Assessing the Impact on Radio and Television Stations of the Federal Trade Commission’s Recently Revised Guidance on Endorsements and Testimonials
On December 1, 2009, the FTC’s newly-revised Guides on Endorsements and Testimonials will become effective. Broadcasters, including their on-air talent, need to know when a claim is an endorsement/testimonial, what on-air disclosures may be required, and what their obligations are to ensure that claims are truthful and not misleading. These endorsement/testimonial-related issues can arise in a variety of contexts, including when station personnel voice commercials, prepare copy for advertisers, engage in banter regarding a product or service, serve as a spokesperson for an advertiser, or provide content to their station websites.
The Federal Trade Commission (“FTC”) enforces certain federal laws promoting competition, including federal consumer protection laws prohibiting unfair and deceptive business practices. In that capacity, the FTC routinely investigates advertising to ensure that it is truthful and not deceptive. The FTC also publishes Guides which provide insight into the FTC’s enforcement approach with respect to specific advertising practices. Broadcasters as a group have not traditionally encountered extensive direct regulation by the FTC because the FTC has most often focused on the advertiser, not the media disseminating the advertising message. However, broadcasters are subject to the FTC’s jurisdiction, particularly when they or their employees are involved in the production and/or dissemination of endorsements for products or services. We previously provided our clients with an analysis of the FTC’s recent revisions to its Guides on Endorsements and Testimonials.1 This Advisory focuses more specifically on broadcasters’ airing of endorsement material produced by third parties, endorsement material produced by the station, and endorsements featuring the station’s own employees. For purposes of this Advisory, the terms “Endorsements” and “Testimonials” are treated as synonymous, since the FTC does not draw a distinction between them.
Endorsements and testimonials, especially by those well-known in a community, are recognized as having the potential to influence consumer perceptions of advertised products and services. The FTC’s research concludes that the fact an endorser has received compensation for his or her statements or has a material relationship with the advertiser can affect the value consumers place on such an endorsement. Given the potential persuasiveness of endorsements, the FTC’s regulations seek to assure that (1) the public is aware that the speaker is being compensated for the messages s/he is conveying about a product or service, and (2) the endorsement accurately reflects the characteristics of the product or service, including the generally expected result that the consumer will experience when using the product or service in the manner depicted. To achieve these goals, the FTC’s Guides concerning endorsements assign specific disclosure requirements, as well as liability for the content of endorsements, to both the advertiser and the endorser. Broadcasters must be aware that if they receive compensation to directly convey positive messages about an advertiser’s product or service, depending on the context, they may be considered endorsers and be liable under the FTC’s regulations.2
The FTC’s primary goal in revising the Guides, which were adopted in 1980, was to include examples that demonstrate how the FTC’s established policies and practices apply to new media, such as blogs and other social media, which are increasingly influencing consumers’ purchasing decisions. Nevertheless, many in the advertising community feel that the revisions go further, effectively establishing new standards of conduct under the existing law. In addition, many in the online community feel that the Guides unfairly establish standards for new media such as “bloggers” that are different from those for traditional media such as broadcasters. In stating their case, they draw comparisons between their activities and the practices of traditional media, noting that the Guides suggest a possibly higher standard for bloggers. The Federal Communications Commission (“FCC”) has its own regulations regarding sponsorship identification and has raised concerns as to whether its regulations should be tightened to assure that the public is made aware when parties pay for broadcast content in an effort to influence the public. Thus, from both an FCC and FTC perspective, broadcasters are well advised to be proactive in complying with these governmental mandates.
What Constitutes An Endorsement
The FTC defines an endorsement as:
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.3
This definition is little changed from the one that has been in place since 1980. The revision to the Guides makes clear that “the fundamental question is whether, viewed objectively, the relationship between the advertiser and the speaker is such that the speaker’s statement can be considered ‘sponsored’ by the advertiser.”4 This focus on the audience’s perception is important for broadcasters because advertisers increasingly seek to integrate their messages more seamlessly into programming, rather than relying on pre-produced “spot” commercials. Some of these efforts may lead the public to conclude that a message delivered by an identifiable station employee is a statement of the employee’s true experience and beliefs about a product, when he or she may simply be reading advertising copy verbatim.
Obligations When Making An Endorsement
Where an advertising message gives the impression that it reflects what the station employee personally believes or has experienced, rather than simply what the advertiser believes or has experienced, the endorser, the station employing the endorser, and the advertiser have an obligation to ensure that the public is aware of their relationship. They also have a duty to ensure that the message conveyed is accurate and that the claims made by the endorser can be substantiated.
Whenever an endorsement is made in a context in which the public will not likely assume that consideration has been paid for the endorsement, a disclosure must be made to advise the public of that fact. The FTC recognizes that in certain circumstances, some persons are so famous (a “celebrity”) that the public would naturally assume in traditional advertising contexts that the celebrity is being paid to give the endorsement and therefore no disclosure of that fact is necessary. However, if a celebrity’s endorsement occurs outside the context of a traditional advertisement, disclosure may very well be required. Note that in either case, an endorsement has occurred. The only difference is whether the endorser’s connection with the advertiser needs to be specifically disclosed.
To illustrate this situation, the FTC Guides provide the example of a celebrity who, during an interview on a television talk show program, discusses a recent surgical experience s/he has undergone. She makes positive statements about the experience and mentions the doctor/facility by name. The FTC states that the audience would likely assume that the celebrity received compensation for those statements if they were delivered in the context of a traditional commercial spot. However, because the statements occurred in the context of a talk show interview, a disclosure must be made.
The “celebrity” scenario poses a potential dilemma for stations. If their on-air personalities are viewed as “celebrities,” then no separate disclosure of their relationship to an advertiser need be made when they endorse an advertiser’s product or service on-air. However, as seen below, as an endorser, the on-air personality and the station employer have an obligation to make reasonable inquiry into the accuracy of the content of the endorsement and be satisfied that the claims are substantiated.
Keep in mind that the FCC’s sponsorship identification rule already requires that disclosure be made when material being broadcast has been paid for or sponsored unless the sponsored nature of the content is obvious. The FCC’s rule, however, does not extend to online or social media activities of on-air personalities. Here, the FTC believes that the likelihood that the public will not be aware of a relationship between a celebrity and an advertiser is greater and therefore requires disclosure. Thus, as broadcasters work with advertisers to develop innovative multi-platform advertising campaigns, they should consider whether the listening/viewing audience will be able to recognize when the station or personality has received payment or something of value to convey the message, and craft appropriate disclosures.
A PDF version of this article can be found at Assessing the Impact on Radio and Television Stations of the Federal Trade Commission’s Recently Revised Guidance on Endorsements and Testimonials.
- See Client Alert, FTC Updates Guidance on Endorsements and Testimonials in Advertising (October 15, 2009).
- The FCC has long enforced its sponsorship identification rule requiring that whenever consideration is given in exchange for the broadcast of material, an over-the-air announcement be made stating that fact and identifying the sponsor. See Advisory, Paying the Piper: Avoiding Payola/Plugola Violations and Minimizing Liability (August 2009). The FCC has also been actively examining whether its sponsorship identification rule adequately achieves this public notification goal, particularly with regard to program material provided by third parties. Broadcasters must therefore be mindful of the changing state of the law at both the FCC and FTC when making an endorsement.
- 16 C.F.R. § 255.0(b) 2009.
- 74 Fed. Reg. 53124, 53126 (October 15, 2009).