The Federal Trade Commission (FTC or Commission) has issued several new proposals or policy statements affecting advertisers recently, including resurrection of its Penalty Offense Authority and an Enforcement Policy Statement Regarding Negative Option Marketing (which we previously reported on here). The FTC is now seeking public feedback on a proposal to enhance and strengthen the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising (the Endorsement Guides) and a review of its .com Disclosures: How to Make Effective Disclosures in Digital Advertising (.com Disclosures Guidance or Guidance).
Proposed Updates to the Endorsement Guides
At an open meeting on May 19, 2022, the FTC voted unanimously to publish a notice in the Federal Register proposing updates to the current Endorsement Guides. The FTC’s proposed updates to the Endorsement Guides, which were first published in 1980 and last revised in 2009, focus on advertisers that post fake positive reviews or delete negative reviews and advertisers whose disclosures fall short. One area of concern identified by the FTC is influencers who are paid, receive free products or services, or have a relationship with a brand but fail to disclose the material connection with the advertiser, in violation of the Endorsement Guides.
In addition to adding more examples to improve understanding of the Endorsement Guides, the FTC’s proposed updates include the following:
- Expanding the definition of “product” to include brands;
- Clarifying that marketing and promotional messages, including social media tags, can constitute endorsements;
- Extending the definition of an “endorser” to cover “fabricated endorsers”;
- Adding a new section that addresses consumer reviews and clarifies that advertisers should not distort or misrepresent what consumers think of their products;
- Clarifying that the substantiation requirement covers both express and implied claims;
- Tightening the definition of “clear and conspicuous” to mean a disclosure that is “difficult to miss … and easily understandable by ordinary consumers”;
- Clarifying that a material connection can exist regardless of whether an advertiser offers payment or free products to an endorser;
- Adding a new section that explains the potential liability of intermediaries such as advertising agencies and public relations firms;
- Clarifying that an advertiser may be liable for an endorser’s deceptive statement even when the endorser is not liable and adding a new section that explains when endorsers can be liable for their statements;
- Adding a new section regarding endorsements directed to children and emphasizing that “practices which would not ordinarily be questioned in advertisements addressed to adults might be questioned in such cases.” (The FTC will hold a public event on October 19, 2022, to discuss how children perceive online advertising and advertisers’ responsibilities for disclosures to children.)
Comments are due 60 days after the date of publication of the proposed updates in the Federal Register, which has not occurred as of the date of this posting.
Proposed Updates to the .com Disclosures Guidance
The FTC is also seeking comments on proposed changes to the .com Disclosures Guidance. First issued in 2000 and updated in 2013, the .com Disclosures Guidance focuses on how businesses can evaluate the effectiveness of online disclosures to assure they are clear and conspicuous. The Guidance also includes factors the FTC uses to evaluate whether such disclosures comply with the FTC Act.
In a Request for Comments published on June 3, 2022, FTC staff seek public input on updates to the Guidance. The FTC welcomes comments on any issue but is particularly interested in the following:
- Issues raised by online technologies, activities, or features, such as sponsored and promoted advertising on social media platforms, advertising content embedded in games, and dark patterns;
- Whether the current Guidance adequately addresses mobile advertising;
- Whether further guidance concerning multi-party selling arrangements is needed;
- Whether the Guidance adequately addresses how to make qualifying disclosures when consumers must navigate multiple webpages to complete purchases;
- Whether the Guidance should address issues related to advertising that appears in virtual reality or the metaverse;
- How the guidance on the use of hyperlinks can be made more effective; and
- What existing guidance is outdated or unnecessary, and what guidance should be clarified, expanded, strengthened, or limited.
Comments on the proposed changes to the .com Disclosures Guidance must be received by August 2, 2022.