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Briefing Note
This work is licensed under the Creative Commons Attribution-Noncommercial-ShareAlike 3.0 United States License. To view a copy of this license, visithttp://creativecommons.org/licenses/by-nc-sa/3.0/us/ or send a letter to CreativeCommons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
Endorsements and testimonials in advertising and social media
The impact on brands of Federal Trade Commission guidance changes
by Niall Cook
| 13 October 2009
Introduction
On 1 December 2009 new guidelines (Guides) from the Federal Trade Commission (FTC)concerning the use of endorsements and testimonials in advertising come into force in theUnited States. This briefing note outlines the changes and their impact on brand owners andtheir clients.The most significant development in this revision is the inclusion of social or consumer-generated media as a form of endorsement. It is perhaps appropriate that this has been thefocus of discussion and comment online. Whilst there is much in the full 81-page Guides that brand owners should review, the following actions are the most pressing when considering any campaign.
1. Decide whether marketing activities fall under the jurisdiction of the FTC
If your company is based in or running a marketing campaign to consumers in the UnitedStates, the FTC Guides and Act will apply to you. Notable exceptions are banks, savings and loaninstitutions, Federal credit unions and common carriers that are not governed by the FTC Act.
2. Understand what is and isn’t an endorsement
Under the FTC Guides an endorsement or testimonial is any advertising message “thatconsumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser.”In practice, this means that a film critic’s review of a movie excerpted in an advertisement would constitute an endorsement but a TV commercial depicting an unknown womanrecommending a detergent to a friend would not. Likewise, a well-known racing driver speakingof the smooth ride, strength and long life of tires – even if not their own personal opinion – would be classed as endorsement, whereas an announcer unfamiliar to the public speaking on behalf of the company in an advertisement would not.The Guides include the following example to clarify the meaning of endorsement in thecontext of consumer-generated media (emphasis added):
 A consumer who regularly purchases a particular brand of dog food decides one dayto purchase a new, more expensive brand made by the same manufacturer. She writesin her personal blog that the change in diet has made her dog’s fur noticeably softer and shinier, and that in her opinion, the new food definitely is worth the extra money.This posting
would not be deemed an endorsement 
under the Guides. Assume that rather than purchase the dog food with her own money, the consumer gets it for free because the store routinely tracks her purchases and its computer has
 
Briefing Note
This work is licensed under the Creative Commons Attribution-Noncommercial-ShareAlike 3.0 United States License. To view a copy of this license, visithttp://creativecommons.org/licenses/by-nc-sa/3.0/us/ or send a letter to CreativeCommons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
generated a coupon for a free trial bag of this new brand. Again, her posting
would not be deemed an endorsement 
under the Guides. Assume now that the consumer joins a network marketing program under which she periodically receives various products about which she can write reviews if she wantsto do so. If she receives a free bag of the new dog food through this program, her  positive review
would be considered an endorsement 
under the Guides.
3. Have a good reason to believe that endorsers subscribe to the endorsement
The Guides state that endorsements must reflect the honest opinions, findings, beliefs, orexperience of the endorser. Further it places the responsibility on the advertiser to ensure this isthe case, stating that it may only use the endorsement whilst it has “good reason to believe” thatthe endorser continues to subscribe to the views attributed to them. In the case of a product orservice endorsement, the endorser must have also been “a bona fide user” of it at the time of theendorsement.The penalties of not adhering to this ruling are severe. Advertisers will be subject to liability for false or unsubstantiated endorsements or for failing to disclose connections with endorsers.Endorsers themselves may also be liable for statements made in the course of theirendorsement.
4. Educate and monitor consumer endorsers
 According to the Guides, where consumers take on the role of endorser by participating inproduct and service review campaigns, both the advertiser and the consumer become liable fortheir statements. For example, if a company asks bloggers to try a new product and write areview on their blog, both the company and the consumer become liable for any misleading orunsubstantiated statements made.Companies engaging in such activity should therefore ensure that they, and any agencies orservices they use, provide training and guidance to bloggers concerning the need to maketruthful and substantiated statements. They should also ensure that they monitor thesestatements and take steps to halt any deceptive representations.
5. Disclose material connections
The Guides state that when there is a connection between an endorser (individual, expert ororganization) that might materially affect the credibility of the endorsement, the connectionmust be fully disclosed. Some complex example scenarios are provided in the Guides and worthy of further examination.Regarding consumer-generated media, the Guides are very specific. If the manufacturer of aproduct sends a free copy of it to a blogger who subsequently writes a favourable review, thenthe blogger must “clearly and conspicuously” disclose that it was received free of charge.Companies should advise bloggers at the time the product is provided that the connectionshould be disclosed and should have procedures in place to monitor compliance.
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