The FTC has, since the 1980’s, been actively involved in regulating endorsement and testimonial advertising that is designed to entice consumers into choosing products based upon “real life” experience (or the promise of success from a reputable source). Its guidelines help define the scope of testimonial and endorsement advertising. They point out, generally, if a single user’s experience is not typical of the average consumer, then a company may not imply that potential buyers of the product will get the same result. Now, the FTC has determined its rules about testimonials and extreme results need to be updated.
In an attempt to keep up with consumer complaints about dishonest advertising, online social networking and other internet venues that reach consumers, according to the Financial Times, the FTC is proposing legislation that could make companies liable for testimonials written by bloggers and parties who receive free samples or other incentives to try products and subsequently write good reviews.
According to Richard Cleland at the FTC, these new updated guidelines are designed to curb the use of terms like “Results Not Typical,” to justify putting up extreme and untested consumer outcomes for products and services. The new guidelines are also designed to hold companies responsible both for encouraging third party testimonial information it knows to be false, or for using spokespersons who have achieved extreme results for products, knowing the results are outrageous.
If the new guidelines are adopted, companies will not only have to consider how they use spokespersons and social networking sites, but also how they develop their “influencer” programs. Influencer programs are those programs designed specifically to attract a certain target market by paying (or giving free samples to) loyal product users in exchange for spreading the word about their personal experience through social networking (both online and offline) groups. At the very least, it’s likely that contracts between companies and third party influencers will see some changes.
Notwithstanding the spotlight that has hit the FTC proposal and the resultant uproar from many companies and marketing associations, there have been other attempts to regulate third party claims about products and services. Law professor and prolific blogger (and Twitter®er), Eric Goldman, has cited to other attempts at third party testimonial regulation.
For instance, points out Goldman, the Florida State Bar treats consumer reviews of attorneys as regulated testimonials. Goldman even remarks on his Technology and Marketing Blog that the SEC’s recent proposed hyperlinking guidelines may contravene 47 U.S.C. 230 which immunizes websites from liability for third party content.
Regardless of what happens in the short term, issues of agency will be important if the FTC truly wishes to hold companies and bloggers liable for third party content. It is impractical (and likely impossible) for companies to police what third parties write about their products. In all likelihood, therefore, the FTC would limit liability to cases where the company links to or endorses information on a third party site, or where the influencer is retained without a contract provision about outlandish statements.
The biggest challenge, depending on how the guidelines are written, may ultimately be to advertisers who use spokespersons with unusual outcomes, who have until this point, gotten by with a disclaimer of “Results Not Typical,” or “Your Results May Vary.” The long running commercials involving Jared, who claims to have lost hundreds of pounds by eating Subway sandwiches, may have seen their last days.
Practice Note: Despite the current feeling about the proposed guideline changes, the sky is not falling. Advertisers have weathered advertising regulation in the past, and at the end of the day, we still manage to get a fair number of commercials (and testimonials) out there. In truth, and regardless of whether there will ever be another Jared to enable Subway to point to a pattern of weight loss, he won’t go away, and the FTC is not going to find liability with companies or bloggers that are generally engaged in appropriate disclosure practice.