Wednesday, October 14, 2009

New FTC Guidelines on Product Testimonials and Endorsements - a Useful Resource to California Practitioners

On October 5, 2009, the FTC announced approval of final revisions to the guidance it gives to advertisers on how to keep their endorsement and testimonial ads in line with the FTC Act.  As explained in the official press release, the new guidelines address endorsements by consumers, experts, organizations, and celebrities, as well as the disclosure of important connections between advertisers and endorsers. These changes, discussed in detail here, compel the following affirmative disclosures to avoid deceptive advertising:
1.  Atypical Results: advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the Guides – which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as “results not typical” – the revised Guides no longer contain this safe harbor.

2.  All Forms of Paid Endorsement, Including Sponsored Research: The revised Guides also add new examples to illustrate the long standing principle that “material connections” (sometimes payments or free products) between advertisers and endorsers – connections that consumers would not expect – must be disclosed. Examples where disclosure would be required include (1) the post of a blogger who receives cash or in-kind payment to review a product, or (2) reference to the findings of a research organization that conducted research sponsored by the company. A paid endorsement – like any other advertisement – is deceptive if it makes false or misleading claims.

3.  Celebrity Disclosure of Relationship with Advertisers: In addition to reinforcing existing precedent that celebrities may be held personally liable for false or unsubstantiated claims made in an endorsement – or for failure to disclose material connections between the advertiser and endorsers, the revised Guides also make it clear that celebrities have a duty to disclose their relationships with advertisers when making endorsements outside the context of traditional ads, such as on talk shows or in social media.
These new guidelines may be a useful tool to California practitioners, as the California Supreme Court has long held that California Courts may seek guidance from interpretations of Section 5 of the FTA when interpreting the provisions of the UCL. See e.g. Barquis v. Merchants Collection Assn., 7 Cal. 3d 94, 110 (1972); Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 186 (1999)

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