ALERT: FTC Warns Ad Industry About Reviews and Endorsements

On October 13, 2021, the Federal Trade Commission (FTC) warned over 700 advertisers and agencies that it intends to regulate the industry’s use of reviews and endorsements. In a widely-disseminated “Notice of Penalty Offenses,” the FTC signaled that it was prepared to issue civil penalties of up to $43,792 per violation of the law.

The FTC Warning Notice

The list of recipients reads like a “who’s who” list of great American brands and agencies. At the same time, the Notice clearly states that the over 700 recipients had not necessarily engaged in unlawful practices. Nonetheless, the entire industry should be on notice of the potential financial risk. Improper use of reviews and endorsements could lead to substantial civil penalties.

The FTC points the recipients of the letters to the agency’s Endorsement & Testimonial Guides for more information. Those Guides, and the FTC’s various enforcement actions, make it clear that an endorser is anyone with a material connection to the brand, whether through some kind of payment, free product, or any other benefit. An endorser can be someone from within the company, an agency acting on behalf of the company, an influencer, or even a customer posting a review in exchange for a gift or sweepstakes entry.

The Notice also lists examples of unlawful conduct:
• Falsely claiming an endorsement by a third party
• Failing to disclose a material connection with an endorser
• Misrepresenting whether an endorser is an actual, current, or recent user
• Using an endorsement without good reason to believe that the endorser still holds those views
• Disseminating an endorsement that makes deceptive performance claims
• Failing to disclose an unexpected material connection with an endorser
• Misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience.

The FTC likely issued this Notice so that it could argue that any recipient has actual knowledge of the law. The Notice paves the way for the FTC to use its Penalty Offense Authority, pursuant to Section 5 of the FTC Act.

What to Do:

If your company received this Notice of Penalty Offenses, it is certainly time to audit your online and social media review and endorsement marketing activities, including those conducted by agencies or vendors on your behalf.

Even if you are not on the recipient list, that does not mean you get a pass. This widely disseminated list signals a clear enforcement intention from the FTC, and it is likely that state Attorneys General will follow suit as well. You, too, should be auditing your activities.

For questions about your legal risk, contact Kyle-Beth Hilfer to create a mitigation plan.