Guidelines for Endorsements and Testimonials in Advertising

2Federal Trade Commission Guidelines | October 2009

On Monday, October 5, 2009, the Federal Trade Commission released its revised “Guides Concerning the Use of Endorsements and Testimonials in Advertising” — the first time these guidelines have been changed since 1980. A lot has changed in the public relations landscape since then, and many of these changes have stemmed from how consumers are using information they find on the Internet.

Beginning December 1, 2009, the FTC will regulate the social and traditional media space for paid endorsements, evaluating content as to whether or not it qualifies as “sponsored.” If content is deemed to be sponsored, and this fact is not disclosed in the content itself, brands, agencies and bloggers are subject to up to an $11,000 fine per incident.

Weber Shandwick will continue to explore the implications of the new guidelines and will share them with our clients and agency partners. We believe the updated FTC guidelines are in the true spirit of social media, and will improve the quality and credibility of our clients, our partners and Weber Shandwick in general.

Under the 1980 guidelines, brand- and product-motivated word of mouth reviews and marketing, or paid endorsements, were allowed as long as a simple “results not typical” disclaimer was included with the endorsement content itself.

According to the new rules, this will no longer suffice, as the revised guidelines’ main purpose is to address the proliferation of “sponsored,” or paid endorsements, in digital and traditional media.

The new rules require full disclosure from every agency partner, from a celebrity sitting on Conan O’Brien’s couch to a blogger with any size audience, that they received money or free product (a sponsorship) in exchange for their endorsement.

InTrODUCTIOn

BACkGrOUnD

3Federal Trade Commission Guidelines | October 2009

Many brands approach influencers as part of their ongoing

marketing and public relations efforts, whether it’s asking them to

write product reviews, go on television to talk about a product or

simply telling others about a brand’s marketing program.

According to the Guides, an endorsement is:

“… any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser.”

From a social media perspective, the following scenario is, in fact, an endorsement:

“If [a] blogger frequently receives products from manufacturers because he or she is known to have wide readership within a particular demographic group that is the manufacturers’ target market, the blogger’s statements are likely to be deemed to be ‘endorsements,’ as are postings by participants in network marketing programs.”

Many brands approach influencers as part of their ongoing marketing and public relations efforts, whether it’s asking them to write product reviews, go on television to talk about a product or simply telling others about a brand’s marketing program. If the endorser meets the following criteria, the content will be considered sponsored:

• The endorser is compensated (with money or free products or services) by the brand or a third party

• The endorser has received products or money from the same or similar marketer • The endorser receives such products or services regularly (from the same or similar

marketer), and expects to do so in the future

WhAT IS An EnDOrSEMEnT?

4Federal Trade Commission Guidelines | October 2009

When Weber Shandwick provides a product sample, reward or gift — large or small — in conjunction with public relations or marketing campaigns, we must now require that our spokespeople and advocates (product influencers) provide meaningful disclosure that’s understandable to the average consumer. This means, when Weber Shandwick begins to work with any partner, celebrity or blogger, we should not only reinforce this fact, but we must provide additional tips and guidance when necessary.

The FTC also says that once a digital campaign that encourages endorsements commences, we must monitor for and correct any failures to disclose a sponsored relationship. This is something Weber Shandwick does regularly.

DISClOSUrES

Once a digital campaign that encourages endorsements

commences, we must monitor for and correct any failures

to disclose a sponsored relationship. This is something

Weber Shandwick does regularly.

5Federal Trade Commission Guidelines | October 2009

We will continue to monitor these developments and follow-up as appropriate, but until further notice you will need to follow the FTC guidelines in the following situations: Blogger Compensation In all cases, bloggers must disclose their relationships with marketers. This means that if a blogger receives anything in exchange for a post or review, they must disclose their relationship.

Examples include: • Free product for testing purposes • Cash • Entry in a sweepstakes • Travel to a product launch

One point not mentioned in the FTC guidelines is just how bloggers must disclose their relationships, only that they be disclosed in a manner that an average reader can understand. Weber Shandwick interprets this to mean the disclosure must be part of the content itself. CeleBrity endorsements The revised FTC guidelines also require celebrity endorsers to disclose their relationship with a marketer when that relationship is not obvious.

• Paidadvertisement: In most television ads, no additional disclosure is necessary; since the public generally understands that the celebrity is being paid.

• Talkshowappearance:A celebrity appears on a talk show to promote her new movie and also mentions that she’s had great results from recent lasik eye surgery. If she was compensated by the surgery provider, she must disclose this fact.

• Eventappearance: A celebrity appearance at a marketer-sponsored event (e.g. an internal sales meeting) would not require additional disclosure. On the other hand, a celebrity appearance on behalf of a corporation at a third-party event (e.g. the new York Mets fan fest) would require disclosure if the average consumer would reasonably not be expected to know the celebrity is being compensated.

SCEnArIOS

FTC guidelines state bloggers must disclose their

relationships in a manner that an average reader can

understand. Weber Shandwick interprets this to mean

the disclosure must be part of the content itself.

6Federal Trade Commission Guidelines | October 2009

expert endorsements An expert’s expertise must be consistent with the matter on which she is speaking. Therefore, her statements must be based on her expertise and must be truthful.

• Expertise:AnindividualwithaPhDinpsychologycannotbepresentedasa“Doctor”for purposes of endorsing a heart medication without full disclosure of the person’s true expertise.

organizational endorsementsThe FTC guidelines treat organizational endorsements similarly to other types of endorsements:

• Paidendorsements:If a marketer can obtain the endorsement of an organization by paying a fee, that fact must be disclosed.

• Organizationalexpertise: An organization’s opinion must be related to its field of expertise and based on its independent, objective evaluation.

other Consumer aCtionConsistent with the aforementioned blogger guidelines, the FTC guidelines give new examples of consumer compensation requiring disclosure:

1. Postingsonamessageboard:If an employee or representative of a company is going to post on a message board, the individual’s relationship with the company must be disclosed in a clear way.

2. Word of mouth/street teams: If an individual is paid in cash or, for instance, points exchangeable for merchandise every time she talks to her friends about a specific product, that fact must be disclosed by the individual.

aCCuraCy and truthfulnessStatements made by bloggers and other endorsers in the aforementioned scenarios must reflect the honest opinions, findings, beliefs or experience of the endorser. Whether the speaker is a blogger, an expert or a celebrity, the speaker’s statements must be accurate and truthful or both the speaker and the marketer can be liable.

The endorser must be:

• Productuser:If a speaker claims to use a product, he/she must actually use it. • Accurate:If a speaker touts the qualities of a particular product, the speaker’s statements

must be accurate. A speaker can’t claim a medicine cured her acne unless it actually did. • “Atypical”:If an individual appears as a “typical” user and his results are atypical, it is no

longer adequate to state “results not typical” within the endorsement itself.

Consumers must be told what they can expect. For instance, a review for a product that claims to help bald men grow hair must state what results a typical man can expect. (e.g., “Most men will only see minimal hair growth using our product.”)

7Federal Trade Commission Guidelines | October 2009

ChrisPerry 310 854 8250 cperry@webershandwick.com

www.webershandwick.com

Adam keats 312 988 2319 akeats@webershandwick.com

When choosing a potential endorser, either celebrity or digital, we will take a look at the following criteria:

• Whether the endorser clearly understands the new FTC guidelines

• Whether the endorser has shown full disclosure with previous client programs

• Whether the disclosure has interfered with the content of the said endorsements

As the guidelines come to life and marketers begin incorporating them into programs, we will keep our staff, clients and partners updated on the practical implications and how to abide by them.

MOvInG FOrWArD