The Federal Trade Commission (FTC) recently released revised Guides Concerning the Use of Endorsements and Testimonials in Advertising. The Guides are codified at 16 C.F.R. §255 and become effective on December 1, 2009. While the Guides are not law, they provide the FTC's view of the law prohibiting deceptive and unfair practices in advertising. In general, the revised Guides expect advertisers to provide greater disclosure of "typical" product performance and connections between endorsers and advertisers. The new Guides also make clear that endorsers as well as advertisers may be liable for misleading advertising. Some of the revisions are significant and may come as a surprise to both advertisers and endorsers.

Under the revised guidelines, the FTC may take action against a company for failing to describe the generally expected performance for its product under the depicted circumstance in its advertisement. A company may also be liable if there is no disclosure of material connections with outside research organizations, expert and celebrity endorsers, and even its employees. In effect, endorsers, as well as the advertising company, may be held liable under the FTC Act for making false and unsubstantiated claims about the endorsed product.

The new Guides no longer consider the traditional disclaimer "RESULTS NOT TYPICAL" to be a safe harbor for advertisers and will now expect advertisers to have substantiation that the endorser's experience is typical. If the endorser's experience is not representative, the Guides expect the advertisement to clearly and conspicuously disclose the generally expected performance under the depicted circumstance.

The updated Guides also require greater disclosure of material connections between endorsers and advertisers. The Guides recognize that endorsers may include consumers, employees, celebrities, and organizations. Additionally, disclosure of cash compensation is not the only type of connection that the Guides contemplate. The Guides contemplate disclosure of any connection between the endorser and the advertiser that would materially affect the weight or credibility of the endorsement. Material connections might include the following: an advertiser's payment of expenses to an outside research organization - even if the outside organization wholly controls the research; a consumer's receipt of product in exchange for providing a product review - even if the advertiser exercises no control over the actual review; or an expert's ownership of shares in the advertiser - even if the expert receives no direct compensation for the endorsement. "Hidden camera" advertisements or advertisements that appear to depict actual patrons are expected to disclose whether the individuals in the advertisement are actors or are being compensated for giving reviews. Even an employee's personal blogging about his employer's product or service may require disclosure of the relationship under the revised Guides.

If an advertiser uses the endorsement of a celebrity or expert, the advertiser should review the updated Guides for revisions in this area as well. If the endorser is a celebrity, the celebrity should subscribe to the views presented. A celebrity spokesperson's oral endorsement of a product on a talk show may need to be accompanied by a disclaimer, depending on the circumstances. If the endorser is an expert, the endorser's qualifications should correspond to the expertise that is represented in the advertisement, e.g., if the advertisement presents the endorser as a doctor, the Guides expect that the advertisement would make clear the nature and limits of the endorser's expertise as a doctor. An expert's evaluation should be of the type that another expert with equivalent or greater experience would have undertaken. If the advertisement contains an expert's comparison of one product to another, the Guides expect the comparison to be included within the expert's evaluation.

The Guides also recognize that endorsements appear on an array of nontraditional advertising media, including social networking sites, message boards, and the like. Endorsers using blogs, Twitter, Facebook, and other forms of social media are specifically mentioned, and they are expected to disclose a connection with the advertiser if one exists. Employees who endorse their company's products should also disclose their relationship to the company in these forums.

Endorsers, as well as advertisers, may be liable for false or unsubstantiated statements made in their endorsements. If the endorser knows the statements in the endorsement to be false and gives the endorsement anyway, the endorser and the advertiser may be held liable for the false statements. Similarly, both the endorser and advertiser could be subject to liability for an endorser's unsubstantiated claims, even if the claims were not approved by the advertiser. This includes Internet-based "word of mouth" or "buzz marketing" endorsers who receive cash, product, or other compensation to "blog" about a company's product or service. Advertisers should review their procedures for substantiating endorsers' claims and consider whether monitoring steps are needed to confirm that endorsers provide not only accurate information but also the appropriate disclosure.

Companies should review their policies on the use of endorsements and testimonials to evaluate how these new Guides impact their current and future advertising. This review should extend beyond the company's traditional advertising media to include Web sites, blogs, or other consumer interactive media that may be fostering "endorsements" under these new Guides. Also, keep in mind that well-intended and enthusiastic employees touting the advantages of a company's products or services on their own blogs or Web pages may unwittingly become "endorsers" under the new Guides. Companies should consider whether employee training and policies are needed to ensure that the company and its employees stay within the FTC's new Guides.

If you have any questions or wish to discuss how this decision may impact your company, please contact your attorney at Brinks Hofer Gilson & Lione.

This Client Alert is intended to provide information of general interest to the public and is not intended to offer legal advice about specific situations or problems. Brinks Hofer Gilson & Lione does not intend to create an attorney-client relationship by offering this information and review of the information shall not be deemed to create such a relationship. You should consult a lawyer if you have a legal matter requiring attention. For further information, please contact a Brinks Hofer Gilson & Lione lawyer.