This week, the FTC issued updated guidelines governing how companies use endorsements and testimonials in their advertising and marketing. The FTC press release cites three specific groups that will be most affected by these changes. Let’s take a look at these groups and how the changes may affect certain businesses.
From the FTC , “Under the revised Guides, advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the Guides – which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as “results not typical” – the revised Guides no longer contain this safe harbor.”
This change will have a significant and immediate impact on diet/exercise/weight loss advertisers. Where as before they could include the simple disclaimer of “results not typical”, they now have to tell you the average results that you can expect.
The headline will go from, “Becky lost 40 pounds in 2 months!” (Results not typical); to “Becky lost 40 pounds in 2 months!” (You can expect to lose 5-10 pounds in 2 months based on average user results). As you can see, this is a change that could have a serious impact on businesses in this industry.
From the FTC, “Material connections (sometimes payments or free products) between advertisers and endorsers – connections that consumers would not expect – must be disclosed. These examples address what constitutes an endorsement when the message is conveyed by bloggers or other ‘word-of-mouth’ marketers. The revised Guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service.”
Reputable bloggers have been self-regulating and employing this form of disclosure for some time. These guidelines, however, firmly reinforce the necessity for full disclosure and now associate a penalty of up to $11,000 if a blogger fails to comply. It is hard to say exactly what affect this will have on bloggers and the marketers employing word-of-mouth strategies. I am sure the FTC will seek out a well-known blogger who is out of compliance and make an example out of them. Beyond that, due to the sheer number of bloggers, this seems like a piece of the guidelines that could be difficult to enforce.
From the FTC, “Celebrity endorsers also are addressed in the revised Guides. While the 1980 Guides did not explicitly state that endorsers as well as advertisers could be liable under the FTC Act for statements they make in an endorsement, the revised Guides reflect Commission case law and clearly state that both advertisers and endorsers may be liable for false or unsubstantiated claims made in an endorsement – or for failure to disclose material connections between the advertiser and endorsers. The revised Guides also make it clear that celebrities have a duty to disclose their relationships with advertisers when making endorsements outside the context of traditional ads, such as on talk shows or in social media.”
The biggest points made regarding celebrity endorsements are that celebrities can also be held liable if claims made about them and a product are false and that these rules do not pertain just to traditional ads but to any mention of the celebrity and product, no matter where it happens. These rules are pretty straight forward when it comes to traditional ads. Companies can easily include a disclaimer stating that the celebrity is a paid endorser. Where it gets complicated is when these celebrity endorsements or product uses happen in the real world. Choire Sicha had a really interesting quote in his New York Times Op-Ed piece about this. He says,
“Unfortunately, whole careers, both online and off, are built upon stealth endorsement. Consider the very successful career of a celebrity dresser, whose business is obtaining free clothing — which quite often displays a large designer logo — and placing it on and around famous people for the purpose of red-carpet photography. What is that if not a complex, triaged endorsement relationship? Indeed, these disclosure rules will go into effect just as Hollywood’s award-show attendees will begin planning outfits — what will the F.T.C. do? Come the Golden Globes, will our nation’s most important celebrities be forced to wear disclaiming signage?”
It will be very interesting to see how these guideline changes affect each of the above groups as well as marketers. The FTC will have their hands full and a tough time monitoring all of this activity. My favorite quote from the Sicha piece is when he compares the FTC in this situation to “a Pomeranian racing for a bullet train”. It remains to be seen if this Pomeranian will be able to catch up.