something about it.
For more on this topic, see:
Maria Daatio Perez: That's a risk assessment issue. You can say, "Okay our risk is a little more manageable because this is part of a larger review set." Don't highlight it or your risk goes up. But really, it just depends. If that review affects the star rating for a product significantly — and I doubt just one review would do that — but if it does, the FTC had said that that could be considered misleading.
Q. As an employee of a company, if I post something on LinkedIn that simply says, "I love our new product," does that constitute a review?
Dudukovich: Your phrasing there is great because you used the word "our," which would constitute a disclosure. Now if you were to say, "I love brand X's new product," without indicating that you work for that brand, there is no disclosure. This is not black and white. The focus is on your company's processes for procuring, soliciting, generating, and collecting reviews and where are those reviews getting published and what role does the business play in that. Acting independently as an employee, you're probably okay. If the company starts collecting these reviews and using them in marketing messaging without a disclosure, that may be problematic.
CLE Materials
Source
"The Endorsement Guides: What's New and What's Next." Jim Dudukovich, counsel at Bryan Cave Leighton Paisner LLP; Maria Daatio Perez, director and senior counsel at Mattel, Inc. ANA Law 1-Day Conference, 7/19/23.