The Federal Trade Commission is putting industry on notice that if they use endorsements, including through social media influencers, to deceive consumers, the FTC "will be ready to hold them responsible with every tool at its disposal."
For several years, the FTC has provided guidelines regarding the use of endorsements and testimonials in advertising. In 2019, the FTC released a summary document titled “Disclosures 101 for Social Media Influencers” specifically geared toward social media influencers and the FTC has since been active in reminding influencers and the companies that engage with them of their obligations through enforcement letters. Most recently, the FTC has invoked its "Penalty Offense Authority" and sent letters to more than 700 companies, reminding them of the laws governing advertising, including the use of product reviews and endorsements. By placing the companies on notice, the FTC can then seek civil penalties of up to $43,792 per violation if a company's advertising runs afoul of those admonitions.
As Samuel Levine, Director of the FTC's Bureau of Consumer Protection, explained, "Fake reviews and other forms of deceptive endorsements cheat consumers and undercut honest businesses. Advertisers will pay a price if they engage in these deceptive practices."
In the notice sent to the companies, the FTC identified the following practices that the FTC has determined to be unfair or deceptive in prior administrative cases:
- Making claims which represent, expressly or by implication, that a third party has endorsed a product or its performance when such third party has not in fact endorsed such product or its performance.
- Advertiser misrepresenting that an endorsement represents the experience, views or opinions of users or purported users of the product.
- Misrepresenting an endorser as an actual user, a current user, or a recent user of a product or service.
- Advertiser continuing to advertise an endorsement unless the advertiser has good reason to believe that the endorser continues to subscribe to the views presented in the endorsement.
- Advertiser using testimonials to make unsubstantiated or otherwise deceptive performance claims even if such testimonials are genuine.
- Failing to disclose a connection between an endorser and the seller of an advertised product or service, if such connection might materially affect the weight or credibility of the endorsement and if the connection would not be reasonably expected by consumers.
- Misrepresenting, explicitly or implicitly, through the use of testimonials, that the experience described by endorsers of a product or service represents the typical or ordinary experience of users of the product or service.
The list of companies who received the Notice spans many industries and includes what the FTC describes as "large companies, top advertisers, leading retailers, top consumer product companies, and major advertising agencies." The FTC notes, however, that a company's inclusion on the list "does not in any way suggest that it has engaged in deceptive of unfair conduct."
Still, by publicly announcing this largescale effort with the potential for significant civil penalties, the FTC is signaling an aggressive stance against fake online reviews and other deceptive endorsements.
All advertisers would be wise to reassess their websites, social media pages, and any other materials featuring product reviews or endorsements in light of the FTC's list of what it considers to be deceptive practices.
Companies should also revisit their policies regarding product reviews as well as any agreements with influencers or endorsers to ensure ongoing compliance with the law.