The use of endorsements and testimonials is commonplace in advertising. Advertisers frequently choose to feature the opinions of happy, satisfied customers, or influence potential purchasers through the use of celebrity or expert endorsers, and in more recent times social media influencers.
However, it is important to know that certain uses of endorsements and testimonials may be considered deceptive or unfair advertising practices where the endorser’s claim is not substantiated, or material connections are not disclosed.
Endorsement Agreements with an Online Influencers should have aRepresentations and Warranties clause that states that each party represents and warrants to the other party that it will comply with all applicable laws, rules, and regulations in existence applicable to its activities under the agreement (including without limitation any and all FTC guidance in connection with advertising and endorsements).
So, what is the FTC and what is the FTC’s guidance?
Well, FTC stands for Federal Trade Commission. The FTC has general authority under Section 5 of the Federal Trade Commission Act (15 U.S.C. 45) to investigate and bring enforcement actions against companies engaged in deceptive or unfair advertising practices.
Because the scope of what constitutes deceptive or unfair advertising practices is quite broad, the FTC provides non-legally binding “guides” that set forth the agency’s interpretation of its authority and enforcement priorities.
Fortunately, The FTC provides guidance on the proper use of endorsements and testimonials in its Guides which Include guidance for endorsements made by online influencers on social media outlets such as Facebook, Instagram, Twitter, Snapchat, and Pinterest.
Special Considerations for Social Media
Social Media can be a source of considerable consumer confusion.
Why? Because Many bloggers post their impressions about products or services without any connection or tie to the product or service provider.
However, in an ever-growing number of cases, advertisers maybe compensating the influencer, either in the form of money or a free or reduced cost product, to write about or do a video with their products. The Endorsement Guides note that the influencer can be liable for failure to disclose such a material connection.
The FTC requires social media influencers to disclose when an influencer has any of the following types of relationships with a brand:
- Financial relationship (e.g., this means that influencer receives a monetary payment, free or discounted products, or anything else of value for mentioning the brand’s product)
- Employment relationship
- Personal relationship
- Family relationship
The FTC also notes that endorsements can be made via tags, likes, pins, etc., and that U.S. law applies when posting abroad if it is reasonably foreseeable that the post will affect U.S. consumers.
It is very important for advertisers to inform influencers and for influencers to understand what the duty to disclose means and have the proper procedures in place for compliance.
If you are an advertiser or social media influencer providing endorsements and testimonials and want to make sure you are in compliance as well as protecting yourself in these types of business transaction, please make sure to contact me to set up consultation.