Advertising regulation is a broad area of law that applies to many industries. Marketing and advertising have evolved significantly over the past decade with the rise of social media and influencers as important parts of big business advertising campaigns. As paid advertising and sponsorships on social media increase, it’s important for businesses to keep advertising approval rules in mind.
The agency responsible for enacting and enforcing these regulations is the Federal Trade Commission (“FTC”), whose primary purpose is to protect consumers from deceptive and misleading practices. Where misleading advertising is a general prohibition applicable to all industries, the FTC specifically examines advertising claims related to consumer health and money beyond advertising claims made by other industries. Examples of industries or products that affect consumer health and money typically include claims for food, cosmetics, over-the-counter drugs, dietary supplements, tobacco, and alcohol. The FTC even goes so far as to monitor and publish reports on the advertising practices used in the marketing of alcoholic beverages and tobacco.
When a violation has occurred, the FTC will file an action “in federal court seeking immediate and permanent orders to stop the scams, prevent the fraudsters from committing scams in the future, freeze their assets, and obtain compensation for the victims”. Often, however, the FTC will send warning letters to companies that may be in violation of advertising law and notify said companies that the FTC is watching them.
In the latest FTC letter issuance, major corporations such as liquor manufacturers, luxury goods companies, branded clothing retailers, cosmetics, and many other businesses were notified of various laws on The advertisement. The communication round was sent to more than 700 companies in various industries, using the FTC’s model letter and addressing specifically the use of endorsements and testimonials.
In its model letter, the FTC states that being the recipient of such a letter does not in itself indicate that the receiving organization has broken any rules, or that the organization is being singled out. In fact, the letter has the effect of informing these companies that the FTC will examine endorsement and testimonial practices in more detail over time. Bringing these illegal practices to the companies’ attention will also assist the FTC in any future enforcement actions by ensuring that the companies are aware of the rules regarding endorsements. In the most recent letter, the FTC directed companies to several resources to provide context and further clarify what is and is not allowed in endorsements.
One such resource is the “Guides to the Use of Endorsements and Testimonials in Advertising” (“Guides”), which state that an “endorsement means any advertising message that consumers are likely to believe reflects the opinions, beliefs, conclusions or experiences of a party other than the sponsoring advertiser, even if the opinions expressed by that party are identical to those of the sponsoring advertiser. The endorser in an advertisement may be an individual, group or institution and endorsements should reflect the honest opinions, findings, beliefs or experience of the endorser. Endorsements are further prohibited from conveying any express or implied representation that would be misleading if made directly by the advertiser. Additionally, the endorser must be a bona fide user of the product at the time of endorsement if the advertisement indicates that the endorser is a user.
In addition, advertisers are held responsible for false or unsubstantiated statements made through their endorsements. For example, a statement on a blog where an influencer selects and expresses an opinion about a particular product of their own volition will not trigger FTC guidelines because the influencer is not compensated to discuss the product. However, an influencer who is paid (or otherwise included in a marketing program) would be subject to the guidelines, extending until any comments made on the product are attributable to the advertiser. Endorsers may also be liable for statements made in connection with their endorsements, in addition to the advertiser who hired the endorser.
It is important to note that advertisers and endorsers are required to fully disclose any connection that may materially affect the weight or credibility of the endorsement. However, it can be difficult to determine whether a link materially affects the weight or credibility of a mention. Fortunately, the guides provide examples to help companies determine if a connection should be disclosed. Generally, if an ad does not represent the endorser as an expert and the endorser is not well known to the public, the advertiser should disclose any compensation paid to the endorser. Compensation may include payment for services, a promise of payment for future sales, or even the mere knowledge that a favorable product endorsement would provide some benefit to the advertiser. This benefit can be as simple as appearing on TV or posting on social media.
For celebrities, the emphasis on disclosure is based on whether the advertiser’s audience will understand that the celebrity has received payment for the endorsement. For example, the guides state that if a celebrity endorses a food item using only taste and preference points, disclosure is probably not necessary because the public would expect the celebrity to be compensated. However, the Guides also point out that if the medium did not lend itself to a viewer knowing there was a material connection, it must be disclosed. The guides state that an athlete endorsing a medical procedure during an interview or speaking positively about the procedure on social media are examples of when the publicity nature of the endorsement must be disclosed because viewers cannot reasonably tell. expect there to be a link given the medium.
Similar logic applies in a scenario where an advertiser offers a product to someone whose business regularly reviews similar types of products; by viewing the product in exchange for receiving the free product, the person becomes an endorser and the receipt of the free product must be disclosed. If the fact that the product was received for free is not disclosed, regular viewers of the individual’s reviews may not expect the product to have been offered for free and are unlikely to think about the impact that would have on a positive review. The FTC interprets the behavior of the advertiser and/or endorser as an attempt to conceal that the endorser is being paid or otherwise received a free product, which amounts to misleading or deceptive advertising. Of course, the advertiser would prefer that the public think that the endorser is talking about the product of his own free will; however, the FTC does not allow this.
All in all, there are many considerations that large companies must take into account when engaging in advertising through new platforms and endorsers. Companies should be careful and ensure disclosure of any financial relationship or arrangement with its endorser.
 15 USC §§ 41-58, as amended (also known as the “Federal Trade Commission Act”)
 Federal Trade Commission, truth in advertisingavailable at https://www.ftc.gov/news-events/media-resources/truth-advertising.
 The FTC treats endorsements and testimonials the same in the context of enforcement. 16 CFR§ 255.0(c); See Federal Trade Commission, List of October 2021 Recipients of FTC Criminal Violations Notice Regarding Deceptive or Unfair Conduct Around Endorsements and Testimony, available at https://www.ftc.gov/system/files/attachments/penalty-offenses-concerning…
 15 US Code § 45 (m) (B) (2)
 16 CFR§ 255.0(b). For example, “[a] a television commercial for a particular brand of golf balls shows a prominent and well-known professional golfer practicing numerous tee shots. It would be an endorsement by the golfer even if it makes no verbal statement in the advertisement. 16 CFR § 255.0 (Example 5).
 16 CFR§ 255.1(a)
 16 CFR§ 255.1(c)
 16 CFR§ 255.0(b). (Example 8).
© 2022 GrayRobinson, PA All rights reserved.National Law Review, Volume XII, Number 41