On June 29, 2023, the Federal Trade Commission (“FTC”) published its highly anticipated Revised FTC Endorsement Guides. The updated Guides implemented significant changes to the previously published Endorsement Guides. This includes new guidance on disclosures, use of consumer reviews and more. As social media influencers, and the role they play in advertising products and services, continue to have a massive impact on advertising and marketing, the Guides seek to ensure transparency and prevent the use of misleading advertising practices.
1. Definition of an Endorsement
The first significant change is an expanded definition of what qualifies as an endorsement. Previously, endorsements were mainly defined as statements made by individuals who have a material connection to a brand and promote its products or services. Now “endorsement” includes reviews, virtual influencers, and tags in social media.
Why This Matters: Any positive statement or review about a product, whether made by a real person or a virtual influencer, must comply with Guides. And yes, you read that right- virtual influencers who aren’t real humans – must comply with real regulations.
2. Material Connections
Another change worth noting is the update to the “clear and conspicuous” standard when it comes to making disclosures of material connections between the endorser and the brand. The FTC defines a “material connection” as “a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement”. If a material connection is not reasonably expected by the audience, the connection must be disclosed clearly, conspicuously, and according to the Guides, unavoidable. (Blog coming soon about this topic!)
Why This Matters: Note that in the ecosystem of influencers and brands, all of the parties are individuals are responsible for compliance. Brands need to have their own guidelines about disclosures and influencers need to have a clear understanding of FTC compliance requirements.
3. Consumer Reviews
The Guides also address the use of consumer reviews as the increased use of endorsement practices such as using fake or incentivized reviews, bots and generative AI present unique opportunities for manipulation and deception in online reviews and endorsements. As a result, the Guides prohibit practices that distort consumer perception of a product through the manipulation of reviews. This includes activities such as boosting positive reviews, suppressing negative reviews, or using AI to only showcase positive reviews. These practices can create a false perception of a product’s quality or popularity.
The FTC has also proposed a new standalone rule to address these practices. (Check it out here.) Why This Matters: Reviews can qualify as endorsements, and brands are prohibited from manipulating or misrepresenting these reviews.
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