Special Report: FTC Revises Its Guidelines On Advertising Endorsements and Testimonials – How Does This Affect Internet Marketers?
By Anna Johnson on October 8th, 2009A few days ago the U.S. Federal Trade Commission announced that it had finalized its revisions to the FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising – the FTC’s guidelines on how advertisers should keep endorsements and testimonial ads compliant with the FTC Act.
We’ve previously discussed the FTC’s proposed changes to the Guides (last updated in 1980), but these latest revisions include additional changes not included in the proposed revisions released in November 2008.
The changes affect EVERYONE involved in publishing endorsements, advertisements and testimonials – web publishers, advertisers, email marketers, bloggers, social networkers, merchants, affiliates – including Internet marketers located outside the U.S. who market TO people within the U.S.
This is stuff you need to know, right? BUT, despite the uproar within Internet marketing circles, you do NOT need to be afraid.
So, instead of joining the circus of fear-mongers, let’s consider what, exactly, the FTC has said, and then consider how it is likely to affect us, as Internet marketers. Oh, just one thing: this is NOT legal advice. To be sure you’re on sound legal ground when it comes to any of this, be sure to consult a qualified attorney.
Okay, so first thing to get clear is that THE LAW HAS NOT CHANGED.
What has changed – or will change, once they’re published – are the ‘FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising.’ These Guides address endorsements by consumers, experts, organizations, and celebrities, as well as the disclosure of material connections between advertisers and endorsers.
As stated by the FTC in its press release announcing the changes:
“the Guides are administrative interpretations of the law intended to help advertisers comply with the Federal Trade Commission Act; they are not binding law themselves. In any law enforcement action challenging the allegedly deceptive use of testimonials or endorsements, the Commission would have the burden of proving that the challenged conduct violates the FTC Act.”
Although the Guides are not themselves law, they represent the FTC’s view of the law and probably how a court will view the law in a given case. Which means that unless you want to test the FTC’s interpretation out in court, you’re probably wise to abide by the Guides!
The main two changes arising from the FTC’s revisions to the Guides relate to (a) how marketers present testimonials and (b) how marketers and others endorse products and services. Let’s discuss each in detail:
1. Testimonials
The jist of the FTC’s revised approach to testimonials appears to be this: if an advertisement features a consumer talking about or conveying their experience with a product or service (e.g. via testimonial, case study or otherwise), and that consumer’s experience is NOT typical, the ad will have to clearly disclose the results that ARE typical i.e. what consumers can generally expect from the product or service.
This is a significant divergence from the approach previously taken by the FTC, in the 1980 version of the Guides. To date, advertisers could qualify atypical results in a testimonial by including a simple ‘Results Not Typical’ disclaimer.
That’s no longer enough under the new Guides; now advertisers can’t just say ‘results not typical’ – they need to say what results ARE typical.
Soooo… if you sell a diet product to 1,000 people and only three of them lose weight, and you include the testimonials of the three people who lost weight in your ad, you can no longer just qualify such testimonials by including a ‘results not typical’ disclaimer.
It seems that, based on the FTC’s new requirements, you would need to have a disclaimer that conveys TWO clear items of information: the fact that such results are not typical and also what results are typical. Such a disclaimer might be along the lines of ‘Results not typical. The average user of this product does not lose weight’ (although you might present it differently… and this is not legal advice!)
Of course, a few issues arise from this:
- How does the advertiser know what the typical result of using their product is?
Such information may be readily available in some circumstances… but not in others. My guess is that if you don’t know what the typical result is, you don’t want to be making any assumptions about what is typical!
- Are we talking about the typical person who BUYS the product… or the person who USES the product?
Many information marketers will, for example, tell you that most of their products go unread and unused, so on that basis the typical customer’s results would be negligible. But what about those who actually read and apply all the teachings? Perhaps the typical result among that group of people is rather impressive after all… Unfortunately, it’s not clear whether the FTC will, in a given case, make a distinction between those who buy and those who apply.
So what CAN you include in a testimonial if you don’t want to (a) fall afoul of the FTC’s interpretation of the law and (b) diminish the value of having a testimonial by saying what your average customer achieved (or did not achieve) with your product?
Well, there seems no restriction on including quotes from people saying how much they like you, your business or your product… just on claims about achieving specific results.
2. Endorsements
Here’s my take on the FTC’s approach to endorsements: if you endorse a product or service for which you receive some kind of reward or remuneration (e.g. payment, gift, free product, etc) and you do so in a forum e.g. news article, blog post, discussion board or social network post, etc, where your audience would NOT expect you to be remunerated for such an endorsement… you must disclose that endorsement.
When it comes to endorsements, the revisions to the FTC Guides don’t so much as reflect a change to the FTC’s stance as they reflect the addition of new examples of endorsements that are likely to come under FTC scrutiny.
Presumably in light of the Internet creating new avenues for people to appear objective – whilst actually promoting products and services – the FTC seems to be clarifying that where there’s a ‘material connection’ between an advertiser and an endorser, that connection must be disclosed.
To me, this just means you need to be upfront about any material interest you have in endorsing a product or service in ANY communication you make where it’s NOT OBVIOUS that you’re advertising or promoting that product or service.
The difficulty is, of course, in distinguishing between what’s obvious and what is not… and you can be sure that the test is not what is obvious from the marketer’s point of view, but from the consumer’s point of view.
Similarly, the FTC’s changes to the Guides clarify that celebrities need to disclose their relationships with advertisers when making endorsements outside the context of traditional ads, such as on talk shows or in social media.
So there’s my take on all of this. The changes take effect on December 1, 2009, so there’s still a little time to make changes to anything you’re currently doing that may not meet the new FTC requirements.
Of course, three months is hardly a lot of time for infomercial marketers who must now dump their existing, tried and true infomercials, and invest in producing brand new replacements.
And, of course, a lot of time and money goes into testing any kind of advertising – including the humble website landing page, and there will be many other marketers who will also have to dump these and start again from scratch…
But, love the changes or not, we’re stuck with ‘em, so unless you want to risk a big fine of up to $11,000 per violation, you’ll probably want to comply… and be sure to get legal advice from your lawyer!
Sources: Federal Trade Commission, “FTC Publishes Final Guides Governing Endorsements, Testimonials,” Federal Trade Commission, October 5, 2009, Federal Trade Commission, “16 CFR Part 255 Guides Concerning the Use of Endorsements and Testimonials in Advertising,” Federal Trade Commission, October 5, 2009
October 12th, 2009 at 10:23 pm
If I understand the changes correctly, one of the intended targets of the changes are the quid pro quo testimonials and endorsements that appear on virtually all new Internet based product launches. Where Guru X endorses a new product being launched by Guru A. Or vice versa. It’s a new product, one never seen before. Yet Guru X knows all about it. Has used it for just ages.Hmmm? Even a newbie knows that Guru X provides the testimonial on the basis that not only will Guru A return the favour in the future but Guru A will allow Guru X to promote the newly launched product to his customers for a substantial share of the sales proceeds.
If the new guidelines stop all of that nonsense, then I am in favour of them. It will level the playing field considerably
October 13th, 2009 at 5:10 am
Hi John!
Yes, it appears the FTC will be cracking down on those who give testimonials appearing to be objective but who are actually receiving some kind of incentive or remuneration for doing so. People who give such testimonials will need to disclose such arrangements, including in testimonials, on blogs, in forums, in emails, and elsewhere.
On the other hand, if it’s a loose/informal kind of ‘you do me a favour, and I may do you a favour in the future’ arrangement it *probably* won’t be captured by the FTC’s new policy. If so, I tend to agree, since there is no definite reward for providing the testimonial.