US FTC Targets Fake Online Reviews, Expanded Liability, With Proposed Endorsement Guides Update

Proposed changes to the FTC’s “Guides Concerning the Use of Endorsements and Testimonials in Advertising” depict an agency looking to crack down on fake reviews and suppression of negative ones, tighten its definition of “clear and conspicuous” disclosures, and clarify that advertisers, endorsers, intermediaries and platforms all can be held liable for their endorsement roles.

Proposed updates to the US Federal Trade Commission’s Endorsement Guides could put advertisers in the crosshairs for posting fake positive reviews or suppressing bad ones, as well as make disclosures difficult for consumers to miss and add a new section on advertising to children.

In a 19 May notice, the commission says it is considering changes to the Endorsement Guides, formally the “Guides Concerning the Use of Endorsements and Testimonials in Advertising,” to better reflect how advertisers reach modern consumers, including via social media channels.

The Endorsement Guides were first issued in 1980 and amended in 2009. They are not mandatory for firms to follow but offer direction to advertisers to ensure that ads featuring endorsements or testimonials are truthful and not misleading. (Also see "FTC Addresses Confusion Over Updated Endorsement Guides" - HBW Insight, 11 Oct, 2010.)

Whether advertisers abide by the FTC’s guidance or not, those that lie to consumers or mislead them through endorsements or testimonials may be in violation of the FTC Act.

“We’re updating the guides to crack down on fake reviews and other forms of misleading marketing, and we’re warning marketers on stealth advertising that targets kids,” says Samuel Levine, director of the FTC’s Bureau of Consumer Protection, in a release.

The proposed changes “suggest that this FTC will continue to push the envelope from prior standards in evaluating when advertising will be considered unfair or deceptive under the FTC Act.” – Kelley Drye attorneys

Specifically, the proposed guides add a new section on Consumer Reviews, directing advertisers to not distort or misrepresent “what consumers think of their products, regardless of whether the reviews are considered endorsements under the Guides.”

The FTC offers examples of conduct that should be regarded as verboten, including advertisers deleting or refusing to publish consumer reviews, purchasing fake reviews, or making threats against consumers who post unfavorable reviews.

The proposed Endorsement Guides also would tighten FTC’s definition of “clear and conspicuous” disclosures, requiring disclosures to be essentially unavoidable, especially on social media platforms.

It would additionally mandate that the disclosures be relayed in the same format as the claim, for instance visually if the triggering claim is visual and audibly if the triggering claim is audible.

In a blog post to Ad Law Access, Kelley Drye attorneys say the proposed guides provide “new examples that reflect a less flexible approach to disclosures for consumer endorsements.”

Moreover, proposed changes to the Endorsement Guides “suggest that this FTC will continue to push the envelope from prior standards in evaluating when advertising will be considered unfair or deceptive under the FTC Act,” they say.

The Endorsement Guides envisioned by the FTC would expand the definition of an endorser to address evolving issues including advertisers utilizing artificial or virtual influencers, which would require disclosures.

The proposed guides also show an FTC supportive of working with social media platforms to develop “effective, built-in disclosure tools,” so long as they avoid problems plaguing some current tools, for example those that are “poorly contrasting, fleeting, or small, or may be placed in locations where they do not catch the user’s attention,” the commission says.

The updated Guides would include a new section regarding child-directed advertising. The topic is of special concern to the commission as “children may react differently than adults to endorsements in advertising or related disclosures,” according to the FTC.

The commission is holding a public event on the topic on 19 October, with a focus on children’s development and their capacity to recognize and understand advertising content and disclosures.

‘Aggressive Enforcement Posture’ Possible

Additionally, the FTC wants to expand liability parameters, clarifying that advertisers, endorsers, intermediaries and platforms can all be held liable for their endorsement roles.

“The changes are an important indication of what the agency is currently thinking, and it is certainly possible for the agency to take an aggressive enforcement posture and indicate that the draft changes put industry on notice,” BakerHostetler attorneys say on the firm’s AD-ttorneys Law Blog.

The commission asked for public comments on the prospect of an Endorsement Guides update in early 2020, driven by what the FTC saw as rampant misinformation online and increased use of influencers, and used that feedback to develop its latest proposal. (Also see "FTC Commissioner Proposes Making Endorsement Guides Into Rules, Seeking Stiffer Penalties" - HBW Insight, 16 Feb, 2020.)

BakerHostetler attorneys suggest it could be up to a year before FTC makes the proposed Endorsement Guides final, as it took 26 months for the commission to develop the proposal after the 2020 comment request.

The proposed update follows FTC letters to 700 businesses in October 2021, including beauty and personal care big-leaguers Procter & Gamble Co., Johnson & Johnson, the Estee Lauder Companies, Inc. and L’Oreal USA, Inc., warning them of penalties that could be imposed for use of deceptive endorsements and testimonials in product promotions. (Also see "FTC Aims At Deceptive Endorsements: Beauty, Health Firms Can Assure They're Not Targets" - HBW Insight, 21 Oct, 2021.)

The FTC added a new commissioner on 11 May as the Senate confirmed the appointment of Alvaro Bedoya. (Also see "FTC’s New Commissioner, Alvaro Bedoya, May Bolster Tougher Stance On Pharma Oversight" - Pink Sheet, 17 May, 2022.)

All five FTC commissioners voted for issuing the proposed Endorsement Guides. Comments are due 60 days after the proposal’s publication in the Federal Register.