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VOL. 133 | NO. 118 | Wednesday, June 13, 2018

Endorsers Must Disclose Material Connections

Randy Hutchinson

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How much weight would you give to a glowing review about a luxury vacation resort if you knew the reviewer had been paid to say great things or given free accommodations? That’s an example the FTC uses in discussing its Endorsement Guides, which are designed to help companies ensure their ads aren’t misleading.

The guides cover all kinds of advertising – TV, radio, blogs, word-of-mouth advertising and social media. Basic principles include:

• An endorsement must reflect the honest opinion of the endorser and can’t be used to make a claim the product’s marketer couldn’t legally make.

• Some endorsers tout wonderful results from using a product. Even if true, if the advertiser doesn’t have proof that other users will generally achieve the same results, then the results they’re likely to achieve must be described.

• An endorser shouldn’t talk about his experience with a product he hasn’t tried or make claims he can’t prove.

• If there’s a material connection between the endorser and the marketer that consumers wouldn’t expect and that could affect their evaluation of the endorsement, it should be disclosed. A material connection could consist of a business or family relationship, monetary payment or the provision of free products to the endorser.

• Consumers should be able to notice disclosures easily and not have to look for them.

The BBB’s Code of Advertising contains similar provisions regarding testimonials and endorsements.

“Influencer marketing” involves using online thought leaders to promote a brand or product. The FTC is becoming more aggressive in making sure that influencers properly disclose whether they’re being paid or given incentives in some other way to promote a product.

In its first law enforcement action against online influencers, the FTC settled charges with two fellows who promoted an online gambling site with statements like, “We found this new site called CSGO Lotto. Made $13k in about five minutes.” People who read such reviews weren’t told the two men owned the company.

In April 2017, the FTC sent “educational” letters to more than 90 celebrities, athletes and other influencers raising concerns about their promotion of products on Instagram and advising that any material connections to the companies should be disclosed. It sent more serious “warning” letters in September to 21 people with large Instagram followings, including Naomi Campbell and Lindsay Lohan.

The Endorsement Guides include more than 35 examples of various endorsement scenarios and how the rules would apply. The FTC also periodically publishes the answers to questions from advertisers and endorsers. The most recent set of questions are heavily focused on what constitutes, and how to disclose, an endorsement on social media sites.

No special wording is required in disclosures as long as they convey the essential information. The FTC says, “Think of it like football. Unless the quarterback throws the ball and the receiver catches it, it’s an incomplete pass.”

Randy Hutchinson, president and CEO of the Better Business Bureau of the Mid-South, can be reached at rhutchinson@bbbmidsouth.org.

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