New FTC Guidelines on Endorsements and Sponsorship Disclosure - Broadcasters and New Media Companies Beware
On December 1, 2009, FTC revised Guidelines went into effect updating policies dealing with advertising using testimonials and endorsements, specifically affecting celebrity endorsements and sponsorship disclosure. These revised guidelines directly impact the established practices of broadcasters and new media companies. These revised endorsement and testimonial guidelines effectively ban the old standard “results not typical” disclaimer so commonly in use in connection with a great deal of testimonial advertising, confirm independent liability for the “endorser” (including celebrities) for false product or service claims, and expand and clarify the need for disclosure of “material connections”, that is consideration (money and other “freebies”) received by new media companies in connection with reviews or other online coverage of products or services. It is vital that media companies, in particular new media, understand the key provisions of these guidelines to make sure that they don’t become a target of any FTC enforcement action. The FTC has indicated that for now at least, its focus will be on enforcement in the new media world (bloggers, social media, viral campaigns) and other “non-traditional” advertising (celebrity guests on news and entertainment shows, endorsements by media personnel such as on-air DJ’s).
Like all FTC Guidance concerning advertising, the revised guidelines are specific regulations, but instead they set out standards (in essence a safe harbor) that outline how the FTC will review advertising to determine if it is “false and deceptive” or otherwise misleading to the consumer in violation of Section 5 of the FTC Act. The revised guidelines provide specific examples as to how they will apply to insure sufficient disclosure so that the listener has all the background necessary to be able to evaluate the strength of the endorsement for him or herself. For broadcast advertising, the new guidelines make clear that endorsers can themselves be liable for misleading statements made during a product pitch. So a radio announcer paid to try a diet plan or some other product and to report about its results on the air needs to be sure not only that his statements are truthful, but that the “results” claimed are in line with what the advertiser can actually prove for the product through clinical study and research. The radio pitchman cannot turn a blind eye to claims that are inherently incredible. In the past, a simple disclosure that "your results may vary" or "these results are not necessarily typical" was sufficient. Today, that disclaimer is no longer enough. Instead, the new guidelines state that any testimonial about the results of using a product be accompanied with a disclosure of the results that a typical user can expect to get from the product. So the announcer must be informed as to what results can be expected by the typical user, and that these results are objectively verifiable, so that the proper disclosure can be made. As the announcer (or the station) can now be liable for statements made in such testimonials, stations should take care to be prepared to make the required disclosures.
The FTC guidelines also discuss the requirement that testimonial ads make clear that they are sponsored by the advertiser. Most broadcasters should already be familiar with these requirements, as the FCC imposes similar obligations that broadcasters disclose promotional consideration provided by the sponsors of any on-air material, i.e. they must disclose when anything of value has been received for any programming aired on the station. This obligation may be simple for the station to recognize when it is one of its own announcers making a pitch for a product during the course of his show as part of a paid advertisement, or where an advertiser has paid to have a celebrity guest or other corporate pitch person appear as part of a non-advertising program segment. Where it is not so easy is when some other celebrity makes an on-air pitch for a product that they have been paid to pitch (during a talk show for example), but the station may not have prior notice of that sponsorship. This is an issue under either the FTC guidelines or the FCC rules, and broadcasters need to do diligence to make sure that celebrities appearing on locally produced programs, or even during syndicated programs, make clear when they are paid to pitch for some product or service, where the pitch is not otherwise clear to the consumer (see our post here on that subject).
The FTC guidelines on new media have created garnered the greatest attention in the popular press. The guidelines expanded the need to disclose "material connections" between an advertiser and endorser in circumstances where the connection might not be obvious to the consumer. In this context, the FTC made explicit application of the Guideline's principles to bloggers and other "non traditional" media. The rules may actually be more stringent for new media than for traditional media (including radio and television). The FTC's believes that people expect that a newspaper or broadcast reviewer, for example, may have received the books they review, or saw the movie they critique, for free. However, the public is unlikely to be harmed as the traditional media reviewer has an unbiased editor or supervisor to review their comments, so the reviewer's opinions are less likely to be swayed by the free stuff they receive. The FTC distinguishes the blogger, who receives "swag" directly and may not have any sort of supervision and review for his or her on-line comments. Thus, the FTC guidelines suggest that the fact that the blogger got the free stuff is not public knowledge, and thus the receipt of the free stuff must be disclosed (even for low-value product samples if there is a continuous flow of such items). The key is whether the reviewer reasonably expects to continue to receive free product for review. Advertisers are required to train and monitor "their" bloggers for compliance and to insure product claims aren't being made beyond what the advertiser could otherwise support. Radio stations that have independent bloggers or other new media producers, who are not under the direct supervision of station management, may need to be sure that these people are aware of the need to disclose the "material connections" with advertisers or promoters of products, and that bloggers or other new media producers who have disclosed "material connections" not make claims about products that the product's owner could not itself make in advertising that it runs.
The FTC has provided numerous examples of what it sees as permissible and not permisible in the Report on this subject. Broadcasters should become familiar with these guidelines, and use them as an opportunity to refresh themselves on FCC sponsorship identification requirements as well. Don’t get caught by a too aggressive promotional campaign.