FTC Revises Endorsement Guide FAQs

This week, the FTC released an update to its FAQs on complying with its Guides Concerning the Use of Endorsements and Testimonials in Advertising  (“Endorsement Guides”). The FAQs offer informal guidance from the FTC and were last updated in May 2015. (For highlights from the last round of changes, please see our previous post.) The newest changes are less expansive than the 2015 update and are, in part, an unremarkable given the FTC’s established guidance on this topic. However, the update does include some helpful clarifications and reminders for endorsers and advertisers, including: Built-In Disclosures are Not (Necessarily) Enough. One particularly notable addition to the FAQ is on disclosure functionality built into certain platforms. The new FAQ applies to all social-media platforms; it indicates generally that built-in disclosures are not necessarily enough and, like any disclosure, require evaluation of how clear, conspicuous, and complete the disclosure is.

However, in its explanation, the FTC specifically (though anonymously) references disclosure functionality made available by YouTube and Instagram and suggests that those features are likely not alone sufficient to fulfill an endorsor’s disclosure obligations. Per the FTC:

A key consideration [in determining whether a disclosure is effective] is how users view the screen when using a particular platform. For example, on a photo platform, users paging through their streams will likely look at the eye-catching images. Therefore, a disclosure placed above a photo may not attract their attention. Similarly, a disclosure in the lower corner of a video could be too easy for users to overlook.

Aggregate Ratings May Require a Disclosure. To an existing FAQ on retailers who give out free products to potential reviewers, the FTC added the following:

Also, reviewers given free products might give the products higher ratings on a scale like the number of stars than reviewers who bought the products. If that’s the case, consumers may be misled if they just look at inflated average ratings rather than reading individual reviews with disclosures. Therefore, if you give free products to reviewers you should disclose next to any average or other summary rating that it includes reviewers who were given free products.

The particular FAQ expressly discusses a company that “runs a retail website that includes customer reviews.” Ostensibly, this hypothetical company could revise its own site to include the disclosure contemplated by the FTC. However, this is one of the more concerning additions to the FAQ because it is unclear to us if/how the FTC would consider this requirement to apply where a third-party site hosts reviews of the company’s products (e.g., Amazon).

Abroad ≠ Exempt. Interestingly, one addition to the FAQ indicates that residing abroad does not exempt an endorser from complying with the Endorsement Guides if (s)he is endorsing products sold in the US via the internet in a manner where it is “reasonably foreseeable” that his/her endorsement will be seen by U.S. consumers.  (The FAQ uses as an example a London-based endorser who posts videos on YouTube.)

Placement Matters. Per the FAQ: “A disclosure should be placed where it easily catches consumers’ attention and is difficult to miss. Consumers may miss a disclosure at the bottom of a blog or the bottom of a page. A disclosure at the very top of the page, outside of the blog, might also be overlooked by consumers. A disclosure is more likely to be seen if it’s very close to, or part of, the endorsement to which it relates.

Elsewhere, the new FAQ indicate that an endorser is not required to lead with the disclosure, but at the same time needs to make the disclosure clear and easily discerned. Bundling an #ad disclosure in among other tags is specifically discouraged:

We’re not necessarily saying that “#ad” has to be at the beginning of a post. The FTC does not dictate where you have to place the “#ad.” What the FTC will look at is whether it is easily noticed and understood. So, although we aren’t saying it has to be at the beginning, it’s less likely to be effective in the middle or at the end. Indeed, if #ad is mixed in with links or other hashtags at the end, some readers may just skip over all of that stuff.

Beware Truncated Captions. Tacking onto an existing FAQ on disclosures in a YouTube video's "Description" field  (not alone sufficient, per the FTC), the FTC has added a new FAQ on disclosures within Instagram captions. Per the FTC, if an endorsement on Instagram is in the photo or before the “more” break after the third line of the caption, the disclosure must also be placed before the “more” break to be effective.

Snaps & Instagram Stories. In making disclosures on Snapchat or in an Instagram Story, the FTC generally recommends using overlaid text, but counsels that “[i]n determining whether your disclosure passes muster, factors you should consider include how much time you give your followers to look at the image, how much competing text there is to read, how large the disclosure is, and how well it contrasts against the image.” In addition, the FTC warns against using an audio disclosure in a video post as “many users of those platforms watch videos without sound. So they won’t hear an audio-only disclosure.”

#Ad Works, but Elsewhere Pithiness Can be a ProblemPer the FTC, the following would not be acceptable:

  • Combining the disclosure “ad” with the sponsor’s name or another word in which the “ad” component may be missed or misunderstood (e.g., “#coolstyllead” for an endorsement of the hypothetical brand Cool Stylle).
  • Thanking the sponsoring company, without disclosing more about the nature of the endorser's connection. For example, “Thanks XYZ brand!” would be insufficient, but “Thanks XYZ for the free product!” would be good enough if it accurately captures the connection.
  • A brand ambassador using the tag #ambassador alone. The FTC indicates that a disclosure of #XYZ-ambassador (where XYZ is the brand name) would be more likely to be understood.
  • A marketing consultant using the disclosure “client,” “advisor,” or “consultant” alone when discussing a client's product, which – per the FTC – would be “ambiguous and likely confusing.”
  • An employee of the endorsed company using the disclosure “employee” alone. (The FTC instead recommends “#XYZ-Employee” or, preferably, a reference to “my company” or “employer” in the body of the endorsement.)

Disclosures Should Capture the Nature of the Connection. Disclosing one type of connection may misleadingly imply the absence of other connections. For example, the FTC states that “[s]aying that you got a product for free suggests that you didn’t get anything else.” If the endorser received payment in addition to a free product, that should be disclosed. Similarly, an owner or employee of the endorsed company should not simply disclose that they were “paid.” Elsewhere in the FAQ, the FTC indicates that a reviewer with a personal or familial connection to the endorsee or his/her business should disclose that connection.

Accommodations are Consideration. Per the new FAQ, if a company invites an influencer to attend an event and covers his/her travel, the influencer must disclose that when writing about the event  – even if (s)he wasn’t otherwise compensated to attend.

Advertising Law, FTCBenjamin Stein