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Big Changes for FTC Endorsement Guidelines & Rule for FTC Incentivized Reviews

FTC endorsement guidelines & FTC rule for incentivized reviews intro

Last Updated: March 15, 2023

The Value of Endorsements and Customer Reviews for Digital Marketers

Endorsements in the form of testimonials and customer reviews are extremely valuable to digital marketers because they provide social proof that can influence potential customers' purchasing decisions. Some ways testimonials and reviews can benefit digital marketing efforts are listed below.

    *  Build Trust: Testimonials and customer reviews can help build trust with potential customers by providing real-world evidence of the benefits of a product or service. People are more likely to trust the opinions of their peers than marketing messages from brands.

    *  Boost Credibility: Positive testimonials and customer reviews can boost a brand's credibility by demonstrating that it delivers its promises and provides high-quality products or services.

    *  Increase Conversions: Testimonials and customer reviews can help increase conversions by giving potential customers the information they need to make an informed decision. Seeing positive reviews can give customers the confidence they need to complete a purchase.

    *  Improve SEO: User-generated content, such as customer reviews, can help improve a website's search engine rankings by providing fresh and relevant content.

    *  Provide Feedback: Testimonials and customer reviews can provide valuable feedback to marketers about their products and services. This feedback can be used to make improvements and address customer concerns.

The FTC Endorsement Guidelines are Being Revised and Strengthened

Background Regarding The FTC Endorsement Guides

The original endorsement guides were enacted in 1980 to address new technological methodologies for advertising to consumers.

Later in 2009, the FTC revised the original endorsement guides to reflect even new advertising techniques.

On June 3, 2022, the FTC announced the official opening for requests for public comment on the published revisions.

The FTC's primary reason for the revisions of the endorsement guides is to provide more specific guidelines to assist the FTC with satisfying its burden of proof in FTC enforcement actions that the alleged conduct is actually deceptive under Section 5 of the FTC Act.

As a result, marketers who fail to comply with the revised endorsement guides will more likely be found liable for deceptive marketing practices with FTC enforcement actions.

Summary of Proposed Revisions

    *  A change to definitions, including expanding the scope of the definition of "endorser" to include virtual influencers and fake endorsements or reviews.

    *  Specifying that any deletion or holdback of a negative review would be a deceptive act or practice.

    *  Prior to making an endorsement, the requirement of a clear and conspicuous disclosure of business, family, or personal relationships.

    *  Noting that endorsements or testimonials targeting children are "of special concern because of the character of the audience."

    *  Specifying that advertisers, endorsers and intermediaries, and hosting platforms for advertisements and endorsements may be liable for deceptive practices under the FTC Act.

The Fake Review Rulemaking Process is Underway to Enable The FTC to Levy Fines for Manipulating Customer Reviews

In the FTC's press release on October 20, 2022, the FTC announced that it is exploring a potential rule to regulate unfair and deceptive practices, including fake reviews, suppressing negative reviews, and paying for positive reviews.

Samuel Levine, Director of the FTC's Bureau of Consumer Protection, stated: "Companies should know by now that fake reviews are illegal, but this scourge persists. We're exploring whether a rule that would trigger stiff civil penalties for violators would make the market fairer for consumers and honest businesses."

The press release noted that: "The rapid growth of online marketplaces and platforms has made it easier than ever for some companies to create and use fake reviews or endorsements to make themselves look better or their competitors look worse. It can be difficult for anyone—including consumers, competitors, platforms, and researchers—to distinguish real from fake, giving bad actors big incentives to break the law."

The FTC is seeking public comment on the following issues.

    *  Fake reviews: These include reviews and endorsements by people who do not exist or have not used the product or service or who lie about their experiences.

    *  Review reuse fraud: Some sellers hijack or repurpose reviews posted about another product or service.

    *  Paid reviews: Marketers may pay for positive reviews about their products or negative reviews about competitors' products.

    *  Insider reviews: These include reviews written by a company's executives or solicited from its employees that don't mention their connections to the company.

    *  Review suppression: Companies might claim that their websites display all reviews submitted by customers when they suppress negative reviews or attempt to suppress reviews on other platforms by threatening the reviewers.

    *  Fake review websites: This is when a seller sets up a purportedly independent website or organization to review or endorse its products.

    *  Buying followers: This involves buying or selling followers, subscribers, views, or other indicators of social media influence.

Legal Concerns and Challenges for Digital Marketers With Social Media Marketing

The Federal Trade Commission's (FTC) initiatives to revise the Endorsement Guides and the Rulemaking process for Fake Reviews have important legal implications for digital marketers.

The Endorsement Guides provide guidance for businesses and influencers on how to disclose material connections between endorsers and the promoted products or services, such as financial incentives or free products. The guides also cover the use of testimonials and endorsements in advertising, including endorsements made through social media.

The FTC's proposed revisions to the Endorsement Guides aim to address emerging advertising practices and technologies, including new forms of influencer marketing, such as TikTok videos, and the use of artificial intelligence to generate endorsements.

The FTC's rulemaking process for Fake Reviews indicates the FTC's concerns regarding the deceptive manipulation of customer reviews resulting in significant harm to consumers.

The proposed revisions to the Endorsement Guides and the FTC's Rulemaking process for Fake Reviews reflect the FTC's increased focus on online advertising and the importance of transparency in advertising practices.

In summary, digital marketers should stay informed about the changes to the FTC Endorsement Guides and the Rulemaking process for Fake Reviews and take steps to ensure their advertising practices are transparent and compliant with FTC endorsement guidelines and the FTC Fake Review Rule, assuming it passes.

How I Can Help You

The legal risk of an FTC enforcement action with social media marketing is in increasing exponentially.

I help digital marketers navigate complex FTC Endorsement Guidelines and FTC Fake Reviews requirements so they can be compliant and competitive.

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Best wishes for your online business success.

Chip Cooper, Esq., eCommerce Attorney

My Background

  • Juris Doctor Degree, Wake Forest University School of Law
  • Adjunct Professor of Law, Wake Forest University School of Law (20 years)
  • Martindale-Hubbell Highest Attorney Peer Rating – AV® PREEMINENT™
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