Yesterday, the Federal Trade Commission released its long-awaited Guides concerning endorsements and testimonials.  The Guides were last updated in 1980, and they are to go into effect on December 1, 2009.

There are three significant changes to the Guides that impact not only advertisers and the marketing practices of all brands and businesses, but bloggers and other social media communicators.

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1.  “Results My Vary” Is History: Disclaimers describing unusual results, such as “results may vary” or “results not typical” are history.  The Guides now eliminate the “safe harbor” that was in place for almost thirty years, and the FTC now requires advertisers to provide the same substantiation that would apply if they made performance claims directly.  Rather, for performance or typicality claims, the Commission mandates a disclosure that describes “the generally expected performance in the depicted circumstances.”   In response to criticism set forth in Comments to the Commission by industry groups, the FTC makes clear, however, that “advertisers are not required to identify a “typical consumer” of their product and then determine what result that consumer achieved.”   The agency also notes that the Guides “do not prescribe a uniform one-size-fits-all disclaimer.”

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2.  Social Media Marketing Is Impacted Through Required Disclosures: The FTC applies these Guides to new consumer-generated media.  The disclosure of “material connections” between advertisers and endorsers in all contexts is now required.  Therefore, cash payments or other consideration provided by advertisers to their representatives must be disclosed.  Relationships between the advertisers and their endorsers that entail connections that consumers would not expect also have to be disclosed.

As a practical matter, this is nothing new for WOMMA members, given the Code of Ethics and Standards of Conduct for its members.

Significantly, however, advertisers as well as endorsers (which include bloggers or other agents of the messaging) can be held liable.  The FTC says that “advertisers who sponsor these endorsers (either by providing free products – directly or through a middleman – or otherwise) in order to generate a positive word of mouth and spur sales should establish procedures to advise endorsers that they should make the necessary disclosures and to monitor the conduct of those endorsers.”

In response to a request for a clarification by WOMMA, the FTC notes that not all communications touting a particular product or service constitutes an “endorsements” that requires any disclosures.  Rather, it is “sponsored speech” that is covered by the Guides.

Importantly, compliance with WOMMA’s Code of Ethics and Standards of Conduct minimizes the risk for challenges by law enforcement officials.

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3.  Standards Concerning Celebrity Endorsements Have Changed: Celebrity endorsements are addressed in the Guides.  They now provide that both advertisers and celebrity endorsers may be liable for false or unsubstantiated claims made in the endorsements, or for failure to disclose material connections between the advertisers and endorser.  Furthermore, the Guides now state that celebrities have a duty to disclose their relationships with advertisers when making endorsements outside of the context of traditional ads, such as on talk shows or in social media platforms.
These Guides reflect a key pro-consumer shift that can not only impact the basis for governmental investigations but influence consumer litigation and advertising challenges.