Tis the Season . . . for Enforcement Actions
By: Desiree Moore and Katie Staba
Summary: The FTC has sent letters to many major consumer brands, warning them about the proper and lawful use of endorsers and testimonials. This blog post provides an overview into the warning letters and how companies can proactively protect themselves.
Key Takeaways: The FTC is on heightened alert as to compliance with the Act as it concerns endorsers and testimonials; how to protect an organization proactively.
As we embark on the flurry of product reviews flooding our purchasing decisions during the holiday season, we are reminded that the Federal Trade Commission is ever-present to ensure that brands and influencers remain truthful and transparent in these efforts. In October 2021, the Federal Trade Commission issued over 700 letters entitled Notice of Penalty Offenses regarding allegedly unlawful practices related to the use of endorsements and testimonials. In sending the letters, the FTC is signaling that it is focusing its attention on the marketing and advertising practices of businesses across industries. In the wake of these letters, here is some important information to be aware of:
Why Did the FTC Send These Letters?
The FTC has stated that recipients are not necessarily being identified as having violated Section 5 of the FTC Act. These letters were purportedly sent to many major consumer brands and advertising agencies as a warning shot of sorts. This warning shot was likely prompted by two factors: (1) the FTC has exhibited a continuing interest in policing the world of endorsements and testimonials online, and (2) recently, the FTC was stripped of its power to pursue monetary relief in the April 2021 U.S. Supreme Court decision, AMG Capital Management, LLC v. Federal Trade Commission (more on that decision and reaction here). After AMG, the FTC must undertake a more cumbersome process to pursue monetary remedies. These letters put its recipients on notice.
What Kind of Activities are Covered by These Letters?
The letters specifically relate to use of endorsers or testimonials. The FTC has taken a strong stance on the proper use of these third parties in advertising efforts. Specifically, the FTC has focused on whether the material connection between the organization and the endorser is properly disclosed and whether the endorser is making truthful and non-misleading claims about the brand, product or service.
What Should I Do to Best Protect my Organization?
Whether you received a notice or not, it is a good idea to take a close look at your current endorsement relationships, as well as any testimonials or reviews that may have been solicited or leveraged. It is also a best practice to work closely with counsel to ensure your processes, policies, and contracts support compliance.