The Federal Trade Commission (FTC) has recently taken significant steps to enhance consumer protection in the areas of endorsements and reviews. These developments include a proposed rule aimed at prohibiting deceptive practices related to consumer testimonials and updated guidelines that offer more clarity on the use of endorsements in advertising. For queries or further discussion, you’re welcome to reach out via email at [email protected].
- FTC Proposed Rule on Use of Consumer Reviews and Testimonials
The Federal Trade Commission (FTC) is advancing a draft regulation known as the “Rule on the Use of Consumer Reviews and Testimonials.” This proposed rule aims to curb specific deceptive or unethical activities related to consumer testimonials and reviews, such as fabricating reviews, manipulating existing reviews, offering undisclosed incentives for positive or negative feedback, and silencing negative reviews through intimidation or legal threats. Additionally, the rule addresses the buying and selling of social media influence. The FTC contends that such actions are widespread and that implementing this regulation would serve the public interest.
Open to public feedback, the FTC is calling for written input, data, and reasoned arguments concerning the proposed regulation. This input must be submitted within a two-month window following the rule’s announcement in the Federal Register. Previously, an Advance Notice of Proposed Rulemaking (ANPR) elicited 42 comments, the majority of which were in favor of the new rule. Some dissenting or skeptical views were also received. Since then, various organizations have weighed in, stressing the impact of false reviews on consumer choices and the importance of safeguarding honest enterprises. Notably, entities like Family First Life and the Center for Data Innovation have aired specific concerns, including the necessity for a “safe harbor” for legitimate incentivized reviews and questioning the timing and effectiveness of such regulation.
While the FTC initially planned to organize public workshops for more comprehensive discussions, those have been canceled, although an informal hearing could be convened if requested. The commission’s document also evaluates the likely pros and cons of the proposed rule, taking into consideration its effects on market competition and offering potential alternatives. The document further details rules regarding issues like falsified reviews, the retooling of existing reviews, incentivized feedback, and reviews from insiders, as well as the suppression of critical reviews. document also discusses exceptions to the rule, prohibitions on the misuse of social media influence, and the rule’s severability clause.
- FTC Revised Endorsement Guides
The Federal Trade Commission (FTC) has unveiled an updated version of its Guidelines on the Use of Endorsements and Testimonials in Advertising, commonly referred to as “the Guides.” Originating from a review process that kicked off in February 2020, the FTC solicited and incorporated a wealth of public input, leading to amendments that weren’t part of the initial draft released in July 2022. These guidelines serve as administrative interpretations that apply Section 5 of the FTC Act to advertising practices involving endorsements and testimonials. They introduce revised definitions for terms like “endorsement,” “endorser,” and “product,” and introduce a new term, “clear and conspicuous,” to clarify the presentation of endorsements.
The revamped Guides offer clarity on several fronts, with examples that touch on the relevance of a video game influencer’s personal experience with a game, the critical nature of transparent disclosures, and the necessity for these disclosures to align with the language of the advertisement. The guidelines also delve into the accountability of various parties involved, such as advertisers, endorsers, and third-party intermediaries. They underscore the importance of evidence to support performance claims, typicality claims, and consumer reviews.
Additionally, the updated Guidelines address the landscape of incentivized reviews and endorsements by employees, along with third-party seals of approval. Special attention has been given to endorsements targeting children. The Guides are replete with new examples that delineate deceptive practices to avoid—such as a company sponsoring positive reviews or coercing against negative ones—and offer guidance on expert endorsements and the representation of collective judgment within organizations. The revisions further elaborate on the application of these guidelines to diverse scenarios, offering more granular guidance on consumer endorsements and disclosure practices.
- FTC proposed Rule on the Use of Consumer Reviews and Testimonials, Questions for Comment
The document outlines the Federal Trade Commission’s (FTC) draft regulation concerning the utilization of consumer testimonials and reviews. It initiates a call for public input, asking whether the regulation aligns with the FTC’s objective of safeguarding consumers from deceptive or unfair practices, and whether it should be formally enacted. The document further seeks feedback on particular aspects of the proposed rule, including its implications for consumers, governments, and businesses. It inquires whether the suggested prohibitions are both explicit and fitting, and asks for thoughts on whether the scope of these prohibitions should be broadened or restricted.
Additionally, the document poses questions about the rule’s potential impact on data collection and its economic ramifications for smaller enterprises. More granular queries are also included for public comment, covering a variety of sections within the rule. These range from the clarity of the definitions laid out in Section 465.1 to the appropriateness of the “knew or should have known” standard stipulated in Section 465.2. The document seeks to understand the conditions under which a business could be expected to recognize a review or testimonial as fabricated or untrue.
Further points of inquiry include whether the characterization of a “substantially different product” in Section 465.3 is suitable, whether the prohibition outlined in Section 465.4 should differentiate between explicit and implicit conditions, and whether applying Section 465.5 to roles like “officers” and “managers” makes sense. Lastly, the document questions if the knowledge requirements in Section 465.5 are justifiable, and whether the reach of Section 465.7 is apt. This comprehensive call for public opinion aims to shape a rule that is both effective and equitable for all stakeholders involved.
- What’s next?
The anticipated Rule and updated Guidelines for Endorsements have not been officially released in the Federal Register as of now. Once they are, there will be a 60-day period for submitting comments on both documents. We stand ready to provide assistance on any questions related to these forthcoming guidelines and rules, including matters pertaining to social media advertising, endorsement procedures, and recommended best practices.
