ADventures in Law

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As we reported <a href="https://www.adventures-in-law.com/ftc/may-2022-public-commission-meeting-meet-commissioner-bedoya-plus-blasts-from-the-past-endorsements-and-an-ftc-legend/?utm_source=BakerHostetler+-+AD-ttorneys+Law+Blog&amp;utm_campaign=c67b4e42e7-RSS_EMAIL_CAMPAIGN&amp;utm_medium=email&amp;utm_term=0_671790effd-c67b4e42e7-76338769">yesterday</a>, the FTC has issued its <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/P204500%20Guides%20Concerning%20Endors%20and%20Testimonials.pdf">proposal for an update to the Testimonial &amp; Endorsement Guides</a>. These are not THE LAW, because (1) guides are not law and (2) even if we treat them as such, this is a proposal. That said, the changes are an important indication of what the agency is currently thinking, and it is certainly possible for the agency to take an aggressive enforcement posture and indicate that the draft changes put industry on notice. So it is important to look closely at the changes and evaluate whether your Company might want to make any modifications to its current practices.

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There will be a formal 60-day notice and comment period after the notice is published in the Federal Register and then likely some more refinements before this proposal grows up to be a real guide. When will that be, you ask? Given that it took 26 months to get to a proposal, we would be willing to suggest another year, largely because the FTC has been pushed to address the alleged evils of kid influencers and is holding a <a href="https://www.ftc.gov/news-events/news/press-releases/2022/05/ftc-hold-virtual-event-protecting-kids-stealth-advertising-digital-media">workshop in October</a> to gather more information. As expected, this proposal is not a revelation. Because the FTC staff has communicated updates to its thinking on testimonials such as via its <a href="https://www.ftc.gov/business-guidance/resources/ftcs-endorsement-guides-what-people-are-asking">FAQs</a>, the proposal largely just formalizes what we already know. That said, there were some areas that made us pause (we will flesh out for you in greater detail in the coming weeks). And one recent change to FTC policy that makes us very sad.

Clear &amp; Conspicuous Disclosures: Material connection disclosures should be both likely to be noticed and easy to understand. Fair enough. And a visual disclosure should stand out from other text. We don’t think the intent was to change the rules we know and have used, but we do question how a disclosure can actually “stand out” from other words in a tweet. Otherwise, the proposal incorporates some of the rules we know, like no disclosures appearing after a “read more” click is required. The proposal also reinforces previous staff guidance that with respect to posts on sites such as Instagram where the endorsement may be made verbally any required disclosure must also be verbal.

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Target Audience: There is reference to looking at the target audience and assessing what is clear and conspicuous for them. The FTC gives examples of older people and kids as two such audiences with potentially different capacities. We hope this means the FTC will take into account when a post targets, say, the gaming community with its own language or Gen Zers who have grown up with social media.

Refreshing Testimonials: The proposal indicates that an endorsement in an ad can only be run so long as the endorser remains a “bona fide user” of the product. What if the endorser still believes in the product even though he or she is no longer using it, such as someone who had used and endorsed a cream that relieved skin irritation but whose skin is no longer irritated? We assume this is limited to when an endorser has truly moved on and no longer believes in the endorsed product. In a piece of practical good news, the proposal says that an advertiser does not need to clean out old endorsements from its social media pages as long as the older endorsements are dated and not subsequently reposted. This is a terrific recognition of the difficulties with the fact that digital lives forever.

Pictures: The proposal notes that “use of an endorsement with the image or likeness of a person other than the actual endorser” may be deceptive if it misrepresents an attribute of the endorser that is material to the endorsement. This makes good sense, particularly in the example cited, where an acne patient photo is someone else with near-perfect skin. But what if the issue is more subtle, for example, when the advertiser does not know what the endorser looks like and is using a written consumer review in its own advertising? Is using such quotes with stock images an issue?

Typicality: With the <a href="https://www.ftc.gov/news-events/news/press-releases/2009/10/ftc-publishes-final-guides-governing-endorsements-testimonials">2009 updates</a>, we lost the ability to say “results not typical” and were told to include the average typical results if they differed from the endorser’s personal experience. The new proposal provides a number of examples in the weight loss context, suggesting the FTC expects something more specific than the “average weight loss 1-2 lbs. per week.” Determining what requires a typicality disclosure and how to make one has long vexed marketers, and this proposal only complicates that exercise further.

Fashion Disclosures: The proposal adopts prior informal guidance that tagging is an endorsement. Yet there is a new example of a tennis pro wearing the clothes of her sponsor but having no disclosure obligation if she is not discussing the clothes. It is very common for fashion brands to give influencers their clothes to just wear in their glamorous lives but not actively promote. It looks like the FTC is not worried about these situations anymore and may be offering some welcome flexibility.

The Kardashian Exception: Many of us have speculated for years whether some influencers might become so well known as “professionals” that disclosure was no longer required because consumers would automatically assume the influencer had been paid by the relevant brand.&nbsp; Well, the FTC has begun to warm up to that idea.&nbsp; The FTC noted, that “without accepting or rejecting” that concept, it was adding the caveat that “an endorser’s material connection need not to be disclosed when it is understood or expected by all but an insignificant portion of the audience.”

Material Connections and Consumer Reviews: The proposal continues to suggest fairly de minimis incentives to write reviews are material connections, including sweepstakes entries and product discounts, even if the consumer is free to write whatever they please. With the increased emphasis on transparency in consumer reviews, this seems like a mistake. Is a review given for an entry into a sweepstakes really something people will think creates bias that they need to know about? Wouldn’t most consumers still gladly take a sweepstakes prize from a company they had just trashed? This is all the odder with the suggestion that including incentivized reviews in calculating average star ratings may be deceptive if the incentivized reviews “materially” increase the average. It seems counterintuitive to set aside any incentivized review; that may deter companies from encouraging reviews. In our experience, consumers will willingly share their experiences, good and bad, but they may need a nudge for their time. This should not be treated the same way as a review written by the owner of the company or its employees.

Platforms: It is evident the FTC is not impressed with the built-in disclosures offered by the platforms, and the proposal makes clear that additional disclosure is needed. While perhaps stymied by <a href="https://en.wikipedia.org/wiki/Section_230">Section 230 immunity</a> for platforms, the FTC has a new theory. It warns the platforms that they may be liable for deceptive claims for anything said to brands or influencers about the utility or effectiveness of platform disclosures. It will be interesting to see how this shapes up.

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Lots to think about. And these are only some first-read impressions. We look forward to engaging with clients and friends over the next months about what this means in practice for use of influencers, consumer reviews, third-party seals and expert endorsements.

So sorry to end on a downer, on a Friday at that, but the thing that makes us sad is the continued strict limitations on the ability of staff to speak at conferences and in other business settings. These are the places where, in the past, so many of us learned about what the FTC was thinking and got to engage on important issues. Amy remembers presenting with Mary Engle and Laura Brett in a packed hall at BAA 2017, gleefully dissecting the warning <a href="https://www.ftc.gov/system/files/attachments/press-releases/ftc-staff-reminds-influencers-brands-clearly-disclose-relationship/influencer_template.pdf">letters</a> the FTC had just sent and NAD’s juicy <a href="https://bbbprograms.org/archive/posts-by-celebrity-endorsers-revised-to-disclose-material-connections-to-fittea-following-nad-inquiry">monitoring case</a> involving the Kardashians. We all hung on every word from our regulators. Daniel remembers the value of speaking at such conferences and having the opportunity to engage directly with in-house lawyers to hear their questions and concerns, as these interactions often led to updates to the FAQs. If staff is unable to engage with industry to answer questions so industry can get it right, it is not only businesses but also consumers who may not be protected.

Testimonial Guides Update – The Things That Make Us Go Hmm