New Rules for Endorsements &Testimonials

FTC’s proposed changes will significantly impact the landscape for nutraceuticals if finalized.

By Todd Harrison &
Jennifer Thomas

The FTC recently published a notice of proposed changes to its “Guides Concerning the Use of Endorsements and Testimonials in Advertising” (“Guides”)1. This notice represents a significant shift in FTC’s enforcement policy with regard to endorsements and testimonials. Although the Guides are not actually rules, and therefore cannot be relied upon by FTC in a law enforcement proceeding, they represent the FTC’s interpretation of the laws it administers. The Guides offer the best indication of the commission’s current thinking with respect to the use of en­dorsements and testimonials, and thus must be referenced when determining whether a particular proposed endorsement or testimonial could be deemed deceptive or misleading.

The existing Guides define “endorsements” and “testimonials” both as “any advertising message that consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser.2” According to the Guides, endorsements or testimonials must reflect the honest opinions, findings, beliefs or experiences of the endorser and may not contain any representations that would be deceptive, or could not be substantiated, if they were made directly by the advertiser3. In addition, the existing Guides state that FTC will interpret any advertisement employing a consumer endorsement or testimonial to discuss an important attribute of the advertised product as representing that the endorser’s experience is representative of what consumers in general will experience4. If the advertiser cannot adequately substantiate that the endorser’s experience is typical, then under the existing Guides the advertisement must clearly and conspicuously disclose what the experience of customers in general is likely to be, or include a disclaimer clarifying that the endorser’s experience is not typical5. Most advertisers currently rely on disclaimers of typicality, because they find it difficult to conclusively determine whether the endorser’s experience is representative of consumers generally, or to determine what the advertised product’s expected performance would be for the average consumer under the advertised conditions of use. Reliance on disclaimers of typicality has led to the widespread use of phrases such as “Your Results/Experience Will Vary” or “Results not Typical” in advertising where an endorsement or testimonial is featured.

How FTC Views ‘Typical Results’

The most important part of FTC’s recent proposed changes to the Guides relates to the commission’s position on the use of statements such as those mentioned previously to disclaim the implied typicality of an endorser’s experience with an advertised product. The commission clearly states in its notice that under the revised Guides such disclaimers will no longer provide a safe-harbor for advertisers who cannot either substantiate the typicality of their endorser’s experience, or clearly and conspicuously state the expected results for consumers in general under the advertised conditions of use6. These rules apply to any endorsement or testimonial that contains objective, quantifiable claims (e.g. pounds lost or money saved)7. FTC has determined that disclaimers do not effectively put consumers on notice that their experience with an advertised product is not likely to resemble that of the endorser.

Although the notice of proposed changes suggests that FTC may no longer consider endorsements and testimonials to imply invariably that consumers should expect the same results8, it is likely that it will continue to find such an implication in the vast majority of cases under the new Guides. Thus, if adopted, the new Guides will result in an increased burden on advertisers seeking to use endorsements and testimonials. Advertisers will need to substantiate the typicality of endorsers’ experiences with their advertised products, or clearly describe the substantiated range of results that consumers can expect to experience, alongside any endorsement or testimonial. FTC recognizes this increased burden, but indicates that it is appropriate in order to prevent misleading consumers. In addition, the agency suggests that in many instances the evidence substantiating the efficacy claim could provide information to establish the parameters of the generally-expected results to be reported alongside an endorsement or testimonial.

FTC also intends to clarify the definition of endorsements and testimonials, such that whether statements made by an endorser that are identical to or different than those made by the sponsoring advertiser, the definition of “endorsement” applies9. This could impact advertisements in which “hosts” (often celebrities) discuss their personal experiences with the advertised product. Although it is clear that the host of an infomercial, for example, is speaking on behalf of the advertiser, the same requirements and limitations would apply to the host’s statements as apply to any other endorser.

Celebrity & Expert Endorsements

The new Guides also include changes regarding the disclosure of material connections between endorsers and advertisers/ sponsors. Under the existing Guides, advertisers are required to disclose any connection between themselves and an endorser that might materially affect the weight or credibility of the endorsement10. This usually means that there must be disclosure if the endorser is paid. The existing Guides provide an exemption from this requirement for celebrities and experts, based on the reasoning that consumers generally expect celebrities and experts to have been compensated for their endorsements11. However, in the notice of changes to the Guides, FTC has indicated concern with the use of celebrity and expert endorsers in non-traditional mediums, such as on blog and on television talk shows discussing the advertised product, without disclosure of a material connection to the product’s marketer12. The commission believes that the expectations of consumers about celebrities and experts may not be entirely consistent with exemption from disclosure for such persons in such non­-traditional contexts13. In addition to removing the blanket exemption from disclosure for experts and celebrities, and clarifying that material connections must be disclosed in such situations, the new Guides provide that “endorsers also may be liable for statements made in the course of their endorsements.14” The new Guides provide examples of situations in which an endorser may be liable for his or her endorsements, all of which concern situations in which the endorser knew that the statement he or she was making concerning the advertised product was false, and nonetheless made the statement.

In the Near Future…

FTC’s proposed changes to the Guides are significant. If they are carried out, they will place an additional burden on advertisers who use endorsements or testimonials in their advertising. Where an endorsement discusses an objective and quantifiable experience (e.g. “I lost 30 pounds”), it will need to either be substantiated by evidence establishing that the endorser’s experience is typical of the experience consumers can expect from use of the advertised product, or be accompanied by a statement clarifying the results that consumers can actually expect from use of the product. In addition, celebrities and experts, as well as endorsers, will likely need to disclose material connections to an advertiser where they appear in a non-traditional context that may imply to consumers that they are acting independently.

The date on which these new Guides could take effect is currently unknown. FTC has requested that all comments be submitted by January 30, 2009, and it is unclear how long the commission’s staff and full commission will take to analyze the comments and promulgate a final version of the new Guides.

References
1. 73 Fed. Reg. 72374 (Nov. 28, 2008)
2. 16 C.F.R. §§ 255.0(a) and (b).
3. 16 C.F.R. § 255.1(a).
4. 16 C.F.R. § 255.2(a).
5. 16 C.F.R. § 255.2(a) (the existing Guides do not explicitly discuss a “disclaimer,” but instead state that the second option for an advertiser lacking adequate substantiation that the endorser's experience is representative is to "clearly and conspicuously disclose the limited applicability of the endorser's experience to what consumers may generally expect to achieve.")
6. 73 Fed. Reg. 72374, 72379-87.
7. Id. at 72381.
8. Id. at 72378.
9. Id. at 72377.
10. 16 C.F.R. § 255.5
11. Id.
12. 73 Fed. Reg. 72374, 72389
13. Id.
14. Id. at 72377.