DOES YOUR DEALERSHIP’S ADVERTISING VIOLATE FTC GUIDELINES? BY HILARY HOLMES RHEAUME AND AFRA DANAI, ATTORNEYS, BERNSTEIN SHUR WHAT TO KNOW ABOUT NEW FTC GUIDES ON ENDORSEMENTS AND TESTIMONIALS After a public comment period, the Federal Trade Commission (FTC) recently updated its Guides Concerning the Use of Endorsements and Testimonials in Advertising, commonly known as the “Endorsement Guides.” The Endorsement Guides, first enacted in 1980 and amended in 2009, were created to advise businesses on what endorsement practices may be deemed “unfair or deceptive” in violation of the FTC Act. The Endorsement Guides express the FTC’s truth-in-advertising principle that endorsements must be honest and evidence-based. Traditionally, the Endorsement Guides were designed to address print and/or television advertisements. However, as advertising has evolved to include digital marketing, such as social media and online reviews, the connection between the business and the advertisement has become less obvious to consumers. For instance, if a consumer reads a review by an endorser who received payment in exchange for writing the review, the connection between the endorser and the business using the endorsement must be disclosed. Otherwise, the business may be in violation of the Endorsement Guides and subject to enforcement action by the FTC under Section 5 of the FTC Act. KEY TAKEAWAYS FROM THE REVISED ENDORSEMENT GUIDES On June 29, 2023, the FTC finalized an updated version of its Endorsement Guides. Here are some key takeaways: 1. The FTC has issued new guidance on procuring, suppressing, boosting, organizing, publishing, upvoting, downvoting or editing of consumer reviews. This new guidance supports the principle that advertisers should not take actions that could distort or otherwise misrepresent consumer views on their brand or product, such as excluding certain reviews that have fewer than three stars or express negative commentary that would mislead consumers. 2. The FTC has provided additional guidance on incentivized reviews, employee reviews and fake negative reviews of competitors. For example, if there is a connection between the endorser and the business using the endorsement for advertising that might affect the weight that the consumer would give to the review, such a connection needs to be disclosed. 3. The FTC has updated its definitions of “endorsement” and “endorser.” Endorsements now include a broader definition to encompass verbal statements and tags in social media posts. The endorser is defined as “the party whose opinions, beliefs, findings or experience the message appears to reflect” and includes actual as well as fictitious individuals, groups or institutions. As a result, a writer of a fake review may be considered an endorser under the Endorsement Guides, and thus, be subject to an action by the FTC. 4. The FTC has provided additional guidance on the potential liability of advertisers, endorsers and intermediaries (i.e., advertising agencies or public relations firms). For example, advertisers may be subject to liability for an endorser’s misleading or unsubstantiated statements, as well as for failing to disclose unexpected material connections between the advertiser and the endorser. 16
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