Tuesday, December 01, 2009

Panel on the FTC's New Endorsement and Testimonial Guides

Sponsored by the American Bar Association Section of Antitrust Law Committees on Private Advertising Litigation, Consumer Protection, Federal Civil Enforcement and Corporate Counseling.

Moderated by Dana Rosenfeld, Kelley Drye

Stacey Ferguson, Division of Advertising Practices, FTC

(Standard disclaimer: these are her own views.) Today’s the effective date of the Revised Guides. Emphasizes that the Guides themselves don’t provide for fines, though practices inconsistent with the Guides can result in FTC investigation and possible resulting fines. Big rule: deceptiveness of endorsement/testimonial depends on the facts.

An endorsement is anything that consumers are likely to believe reflects speaker’s personal views, whether or not identical with the manufacturer’s, whether or not the speaker reads from a script. Fictional dramatizations and statements by company spokespersons are not endorsements because they’re apparent to the audience.

Endorsements must reflect endorser’s general views and must not contain any express/implied representation that would be misleading if made by the advertiser. Advertisers can be liable for misrepresentations and for failure to disclose material connections, as can endorsers.

Principal changes: requirement of disclosure when advertiser paid for study touted in the ad; deletion of “results not typical” safe harbor; addition of examples of disclosing material connections in social media marketing.

Typicality: An advertisement employing an endorsement reflecting the experience of an individual or a group of consumers on a central or key attribute of the product or service will be interpreted as representing that the endorser’s experience is representative of what consumers will generally achieve with the advertised product in actual, albeit variable, conditions of use.

Net impression of typicality controls, regardless of disclaimer—disclaimers don’t generally work. Advertiser must possess and rely on adequate substantiation—consumer endorsements are not themselves substantiation. Must have substantiation of typicality. 20% is not typical.

If the extreme conditions are fully disclosed in the testimonial, you can use them—a woman who testified to extreme weight loss and explained that she worked out six hours a day and ate only the advertiser’s product plus raw vegetables is disclosing the extremity of her circumstances. The Jared/Subway example—apparent that he was an extreme case who made major lifestyle changes. The advertiser must be able to substantiate that people who follow this extreme case could expect similar results. If the endorsement doesn’t disclose the extreme circumstances, it’s deceptive. If the ad just discloses the woman’s weight loss, have to disclose the results consumers could ordinarily expect, and those disclosures need to be substantiated.

Disclosure of connection: when does a consumer become an endorser? When the consumer is sponsored by the advertiser, looked at objectively. Are they acting independently, or are they part of the advertiser’s marketing campaign? Definitely: Explicit understanding; cash payments; additional perks; network marketing programs; network advertising agencies; commissions. It depends: Continuous free merchandise; value of the product or service; links to where the product can be purchased.

Similar concerns with advertorials. Is it editorial or an ad? An ad is a positive statement produced in whole or in part, or otherwise influenced, because of a benefit or expected benefit provided by the advertiser or its agent. Some cases will not be clear.

When in doubt, disclose freebies.

Advertisers should monitor bloggers; other best practices (including frequency of monitoring) remain to be seen. Should guide/train bloggers on appropriate disclosures/claims. Free products should be disclosed because they can be considered compensation on a fact-specific basis. Depends on the value of the product—is it enough to push the consumer towards a positive review? (Cialdini's classic book Influence would say that free alone is enough to change behavior, regardless of value; in fact I recently read a book about that.)

FTC is also concerned with astroturfing. Employee relationship must be disclosed if employee touts on, say, a consumer message board. Advertiser has a responsibility to have policies in place and train employees regarding acceptable practices.

Mark Brian Levine, NAD

Q over elimination of safe harbor: we’ve seen cases with no testing at all, so the advertiser has no idea what the generally expected performance is. Also cases where there are only studies on one ingredient, not studies on the product as sold: how does that work? CelluScience example: study suggested positive results, but not quantifiable and not comparative to other therapies as stated in the ad. NAD found the advertiser couldn’t make percentage or comparative claims via testimonial—result under new FTC guidelines seems likely to be the same.

Another example: Bravina as a social anxiety treatment. Couldn’t make testimonial claims without substantiation, and there was none with respect to public speaking anxiety. Similarly, when weight loss examples were off the scale of the results shown in the advertiser’s study of WeightAway, they couldn’t be used as testimonials even if they were actual results.

Lance Armstrong endorsement for FRS healthy energy supplement: advertiser claimed it was a celebrity endorsement, not a professional Tour de France winner endorsement. NAD found that was unclear; he is a professional cyclist identified as a Tour de France Winner, thus a professional athlete/expert in endurance. What should he do to confirm the supplement’s efficacy? Even if he’s a celebrity, NAD found the ad needed to be changed.

WeKnowDiets: product review website, apparently unbiased, but actually promoting particular products that gave the “editor’s choice” award to the sponsor. This was unacceptable.

Remains to be seen how the new guides will affect NAD—will they prevent advertisers from making such claims in testimonials?

Paul Rand, Z√≥calo Group, President-Elect, Word of Mouth Marketing Ass’n

Marketers really want best practices for marketers and bloggers. Goal: clear and conspicuous disclosure, “above the fold.” Language must be unambiguous to the targeted consumer.

Marketer responsibilities: educate bloggers on their responsibilities; educate internal corporate audiences to create a culture of compliance; require disclosure from bloggers: “If you choose to review or share this product please be sure to disclose that it was provided to you by the company.” Monitor: remind those who “forget” to disclose; determine a cutoff policy for those who do not comply.

Editorial blogs: make it part of the editorial copy: “I received [] from [] to review this.” Also: a “disclosures and relationships” section on the website for bloggers who do this type of thing. Video sharing sites: relatively straightforward—recommend disclosure as part of the video content, ideally both in dialogue and in video description but at least one. Photo sharing: likely has to be part of the photo description. “I received [X product or service] from [company X] to create this” or “I was paid by [company X] to create this.”

Social media: as part of photo/video description; as part of status update; “disclosures and relationships” section on profile. Similarly, with review sites, disclosure should be part of editorial copy and should also create “disclosures and relationships” section on profile or website.

Twitter: hashtag within tweet, #spon or #paid, plus create a link to “disclosures and relationships” section on profile. (Comment: I wasn’t clear whether this link should appear in the tweet, but I guess not?)

Q: exemption for traditional media like newspapers?

Ferguson: No exemption per se. If audience can tell there’s a relationship, disclosure may not be as necessary. Restaurant critic/book reviewer who’s well-known: audience already knows that person has those relationships; personal websites/blogs make disclosure more of an issue.

Q: What if they aren’t well known? What if they are getting a commission?

Ferguson: it’s not that the reviewer has to be well-known, but that they have to be known as a reviewer, who can be expected to be getting stuff for free. They should have disclosure policies too, but we’re concerned with where it’s not obvious what the status is.

Q: What about sites that allow you to review the product on the advertiser’s site? Consumer buys product and writes: this is the greatest ever, it cured my skin disorder. Is the advertiser who puts up the site responsible for the content?

Ferguson: Not entirely resolved. If it’s a statement on behalf of the company, the company would be responsible. But if the consumer is making her statement on her own, but it’s on the company’s site, that’s a gray area. The CDA would exempt the person who owns the website from responsibility for content on the site. But if the advertiser knows the representation isn’t substantiated, the advertiser should be wary of keeping the statement on the site.

Q: question when the claim involves qualitative results—“helped my skin”—how do you figure out what substantiation is?

Levine: Issue is mismatch between testing and claims. Visual testing where people observed a difference would work.

Q: but typicality—what disclaimer would you use for what an average person would expect when it comes to a qualitative claim?

Levine: presumably you have some support—was the test a visual test where X number of people evaluated their skin, or scientists evaluated their skin? Were pictures taken? All those things would factor in.

Q: in the past you wouldn’t have needed to substantiate qualitative claims to show typicality—you wouldn’t have needed to know what the generally expected results were because you could just say “results not typical.”

Rosenfeld: you need to do testing; if you can’t, then you need to make claims that go to subjective views, not performance/efficacy claims.

Levine: that’s no different from how we’ve always handled claims.

Ferguson: Agrees.

Q: we market to our own members who pay for membership, not to the general public; we don’t pay our members to endorse our stuff but we do use their quotes in marketing our services/those of our advertisers. What do I need to think about?

Ferguson: Do members understand the relationship?

A: One member may use a product from another member and give a testimonial.

Ferguson: if there is an understanding of the practice that everyone is receiving a product to try and giving a review, then that should be clear, but a disclosure can’t hurt.

Q: On disclosing the sponsorship of studies: do you have to disclose even if you don’t say who ran the study at all? That is, even if you don’t use a name that might suggest that it was run by an independent lab, do you still have to disclose you paid for it?

Ferguson: yes, she believes that’s the rule. FTC is coming out with FAQs on these issues that should help.

Q: Flabbergasted by answer about consumers who post a review on the company’s own website. In the QVC case under the old guides, the FTC pushed the view that an unsolicited call to a live TV show can make the advertiser responsible; why would it be different if the consumer posted on the company’s website?

Ferguson: we’ve been grappling with this internally. You don’t want to mislead consumers or give the appearance that the company endorses what the consumer says. The company can control what’s on the website, more than it can control who calls in. An issue for the FAQ.

Q: on monitoring. How long do we need to monitor?

Ferguson: we don’t have concrete guidelines on that. If you have in place a policy that checks in 3-6 months after the product, that would go a long way towards showing the company is being proactive.

Q: Some products have a much shorter lifecycle than others—policing burden might differ.

Ferguson: that could be a factor to consider.

I had to leave for class at that point, but it was a useful discussion.


Josh King said...

Rebecca, thoughts on the Q about company liability for client comments left on the company's website? It would seem that CDA 230 would apply even in that case, so long as the company isn't controlling the content of the reviews.

RT said...

Yes, I agree; sounds like the FTC is aware of the issue but maybe not willing to accept that 230 means what it says even for advertisers who may stand to gain from comments on their sites. I was thinking about what level of involvement might constitute becoming a joint producer of the content, but even that seems like a tough sell. However, I imagine that if the advertiser chooses to highlight a positive review and does anything at all to indicate to consumers that the advertiser has singled that review out, that act will be something the FTC asserts the ability to regulate.