The FTC has issued a Proposed Notice requesting public comment on whether to make changes to its Endorsement Guides (“Guides”) as part of the agency’s periodic retrospective review. This review will serve as a key opportunity for industry participants to shape what happens next by showing what they are seeing in the marketplace when it comes to endorsements and testimonials, consumers’ understanding of them, and the effects of new technology and platforms.
While the FTC’s standard practice is to review its rules and guides every 10 years, this review promises to be anything but standard. This is particularly true considering that FTC Commissioner Chopra weighed in with a separate statement, noting that he hopes that the Commission will consider taking steps beyond the issuance of voluntary guidance, including codifying elements of the existing Endorsement Guides into formal rules that could trigger civil penalties and damages. He also suggested that the FTC develop requirements for technology platforms that facilitate and profit from influencer marketing and specify the requirements that companies must adhere to in their contractual arrangements with influencers. The Guides were first issued in 1980, and the Commission last sought public comment on them in 2007. Since that time, endorsement-related practices (and the media where they appear) have changed dramatically, with new platforms and apps emerging that provide new ways for companies and their endorsers to reach consumers. In an attempt to keep up with the changing times, the FTC issued an FAQ-type of document, Endorsement Guides: What People are Asking, and has modified it multiple times over the years.
Given the evolution of the use of endorsements, including the rise of social media influencers, online reviews, and affiliate links over the past decade, the FTC is looking to rework its Guides to accommodate changes in the marketplace, technology, and consumers’ evolving understandings and expectations.
In its Proposed Notice, the FTC asks for input on 22 specific questions, providing detail in the areas the FTC is most interested in. Below, we highlight five topics targeted by the FTC.
(1) Disclosure of Material Connections.
One primary area of interest to the Commission is the disclosure of material connections. Under FTC rules, when there is a connection between the endorser and the seller of a product (such as a payment, gift, or other relationship) that might materially affect the weight or credibility of the endorsement, the connection must be clearly and conspicuously disclosed. The FTC seeks comments about how consumers understand disclosures in different social media formats, whether current disclosures are sufficiently clear, what types of connections are understood (or aren’t), whether the Guides should provide more detail on how to make proper disclosures in various formats, and whether consumer perceptions regarding endorsements have changed since the Guides were last revisited.
This will be a fertile area for comments. To date, the FTC has proceeded on the assumption that the “reasonable consumer” was naïve when it came to the consumption of social media and did not understand that influencers and other endorsers might be paid for their posts. Moreover, the technology has changed, and now many platforms have their own disclosures that can be used by advertisers—but will consumers know to look for them? To the extent that there is research and data that can be submitted on consumer perception, that will likely be of interest to the Commission.
(2) Affiliate Links.
The FTC requests comments about how endorsers use affiliate links, which allow consumers to purchase the products being endorsed and allow the advertiser to compensate the endorser for these purchases; whether consumers understand that endorsers are being compensated for purchases made through affiliate links; and whether and how the Guides should address affiliate links.
(3) Media Intended for Children.
The FTC’s Notice also poses questions about endorsements in media aimed at young children and seeks input on whether children understand disclosures of material connections; how those disclosures can be improved; and whether advertisers and endorsers should provide disclosures to parents. The FTC had recently been pressured on this issue by Senators Blumenthal and Markey and Representative Eshoo.
(4) Incentivized Reviews.
The FTC has put considerable enforcement attention on the practice of incentivizing reviews. The Proposed Notice also focuses on the incentivized reviews and how they factor in composite ratings. Likewise, the Commission is requesting comment on the practice of soliciting customer feedback and sending satisfied customers down one path to a review site while sending customers with negative feedback down another path, such as a customer service resolution process.
(5) Self-regulation, Enforcement, and Compliance Burdens.
The Commission is requesting comments about what changes can be made to the Guides to reduce industry compliance burdens. Further, the agency is requesting input on whether self-regulation or voluntary standards can effectively address endorsement advertising practices, and whether there are alternatives, such as individual enforcement actions, that would be more effective.
These are just a few of the issues the FTC has identified in its Proposed Notice; the full list can be viewed here.
Industry participation will be key in shaping changes to the Endorsement Guides, and given the pace of industry and technological change (and the time it may take until there is another such review), interested parties should take this opportunity to educate the FTC on industry practices, consumer expectations, and possible approaches that would minimize industry burdens and costs. The current round of comments will be due 60 days after the FTC’s official Notice is published in the Federal Register. If you are interested in submitting a comment, please contact the authors of this blog.