FTC Fines Car Companies $10 Million Calling Out Influencers and Endorsers

This summer the Federal Trade Commission (FTC) has turned up the heat on two companies that provide extended car repair coverage, CarShield and American Auto Shields, for deceptive and misleading advertising and telemarketing activities. The agency also named and shamed certain celebrity influencers and professional athletes for endorsing false statements in their advertisements.

The companies sold vehicle service contracts that they advertised as protecting consumers from unexpected repair costs after the manufacturer warranty expires. But the FTC alleged that many consumers could not use the repair facility of their choice, repairs were not covered, and consumers did not receive a rental car as promised.

The celebrities—including sportscaster Chris Berman and actors Ice-T, Vivica A. Fox, Adrienne Janic, and Ernie Hudson—were involved in advertisements claiming they were customers and users of the companies’ services and saved money doing so.

The FTC found that many of the celebrities never used the companies’ services when the advertisements aired, and the claimed savings never occurred. In other instances, the celebrities were treated as “preferred customers” and received services that the typical customer would not experience. Although the FTC chose not to name the celebrities as defendants in the case, they were identified in the FTC press release about the case and mentioned in the complaint.

The agency unanimously authorized the complaint and proposed order 5-0. The unanimity emphasizes the FTC’s willingness to pursue enforcement actions against companies and the importance for companies employing influencers and endorsers to carefully review any disseminated statements that could be deceptive and misleading. Since companies can be liable for influencer and endorser statements made in traditional media and on social media, a robust monitoring and compliance program should be implemented and in place before an advertising campaign is rolled out.

Check out our prior blog on influencers and inadequate disclosures for more FTC enforcement against influencers and endorsements. For a broader discussion on FTC guidance, watch our webinar, “From Clear and Conspicuous to Unavoidable? The FTC’s Updated Endorsement and Testimonial Guides.” For more insights into advertising law, bookmark our All About Advertising Law blog and subscribe to our monthly newsletter. To learn more about Venable’s Advertising Law services, click here or contact one of the authors. And listen to the Ad Law Tool Kit Show—a podcast from Venable.