It has been a year since the Federal Trade Commission (“FTC”) revised its Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Endorsement Guides” or “Guides”), which advises businesses, influencers, brand ambassadors and other endorsers on how to ensure that advertising using reviews or endorsements is truthful. The FTC’s Endorsement Guides, found in 16 C.F.R. Part 255, had not been updated since 2009, well before the advent of popular social media platforms like TikTok and Instagram and the rise of social media influencers. This is a significantly more virtual world than we had in 2009 when the FTC’s main focus was, among other things, on blogs, social networking sites (anyone remember Friendster and MySpace?), online message boards, celebrity endorsers and word-of-mouth marketing.
The 2023 updated Guides represent the FTC’s latest guidance on how the agency enforces Section 5 of the FTC Act, which prohibits unfair or deceptive advertising practices. While the Guides are not law, they are intended to help advertisers comply with the rules and avoid deceptive marketing practices. The FTC’s update to the Endorsement Guides is part of a broader push by the agency to address the many questions that have arisen as the social media marketing landscape has evolved in recent years. To that end, the FTC also updated its guidance document titled “FTC’s Endorsement Guides: What People Are Asking” to answer 40 more questions “with a particular focus on influencers, the required disclosure of material connections across different platforms, and issue[s] related to reviews.”
Below are some highlights from the updated Endorsement Guides.
- New Definition of “Endorsement” and “Endorser.” The updated Endorsement Guides define an endorsement as “any advertising, marketing, or promotional message for a product that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser.” Notably, the Guides explain that in addition to obvious endorsements like verbal references to a brand or use of a brand’s logo, more subtle actions like tagging a brand in a social media post can also constitute an endorsement. The FTC also revised the definition of an “endorser” to include parties that appear to be individuals, groups or institutions, which covers bots that write fake reviews as well as virtual or fabricated endorsers (e.g., AI-generated influencers).
- Potential Liability of Advertisers, Endorsers and Intermediaries. The FTC clarified that advertisers, endorsers and intermediaries each face potential liability for FTC Act violations. Advertisers, for example, may be subject to liability when the endorsers they commission either make misleading statements or fail to make adequate disclosures. Likewise, endorsers, including individual influencers, may be liable if they falsely represent that they personally used a product, make misleading or unsubstantiated statements about a product’s performance or effectiveness or fail to adequately disclose material connections to a brand. The updated Guides also establish liability for intermediaries, including advertising agencies, public relations firms and management companies who help create or disseminate non-compliant content.
- New Definition for “Clear and Conspicuous” Disclosures. The FTC has long held that disclosures must be “clear and conspicuous” in order to be compliant. In its updated Guides, the FTC defines “clear and conspicuous” as “difficult to miss” and “easily understandable by ordinary consumers.” Specifically, the FTC states that if an endorsement is made through visual means, such as in text, graphics or pictures, the disclosure must also be visual; if an endorsement is made through audible means, such as in videos or podcasts, the disclosure must also be audible. In all cases, the disclosure must be unavoidable and easily understood by the target audience. In line with previous guidance from the FTC, if a particular platform does not provide an opportunity to make these clear and conspicuous disclosures, then that platform should not be used to disseminate advertisements that require disclosures.
- Material Connections. The Endorsement Guides have always required the disclosure of unexpected material connections between the endorser and the seller of an advertised product. For a connection to be material, it “must affect the weight or credibility the audience gives to the endorsement.” The updated Guides provide examples of possible material connections that should be disclosed, including but not limited to business, family or personal relationships, financial incentives, or the receipt of free or discounted products by the endorser.
- Consumer Reviews. The updated Guides include a new section on consumer reviews that directs advertisers to avoid “procuring, suppressing, boosting, organizing, publishing, upvoting, downvoting” or editing consumer reviews in a way that distorts or otherwise misrepresents what consumers think of their products, “regardless of whether the reviews are considered endorsements.”
FTC Enforcement Actions
Following the publication of the updated Guides, in November 2023, the FTC sent warning letters to two trade associations and 12 online health influencers who failed to make adequate disclosures in their social media posts. The warning letters marked the first enforcement action taken by the FTC against food and beverage trade groups for social media advertising. The letters were sent to the American Beverage Association and The Canadian Sugar Institute, who paid a number of registered dieticians and health influencers to promote the consumption of the artificial sweetener aspartame and sugar-containing products on their Instagram and TikTok accounts.
In the warning letters, the FTC specifically detailed how each of the influencers violated the FTC Act by failing to comply with the agency’s 2023 updated Guides. Specifically, the FTC flagged nearly three dozen social media posts where the influencers either:
- Failed to include any form of disclosure in their posts;
- Made disclosures in the text descriptions of their posts rather than in the videos themselves;
- Relied on hashtags like “#sponsored” or “#ad” or built-in “Paid Partnership” disclosure tools; or
- Failed to adequately identify the entities sponsoring the posts or only referred to the entities by nickname.
Notably, the FTC emphasized that influencers who make endorsements in videos must make disclosures in the videos themselves rather than in a post’s text description, since “viewers can easily watch a video without reading disclosures in a post’s text.” The FTC noted a “clear and conspicuous” visual disclosure can be made “by superimposing much larger text over the videos.” Additionally, the FTC reiterated that endorsements made through both visual and audible means need to be accompanied by disclosures in both the video’s visual and audible portions.
The FTC reminded influencers that relying on hashtags like “#sponsored” or “#ad” or built-in “Paid Partnership” disclosure tools are inadequate both because they can be easily missed and do not sufficiently identify the sponsor of the posts. In addition, using abbreviations or usernames to identify sponsoring entities—such as “ameribev” for the American Beverage Association or “@cndnsugarnutr” for The Canadian Sugar Institute—failed to adequately identify the organizations for the purpose of making a disclosure. The FTC also specifically noted the trade associations and influencers could face legal action, including seeking a federal district court injunction or an administrative cease and desist order, if they failed to address the agency’s concerns and up to $50,120 per violation for future FTC Act violations.
Could FDA Action Be Next?
In February 2024, two U.S. senators sent a letter to the Food and Drug Administration (“FDA”) urging the agency, which has jurisdiction over the advertising of prescription drugs, to update its guidelines on social media advertising. The FDA has not updated its guidance since 2014. The senators pointed to the recent “explosion” of social media influencers promoting prescription drugs online without adequately disclosing material connections to drug manufacturers. The senators wrote, “[t]he power of social media and the deluge of misleading promotions has meant too many young people are receiving medical advice from influencers instead of their health care professional.” As of July 2024, the FDA has not publicly responded to the letter.
Practical Takeaways
- When working with influencers, advertisers must ensure that they are properly disclosing any material connections in a way that makes clear who is sponsoring the #Ad. For example, use of Instagram’s “Paid partnership” tool may not be sufficient to meet the “clear and conspicuous” disclosure requirements. Neither may be just the use of “#sponsored” or “#Ad.”
- As evidenced by the 2023 warning letters, advertisers and endorsers alike can be held liable for violations of the FTC Act. Advertisers should train and monitor influencers and endorsers to ensure compliance with the Guides and be prepared to take action (e.g., ask the influencer to take a social media post down) if they identify any non-compliance.
- Companies must have policies in place for handling consumer reviews to avoid distorting or otherwise misrepresenting what consumers think about their products. For example, do not delete or hide negative reviews, solicit only positive reviews from consumers or use fake reviews from someone that is not an actual user of the product.
- While the FDA has not updated its social media guidance since 2014, when it comes to the advertising and marketing of prescription drugs, it has the authority to regulate social media posts from anyone, including celebrity influencers, that promotes a drug on behalf of a drug manufacturer (see here for example). However, it is unclear whether the FDA can take action against influencers that are on their own promoting the use of a prescription drug without any affiliation to the drug’s manufacturer or distributor despite the growing concern over this type of social media promotion.
For more information on the advertising and promotion of consumer products, including those subject to the FDA’s jurisdiction, please contact:
- Carolina Wirth at (202) 780-2989 or cwirth@hallrender.com;
- Jemalyn Harvey at (202) 780-2990 or jharvey@hallrender.com; or
- Your primary Hall Render contact.
Special thanks to Anna Lants, Summer Associate, for her assistance with the preparation of this article.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
