On Notice: FTC Issues Warning to Hundreds of Companies Regarding the Use of Fake Reviews and Other Misleading Endorsements in Online Marketing Campaigns

Prompted by the proliferation of social media promoting that always blurs the line between genuine content material and sponsored posts, the Federal Commerce Fee final week despatched greater than 700 firms a Discover of Penalty Offenses warning them towards the use of misleading endorsements in their internet advertising.  The Discover advises recipient firms that participating in promoting conduct the FTC has beforehand decided to be unfair, illegal or misleading below Part 5 of the FTC Act can topic them to civil legal responsibility of up to $43,792 per violation.  As we had beforehand predicted, these letters could mirror a shift in the FTC’s focus in direction of reliance on §5 of the FTC Act, following final time period’s Supreme Court docket opinion in AMG Capital Mgmt. v. FTC which curtailed the FTC’s skill to search financial reduction below §13(b) of the Act.

Companies receiving the Discover embody giant family names together with main retailers and main promoting companies.  Recipients had been additionally directed to distribute copies of the Discover to every of their subsidiaries engaged in the sale or advertising of services or products to shoppers in the United States.  Whereas the FTC makes clear that recipients of the Discover will not be alleged to have engaged in any wrongdoing, the scope of the Notices despatched out—and the Fee’s 5–0 vote to authorize the Discover and its distribution—demonstrates that the FTC is extremely centered on the use of misleading endorsements in on-line ads and is keen to aggressively pursue advertisers that flout its directives.

The Discover despatched to firms offers a non-exhaustive record of practices the FTC has discovered to be illegal in earlier FTC administrative orders, together with:

  • Falsely claiming an endorsement by a 3rd celebration;

  • Misrepresenting whether or not an endorser is an precise, present, or latest person;

  • Utilizing an endorsement to make misleading efficiency claims;

  • Failing to disclose an surprising materials reference to an endorser;

  • Misrepresenting that an endorsement represents the expertise, views, or opinions of customers or purported customers;

  • Misrepresenting that the expertise of endorsers represents shoppers’ typical or unusual expertise; and

  • Persevering with to use an endorsement with out good cause to consider that the endorser continues to subscribe to the views offered.

Copies of the case selections mentioned in the discover are available on the FTC’s website.  The Discover additionally factors advertisers to further assets, together with a workers enterprise steering doc The FTC’s Endorsement Guides: What People Are Asking¸ and the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, 16 C.F.R. Half 255, for additional steering on their obligations below the FTC Act.

Whereas navigating the evolving regulatory panorama concerning misleading internet advertising can current challenges for firms and their promoting companions, avoiding the practices outlined above will possible go a great distance in mitigating the threat of going through an FTC enforcement motion and subsequent legal responsibility.  Our crew continues to monitor these modifications and will apprise our readers of any FTC enforcement actions that come up consequently of the Notices issued at the moment.  Watch this house for additional developments.

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