The Federal Trade Commission (FTC) questions whether the impact of its enforcement efforts are truly acting as a deterrent to stop misleading online marketing. In its latest effort to tackle the growing problems arising from influencers, social media posts, reviews, and other online resources, the FTC is revisiting its Endorsement Guides and calling on the public to comment on where to make changes in those guidelines.
On February 12, 2020, the FTC announced a forthcoming Federal Register notice posing questions about revisions to the Endorsement Guides, formerly referred to as the Guides Concerning the Use of Endorsements and Testimonials in Advertising, which were first enacted in 1980 and last amended in 2009. The purpose of the Endorsement Guides is to assist businesses in conforming their endorsement and testimonial advertising practices to the requirements of Section 5 of the FTC Act. While the FTC has utilized additional resources, including quick reference pamphlets and videos, to educate businesses and has further engaged in enforcement activity in this area, it does not find that these measures have had a lasting effect.
In a statement accompanying the announcement, FTC Commissioner Rohit Chopra explained that businesses have moved toward making advertising appear authentic through the engagement of social media influencers and reviews. Issues arise where influencers “post in ways that disguise that their review or endorsement is paid advertising.” Highlighting recent FTC enforcement activity, Commissioner Chopra added that the FTC needs to “seek tougher remedies for companies that are illegally astroturfing or disguising their advertising as an authentic endorsement or review,” and suggested that beyond voluntary guidance, the FTC should develop requirements for technology platforms (e.g. Instagram, YouTube, and TikTok) that codify elements of the Endorsement Guides, establish formal rules with civil penalties, and specify contractual requirements for influencer agreements.
Before the FTC considers Commissioner Chopra’s proposals, the public will have the ability to comment in response to the Federal Register notice. Some of the topics covered by the questions include the efficacy of the current Endorsement Guides, the clarity of disclosures of material connections, children’s comprehension of such disclosures, and the effect of incentives on customer reviews. Once the Federal Register notice is published, the public will have 60 days to comment.
The FTC’s activity echoes the efforts of the Food and Drug Administration (FDA), which recently issued a notice of a proposed study entitled “Endorser Status and Explicitness of Payment in Direct-to-Consumer Promotion” which would extend previous research by examining four types of endorsers in two separate studies (celebrity, physician, patient, influencer) and whether the presence of a disclosure of their payment status influences participant reactions. The FDA also proposes testing two different types of disclosure language—one direct and more consumer-friendly, and one less direct. These recent actions by the FTC and FDA signal that with increasing use of endorsers by advertisers, enhanced regulations will likely follow.