Privacy & Information Security Law Blog

On October 5, 2009, the Federal Trade Commission (“FTC”) issued amendments to its Guides for the Use of Endorsements and Testimonials in Advertising (“Guides”).  Reactions to the amendment have primarily focused on the provisions that require bloggers to disclose their relationship with companies whose products they endorse.  Largely absent from the commentary, however, have been observations regarding theories articulated in the amendments that demonstrate the risk of enforcement for companies that do not have a blog and that do not use third-party bloggers for promotion.

The Guides address the application of Section 5 of the FTC Act to the use of endorsements and testimonials in advertising.  Although the Guides provide a basis for voluntary compliance with the law by advertisers and endorsers, practices inconsistent with them may result in enforcement action by the FTC.  The Guides set forth general principles that the FTC intends to use in evaluating endorsements and testimonials, together with examples illustrating the application of those principles.

First issued in 1975 and 1980, these Guides generally require that endorsements reflect the honest opinion of the endorser and not contain representations that would be deceptive if made by the advertiser.  In November 2008, the Commission proposed amendments to the Guides, including changes to clarify the obligations of bloggers and other users of new communication technologies and advertising strategies.  In the final Guides, as under the pre-amendment Guides, when an expert or celebrity receives payment to endorse a company’s product in advertisements, the company does not need to explicitly disclose the fact of the payment in advertisements, since the public generally understands that experts and celebrities endorse products because they are paid to do so.  Conversely, when a non-expert or non-celebrity endorses a product (e.g., a “man-on-the-street” testimonial), any payment must be disclosed, since the public generally does not expect such endorsement to have been influenced by payment.  The amended Guides provide a new example of this principle in the online context:  an employee of a manufacturer of MP3 players visits an online MP3 discussion board and posts comments promoting her employer’s products without disclosing the employment relationship.  As a result, whether or not a company has its own blog or engages third-party bloggers, there may be some risk of enforcement based on employee activities.  The amendment explains that the employee should disclose the relationship, since knowledge of the poster’s employment likely would affect the weight or credibility of her endorsement.  The scope of the amendments suggest that the FTC’s view on this matter would extend to promotional comments made by persons with such undisclosed material connections to the promoted company in any emerging communications tool, such as online discussion boards, blogs, social networking sites, Twitter, etc.

To mitigate risk given the FTC’s new focus on this sort of activity, businesses may wish to (i) require their employees to disclose the employment relationship when making online comments that promote the employer or its products, (ii) require that such comments be vetted by the business, or (iii) prohibit employees from making online comments.  Businesses should also consider training employees on any such policies that the business may establish.