Endorsements and the FTC

After almost thirty years without reforming the regulations that govern the use of endorsements to promote or advertise a product, the Federal Trade Commission (FTC) recently announced the final revisions for the guides regulating endorsements and so far third party testimonials have approved.

The FTC works to prevent fraudulent, deceptive, and unfair business practices against consumers. Their “Guides Concerning the Use of Endorsements and Testimonials in Advertising” address endorsements by consumers, experts, organizations, and celebrities, as well as the disclosure of important connections between advertisers and endorsers.

In the 1980 version of the Guides, it allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as “results not typical”. Under the revised Guides, advertisers will be required to clearly disclose the results that consumers can generally expect, when the advertisement features a consumer conveying his or her experience with a product or service as typical; when in reality that’s not the case.

As bloggers’ influence in the marketplace increases, the revised Guides also address this component of the marketing chain. With the intention of protecting the final consumer, bloggers who make an endorsement must indicate the “material connections” (payments or free goods) they share with the seller of the product or service.

In contrast to the 1980 Guides, this revised version reflects modern case law and clearly states that both advertisers and endorsers may be liable for false or unsubstantiated claims made in an advertisement. Celebrities also have a duty to disclose their relationships with advertisers when they’re making endorsements in the form of public relations, such as talk shows or social media.

It’s worth mentioning, however, that these guides are not binding laws themselves, but rather are administrative interpretations of the law intended to help advertisers comply with the Federal Trade Commission Act. (1)

It is likely that the new guides will darken celebrity endorsements as a form of marketing, since the effectiveness of using celebrities to persuade consumers to buy a product or service relies on the consumer believing that what the celebrity is saying comes from real reasons as opposed to monetary reasons. (2)

It will be interesting to see how these new regulations affect the music industry, since – at least at the mainstream level – endorsements for both the public and the private sector represent a significant source of income for many artists.

By Ricardo Gomez

(1) Federal Trade Commission website. FTC Publishes Final Guides Governing Endorsements, Testimonials. October 5th, 2009.
(2) BBC News. Is Celebrity Advertising a waste of money? Video: Hamish Pringle, DG of the Institute of Practitioners in Advertising, explains why celebrity endorsements work.



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