November 30, 2009Client Alert

New FTC Guidelines: Changes That Affect Endorsements and Testimonials and May Require Increased Policing of Social Media Site Content

The Federal Trade Commission (“FTC”) will issue an update to its “Guides Concerning the Use of Endorsements and Testimonials in Advertising” on December 1, 2009. The new guidelines demonstrate an expanded view of advertising methods, to include social media sites, and require advertisers and endorsers alike to disclose “material connections” between them. Notably, failure to comply with the new guidelines may result in a fine for both the endorser and the advertiser.

Endorsements: Liability, Celebrity Endorsements and “Results Not Typical”

The new guidelines include three main changes with respect to product endorsements. First, both endorser and advertiser -- as opposed to just the advertiser -- can be liable for false and misleading endorsements. Second, advertisements that convey a consumer’s experience with a product or service as “typical,” when this is not the case, must clearly disclose the results that consumers can generally expect. This is in contrast to the old practice of conveying an atypical consumer experience simply by stating, often in fine print, that the results were not typical. Third, the new guidelines establish that celebrities will have a duty to disclose their relationships with advertisers when making endorsements outside the context of traditional ads, such as when the celebrity appears on talk shows or in social media.

Disclosure of Material Connections: Advertisers May Be Required to Police Content of Social Media Sites such as Facebook and Twitter

The revised guidelines now require disclosure of “material connections” between advertisers and endorsers, including endorsements found in online social media sites such as Facebook and Twitter. Under the new guidelines, bloggers who make an endorsement must disclose any material connections they have with the seller of the product or service. For example, if a blogger is paid or receives free product in exchange for writing a favorable review on her blog, she must disclose this connection. The disclosure is required even if the free product or payment was unsolicited. The disclosure must be made live with the endorsement and is required no matter the size of the blogger’s audience. Since both advertisers and endorsers can be held liable under the new guidelines, advertisers may be required to police the content of all endorsements, including those found in blogs, to ensure compliance.

For more information or to discuss compliance with the new FTC guidelines, please contact one of the authors of this alert or your Michael Best attorney.

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