FTC Guidelines

On October 5, 2009, the Federal Trade Commission (“FTC”) announced revised guidelines for endorsement and testimonial advertising. The guidelines are only advisory in nature, but they represent administrative interpretations by the FTC to help it determine whether an advertiser or endorser has engaged in deceptive trade practices in violation of the FTC Act.

The revised guidelines took effect December 1, 2009. Bloggers and others posting on social media outlets who receive compensation for product endorsements are subject to the new guidelines. Online participants who review and/or endorse a product or service must disclose any material connections they have with the product’s advertiser, such as cash payments or gifts received (including the receipt of free products and services to be reviewed or endorsed).

Endorsers are made explicitly liable for the failure to disclose any material connections with advertisers when making endorsements outside the context of traditional advertisements, such as in posts to blogs. The disclosure requirement applies to any connection between an advertiser and endorser that might materially affect the credibility of the endorsement (i.e., a connection that a consumer would not expect to exist), such as the endorser’s receipt of a cash or in-kind payment in exchange for the endorsement. Endorsers may be subject to liability for failure to disclose material connections with advertisers, or for misleading or unsubstantiated claims about products or services they make during the course of their endorsements.

A positive review or endorsement by a consumer who has purchased the product or service on his/her own will not require a disclosure. However, online consumers who serve as product endorsers will be potentially liable for the omission of any required disclosures. In addition, advertisers who initiate an endorsement will be potentially liable for misleading representations made by the online endorser, including a failure to disclose the existence of the relationship between the endorser and the advertiser.