United States: FTC Proposed Updates To Endorsement Guides And .com Disclosures Guidance Signal Continued Regulatory Focus On Influencers And Social Media

On May 19, the Federal Trade Commission (FTC or the Commission) issued its long-awaited proposed revisions to the Guides Concerning the Use of Endorsements and Testimonials in Advertising (the Endorsement Guides or Guides), codified at 16 C.F.R. Part 255. The proposal follows the Commission's receipt of more than 100 comments regarding the Guides, as part of the Commission's systematic review of all current FTC rules and guides in February 2020 and the Commission will accept comments on its proposed revisions to the Guides for 60 days after it is published in the Federal Register.

Two weeks after sharing its proposed updates to the Endorsement Guides, the FTC announced similar plans to update its business guidance entitled, ".com Disclosures: How to Make Effective Disclosures in Digital Advertising" (.com Disclosures guidance). The FTC is inviting public comment on its planned revisions to the .com Disclosures until August 2, "to ensure the guides are helping honest businesses treat consumers fairly, rather than being used as a shield by firms looking to deceive."

Consistent with the observations in a prior Advisory, the FTC's proposed revisions to the Endorsement Guides and .com Disclosures guidance reflect heightened scrutiny of endorsements and digital advertising via social media platforms, including a focus on issues such as ineffective disclosure of material connections (e.g., on the profile page of a social media account, via tools offered by social media platforms, or in a place only accessible by clicking a link labeled "more") and deceptive use of virtual or "fake," computer-generated fictional endorsers. The proposal also highlights additional areas of focus for the Commission including:

• Advertiser monitoring of endorsers;
• Expanding forms of "endorsements" including "tags" and brands;
• Additional material connections including clinical study sponsorship and participation in "marketing programs;"
• Disclosure of typical results when using testimonials that are not representative of typical results;
• Endorsement accuracy (e.g., endorsement distortions, use of outdated endorsements, or pairing endorsements with the image or likeness of a person other than the actual endorser);
• Liability of endorsers, expert endorsers, and intermediaries (for example, a public relations firm) for non-compliance with the Endorsement Guides;
• Manipulation of published reviews on hosted platforms (e.g., deleting or not publishing negative reviews, buying fake reviews, and review gating);
• Payments to third-party ranking organizations; and
• Effective disclosures in ads that target specific audiences (e.g., older adults and children).

Notably, the proposal includes several examples of health-related endorsements, coinciding with an increased focus on use of endorsements and social media in drug advertising by the Food and Drug Administration (FDA). Against this backdrop, this Advisory highlights notable proposed revisions to the Endorsement Guides, the FTC's request for comments regarding the .com Disclousres, and related developments in regulatory activity involving endorsements and social media advertising for health products, in particular, by FDA, in the European Union and in the United Kingdom. We then discuss important considerations for companies contemplating or engaging in advertising campaigns using endorsers.

Key Proposed Changes to the Endorsement Guides

The proposed amendments to the FTC Endorsement Guides include modifications to all six sections of the Endorsement Guides, specifically:

• Section 255.0, Purpose and Definitions;
• Section 255.1, General Considerations;
• Section 255.2, Consumer Endorsements;
• Section 255.3, Expert Endorsements;
• Section 255.4, Endorsements by Organizations; and
• Section 255.5, Disclosure of Material Connections.

The FTC also proposes adding Section 255.6, Endorsements Directed to Children, to acknowledge that "endorsements in advertisements addressed to children may be of special concern because of the character of the audience."

A review of the proposed amendments in their entirety reveal six key priorities for the FTC: (1) expanding the scope of the Guides to cover promotion other than specific product promotion; (2) clarifying the inadequacy of certain disclosures, including tools established by social media platforms; (3) ensuring the accuracy of endorser advertisements, including the typicality of touted results; (4) outlining potential endorser, advertiser, and intermediary liability; and (5) protecting the integrity of consumer reviews.

Scope of the Guides

One of the FTC's primary motivations in proposing the amendments to the Endorsement Guides was to ensure that the Guides adequately provide guidance to advertisers in the social media age. The role social media influencers play in today's advertising was not anticipated by the FTC when the Endorsement Guides were last updated (2009). In the modifications to Section 255.0, the Commission attempts to broaden the scope of the Guides to clearly cover social media by expanding the definition of "endorsement" to clarify that marketing or promotional messages related to topics other than specific products can be an endorsement covered by the Guides. As an example, the FTC notes that tagging a "brand" on social media can be considered an endorsement, because a social media tag "generally communicates that the poster uses or likes the brand."

In addition, the updated definition would expand the meaning of "endorser" to capture virtual influencers and fake endorsers that appear to be individuals, groups or institutions. While the FTC acknowledges that an "endorser's use of fake indicators of social media influence is not itself an endorsement issue," the FTC proposes a footnote clarifying that "it is a deceptive practice for users of social media to purchase or create indicators of social media influence and then use them to misrepresent their influence for a commercial purpose."

The Commission also proposes adding a footnote regarding an endorser's denigration of a competitor's product. The proposed footnote would clarify that an endorser's paid or incentivized negative statement about a competitor's product could be a deceptive practice.

Effective Material Connection Disclosure

The Commission is proposing several updates to the Guides intended to clarify the types of connections that are "material" in the eyes of the FTC, when a material disclosure is needed, and how the effectiveness of a disclosure depends on the target audience.

Types of Material Connections

The proposed updates highlight examples of material connections including:

• business, family, or personal relationship;
• monetary payment;
• the provision of free or discounted products or services to the endorser, including products or services that are not related to the endorsed product;
• early access to a product; or
• the possibility of winning a prize, being paid, or appearing on television or other media promotions.

Notably, Example 1 of Section 255.5, makes clear that the FTC currently considers a drug company's financial support of a clinical trial by a research organization to be a material connection necessitating disclosure in advertising that touts "findings" of the research organization, even "where the design and conduct of the research project were controlled by the outside research organization." Additionally, under proposed Example 7 in Section 255.0, a consumer's participation in a marketing program "under which participants periodically receive free products from various manufacturers and can write reviews if they want to" would be considered a material connection that should be disclosed by that consumer when providing a product review. Under the proposal, a material connection can exist from the provision of free or discounted products, even if an advertiser does not explicitly require an endorsement in return.

The FTC proposal also highlights certain material connections that are inherently deceptive regardless of whether they are disclosed or not. In particular, the FTC discusses partnerships with third-party sites in which a platform accepts money from manufacturers for higher rankings of their products. The FTC takes the position that "such paid-for rankings are deceptive," regardless of whether the platform discloses the payments. The FTC also is careful to distinguish the above from a scenario where the platform receives payments for affiliate link referrals, but not higher-rankings.

Format and Placement of Material Connection Disclosure

The proposed update makes clear that a material connection disclosure does not have to include the complete details of the connection, but must clearly communicate the nature of the connection in a manner that is sufficient for consumers to evaluate its significance. As an example, the FTC takes the position that thanking a brand is not a sufficient disclosure if an endorser is receiving thousands of dollars in exchange for the endorsement.

The Commission also expressed concern over built-in disclosure tools developed by social media platforms, noting its position that existing tools offered by social media platforms may result in ineffective disclosures due to poor contrast, fleeting appearance, small size, or placement in locations that do not draw attention. The FTC also opined that social media platforms themselves could be exposed to liability depending on the representations they make about these disclosure tools.

Proposed Example 9 in Section 255.0 is illustrative. In this example, an influencer who is paid to endorse a vitamin product only discloses their material connection to the product's manufacturer on the influencer's social media profile page. The disclosure is described as only appearing for five seconds and being in "small white text," set against a "light background of the image that the influencer posted," competing with "unrelated text" the influencer "superimposed on the image." In the proposed Guides, the FTC takes the position that consumers viewing the influencer's paid posts could "easily miss" the disclosure on the influencer's profile page, and, thus, the disclosure would not be clear and conspicuous. The same examples notes that the disclosure would also be insufficient if consumers had to click on a link labeled "more" in order to see the disclosure.

Effectiveness of the Disclosure (Target Audience)

Importantly, the proposed updates to the Guides also state that when an endorsement targets a specific audience, such as children or older adults, the effectiveness of the disclosure will be evaluated through the lens of the target population. New Examples 10 and 11 illustrate this principle. In Example 10, the FTC states that a disclosure in an ad for a smartphone app that claims to halt cognitive decline will be evaluated from the perspective of "older consumers, including those with diminished auditory, visual, or cognitive processing abilities" to determine whether the disclosure is clear and conspicuous. Example 11 further suggests that a disclosure in an advertisement targeted at Spanish-speaking individuals would not be considered to be clear and conspicuous by the FTC if it appeared in English when the rest of the advertisement is in Spanish.

As noted above, the Commission also proposes adding a new section discussing Endorsements Directed to Children, Section 255.6, intended to address the fact that practices that would not ordinarily be questioned in advertisements directed to adults might be questioned if they are directed to children. Relatedly, the Commission is seeking more evidence to develop specific guidance for endorsements directed to children. In line with this goal, the Commission will hold a public event on October 19, 2022 to gather research and expert opinion on (a) children's capacities at different ages and developmental stages to recognize, understand, and distinguish advertising content; (b) whether disclosures are necessary and effective solutions to children's ability to recognize an advertisement; and (c) the more effective format, placement, and wording for disclosures in advertisements directed to children.

Endorsement Accuracy

Unsurprisingly, the FTC's proposed amendments also focus on the importance of ensuring endorsements are and remain accurate through the time period in which a company is using the endorsement in its advertising by emphasizing the importance of ensuring that endorsements (1) disclose the typical results (2) are not distorted by advertisers; and (3) are not used past expiry.

Typicality

The proposed amendments emphasize the need to accurately disclose when an endorsement does not demonstrate the typical use or results of a product or service. Currently, Section 255.2 conveys the FTC's position that an endorser experience that is depicted in an advertisement will be interpreted as being representative of the typical consumer's experience with a product or service and recommends that, in the case the depiction is not representative of the typical consumer's experience, advertisers "clearly and conspicuously disclose the generally expected performance in the depicted circumstances."

In the proposed updated Guides, the FTC has modified the Examples in Section 255.2 to underscore the importance of this disclosure. In particular, the proposed additions highlight situations in which the disclosures, though present, would, nevertheless, be considered deceptive by the FTC. An example provided by the FTC is one where a nationally disseminated advertisement for a heat pump on homes disclosed expected results based on the experiences of customers in a southern climate, when those results are better than what would be typical for consumers who used the heat pump in a northern climate. The FTC also makes clear that, if an advertisement contains a disclosure of generally expected results based on the average results consumers experienced, but the average is "substantially affected by outliers," the FTC would consider the touted results to be misleading.

Endorsement Distortion

Under new Section 255.2(d), the FTC proposes stating that advertisers should not engage in practices that would distort or misrepresent what consumers actually think about their products (a principal that would apply whether or not the review is an "endorsement" under the Endorsement Guides). To illustrate this point, the Commission proposes to modify Example 1 in Section 255.0 to demonstrate if an advertiser uses an excerpt from an endorser's review, the excerpt will be deceptive it is alters or quotes the review in such a way that "does not fairly reflect its substance."

The FTC expands this principle to a discussion of use of another's image or likeness with a distinct endorser's testimonial. In particular, the FTC proposes to add a new Section 255.1(g) that would state the general principle that "[t]he use of an endorsement with the image or likeness of a person other than the actual endorser is deceptive if it misrepresents a material attribute of the endorser." Two new Examples in Section 255.1 demonstrate this principle and the FTC's concern that mismatching testimonials with images of individuals who are not the actual endorser could misrepresent the product's effectiveness. In Example 6, the Commission notes that it is deceptive to feature accurate testimonials of users of a product, such as an acne treatment or weight loss product, if the testimonials are paired with images of individuals who are not the actual endorsers and have "near perfect skin" or weigh significantly less than the actual endorser. Similarly, Example 7 explains the FTC would consider it to be deceptive to pair a testimonial for a learn-to-read program from the parent of a seven-year-old with a photo of a child who appears to be only four years old.

Timeliness of Endorsements

Under Section 255.1 of the current Endorsement Guides, an endorser must be a "bona fide" user of the endorsed product at the time the endorsement was given, and an advertiser can continue to use the endorsement so long as (1) the advertiser has reason to believe the endorser remains a bona fide user of the product and (2) the advertiser has good reason to believe the endorser continues to subscribe to the views presented in the advertisement. In the proposed updated Guides, the FTC notes that, if a product has been reformulated or changed in a material way, an advertiser should ensure that the endorser would continue to use the product and still agrees with the views previously advertised. On the other hand, the FTC also proposes to amend Example 1 in Section 255.1 to clarify that even if the endorser refuses to use or recommend the reformulated or changed product, previous posts by the endorser do not need to be modified or deleted so long as the date of the post is "clear and conspicuous to viewers" and the endorsement was accurate at the time it was made.

Endorser, Expert Endorser, Advertiser, and Intermediary Liability

Proposed changes to Section 255.1 address potential liability for endorsers, advertisers and intermediaries if an advertisement does not comply with the Endorsement Guides.

Endorser Liability

For endorsers, the FTC proposes adding a new Section 255.1(e) that would make clear that endorsers may be liable for their own statements, such as by making a representation that they know or should know is deceptive or failing to disclosure a material connection between themselves and an advertiser. This section would also address the due diligence that endorsers should perform before providing an endorsement, with expert endorsers (such as doctors) being held to a higher standard than non-expert endorsers.

Under current Section 255.3 of the Guides, if an advertisement represents, explicitly or implicitly, that an "endorser is an expert with respect to the endorsement message," then the endorser's qualifications must actually give the endorser the expertise that is represented. Experts must also use their expertise when evaluating a product or service, and the evaluation is expected to include an examination or testing of the product that is "at least as extensive as someone with the same degree of expertise would normally need to conduct in order to support the conclusions presented in the endorsement."

In the proposed updated Guides, the Commission proposes clarifying that its guidance on expert endorsements applies to both express and implied representations. The Commission also proposes modifying the Examples provided in this section to clarify that an expert endorser should have relevant expertise; that a clear and conspicuous disclosure is not sufficient to cure a potentially deceptive message when a non-expert does not have enough expertise to endorse a product; and that it is the expert's "purported" degree of expertise that is important to consider for this purposes of this section, and not the expert's actual degree of expertise. For example, the Commission proposes amending Example 6 in Section 255.3 to clarify that a doctor making an endorsement about a drug must review "scientific evidence that others with the purported degree of expertise would consider adequate to support" the conclusion made in the advertisement. If a doctor failed to do so, they and the advertiser could be liable for false statements made in the advertisement.

Relatedly, the newly modified Example 3 in Section 255.1 is illustrative of the additional responsibility expert endorsers have when reviewing background materials prior to giving an endorsement. In the example, a dermatologist is a paid advisor to a pharmaceutical company and is asked to post about the company's products on the doctor's social media. The company provides the dermatologist with a write-up of a clinical study prior to the dermatologist posting that one of the company's products is "clinically proven" to work. The write-up of the clinical study indicates the study was flawed in design and conduct and the conclusions about the efficacy of the product are therefore not accurate. According to the Commission, because the dermatologist has medical expertise, the dermatologist should have recognized the study's flaws prior to posting their endorsement, and are therefore the dermatologist is subject to liability for the false statements made about the product. However, had the dermatologist asked the company for supporting evidence prior to making the endorsement, and the company purposefully did not provide the doctor with the results of a study that failed to find the product was effective, the dermatologist would not be liable for a false statement because the dermatologist "did not have reason to know that the claim was deceptive."

Advertiser Liability

The FTC also proposes that, in addition to being subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers, advertisers may also be liable for an endorser's deceptive statement even when the endorser is not liable.

The proposed amendments to Section 255.1(d) suggest steps that advertisers should take to train their endorsers and therefore limit the liability for both advertisers and endorsers. These steps include (1) providing guidance to endorsers regarding the need to ensure endorsers' statements are not misleading and to disclose unexpected material connections; (2) monitoring endorsers' compliance with the Endorsement Guides; and (3) acting to remedy any non-compliance with the Endorsement Guides and to prevent any future non-compliance with the Endorsement Guides. This addition reflects previous guidance only provided in Example 5 of Section 255.1.

Intermediary Liability

Additionally, the FTC proposes to add a new Section 255.1(f) that explains the potential liability of intermediaries such as advertising agencies and public relations firms. The FTC proposes that these intermediaries can be held liable for their roles in disseminating what they knew or should have known were deceptive endorsements, and for their role in endorsements that fail to disclose unexpected material connections.

Consumer Reviews

The FTC proposes adding a new Section 255.2(d) that would state that in procuring, suppressing, boosting, organizing, or editing consumer reviews, advertisers should not distort or misrepresent what consumers think about their products. Examples of prohibited actions include deleting or not publishing negative reviews, buying fake reviews, and review gating. Similarly, modified Example 4 in Section 255.2 demonstrates that an advertiser can be liable for procuring a fake consumer review and having it published on a third-party review website.

The FTC further proposes adding a footnote to new Section 255.2(d) clarifying instances when an advertiser is not required to display customer reviews, such as when the review contains unlawful, harassing, abusive, obscene, vulgar, or sexually explicit content, or content that is inappropriate with respect to race, gender, sexuality, or ethnicity, or reviews that the advertiser reasonably believes are fake. Advertisers also would not be required to display reviews that are unrelated to their products or services.

Focus on Deceptive Advertising—Request for Comments on FTC's .com Disclosures Guidance

In another initiative to address digital deception, the FTC announced that it is requesting public comment on ways to update its ".com Disclosures: How to Make Effective Disclosures in Digital Advertising" guidance document . The .com Disclosures guidance was published in March 2013 to describe how advertisers may present required disclosures clearly and conspicuously so that an online advertisement is not misleading. FTC is seeking comment on possible revisions to the .com Disclosures guidance on various issues, including sponsored advertising on social media, advertisements that are embedded in games or microtargeted, the use of dark pattern techniques in digital advertising, advertising on mobile devices, the use of multi-party selling arrangements in online commerce, the use of hyperlinks, and the adequacy of online disclosures when consumers navigate multiple webpages. The Commission's request for public comment was published on June 3 and the Commission will accept comments on ways to modernize the .com Disclosures guidance until August 2, 2022.

Increased Focus on Consumer Health and Drug Advertising

Notably, the amended Endorsement Guides provide nine examples that involve medical doctors or promotion of drug products, demonstrating the FTC's particular concern regarding the use of endorsers in health product advertising. As described above, much of the Commission's guidance in the Endorsement Guides related to medical doctors or drug products has to do with expert endorsers' proper review of a product or service before making an endorsement and properly disclosing a material connection between the expert endorser and the company whose product is being advertised. The FTC is not the only agency focused on use of endorsements and social media to advertise consumer health and drug products. The FTC and FDA operate under a memorandum of understanding, meaning that they both scrutinize influencers used to promote health products, and FDA has actively involved in research in enforcement related to product promotion using endorsers, particularly via social media. In addition, companies involved in global advertising of health products should continue to monitor developments in the European Union and United Kingdom, as well as other relevant jurisdictions.

FDA Research

FDA is empowered by statute (Federal Food, Drug, and Cosmetic Act (FD&C Act) (section 1003(d)(2)(C), 21 U.S.C. 393(d)(2)(C) and Public Health Service Act section 1701(a)(4), 42 U.S.C. 300u(a)(4)) to conduct research related to health information, drugs, and other FDA-regulated products. The agency's Office of Prescription Drug Promotion (OPDP) has a long history of conducting research on issues related to direct-to-consumer (DTC) advertising and drug promotion, which is intended to develop evidence that informs prescription drug promotion policies.¹ As covered in a previous Advisory, in January 2020, FDA announced that it planned to conduct two studies on "Endorser Status and Explicitness of Payment in Direct-to-Consumer Promotion" to evaluate how consumers respond to varying types of endorsers and payment disclosures in relation to the promotion of a health product in print and social media. As of the date of this Advisory, the research is ongoing. FDA's initiation of the studies showed FDA's awareness of the widespread use of endorsers in DTC drug advertising and a desire to improve FDA's understanding of how features utilized in advertising affect consumers' understanding of prescription drug risks and benefits. The research is examining four types of endorsers (celebrity, physician, patient, and influencer) in two separate studies and whether a disclosure of the endorser's payment status influences the study subjects' reactions. The studies will also evaluate two types of disclosure language—"direct" (e.g., "paid ad") and "indirect" (e.g., "#sp" (short for sponsored)). FDA hopes to learn more about how endorsement and payment status affect the "participants' recall, benefit and risk perceptions, and behavioral intentions." Various other FDA research has investigated issues related to DTC advertising. For example, FDA's research on Character-Space-Limited Online Prescription Drug Communications, Experimental Study of DTC Advertising Directed at Adolescents, and Risk Information Amount and Location in Direct-to-Consumer Print Ads is pending peer review and publication.

FDA Enforcement

FDA's research on product promotion is expected to impact FDA enforcement related to drug and consumer health advertising. While FDA has yet to update its guidance documents that speak directly to social media (e.g., FDA's January 2014 Draft Guidance for Industry – Fulfilling Regulatory Requirements for Post-Marketing Submissions of Interactive Promotional Media for Prescription Human and Animal Drugs and Biologics, Guidance for Industry – Internet/Social Media Platforms: Correcting Independent Third-Party Misinformation About Prescription Drugs and Medical Devices and Guidance for Industry—Internet/Social Media Platforms with Character Space Limitations—Presenting Risk and Benefit Information for Prescription Drugs and Medical Devices, more information about which is provided in a prior Advisory), FDA has increased its review and citation of company-generated and influencer-generated social media content in warning letters. A notable theme in FDA enforcement is the agency's focus on claim accuracy and appropriate disclosure of risk information on websites and social media platforms, including Facebook, Instagram, Twitter, LinkedIn, and Youtube.

For example, in January 2022, FDA's OPDP's first enforcement letter of the year was sent regarding an Instagram advertisement that OPDP alleged made false and misleading benefit and risk presentations. In particular, FDA objected to how the post purportedly made a claim, but failed to communicate its full FDA-approved indication and limitations of use. In addition, FDA objected to how the Instagram post made prominent benefit claims and representations about the drug "emphasized by colorful, compelling, and attention-grabbing fast-paced visuals that take up the majority of the post in a video with frequent scene changes, busy scenes, and large-moving superimposed text along with other competing modalities such as the strong, fast-moving musical beat," while, in contrast, the risk information was in a "small window relegated to the bottom of the post . . . that is difficult to read and cannot be adequately processed or comprehended by consumers." OPDP's second Untitled Letter in 2022 also cited a direct to consumer video that included a patient testimonial and physician spokesperson featured on Lifetime TV for overstating efficacy and failing to present risk information for a prescription drug product.

Over the past two years, FDA has also sent several enforcement letters to companies that have been promoting unauthorized masks and COVID-19 related devices/testing kits, including through advertising on social media (e.g., Avazo-Healthcare, LLC (2020, Facebook, Instagram, YouTube); Dubak Electrical Group (2021, Twitter, Vimeo, website); DermaCare Biosciences (2021, Instagram, LinkedIn, Facebook)).

Notably, last year, three out of the six enforcement letters issued by the OPDP in 2021 involved endorsements in DTC videos. In addition to Kim Kardashian, Khloe Kardashian was the subject of a 2021 FDA Untitled Letter over her promotion of a prescription drug on "The View." Although Khloe Kardashian was properly recognized as a paid spokesperson, FDA alleged that the social media posts made false and misleading claims about the efficacy and risks of the product, stating that it was a "game changer," works in 15-20 minutes, and does not have side effects of some other similar medications. In a Warning Letter issued to CooperSurgical Inc. in 2021, FDA alleged that a DTC video made a false and misleading presentation of efficacy and failed to include risk information. While the video stated that it was "sponsored by PARAGARD," FDA alleged that the video featured a physician interview that failed to include any risk information about the product. The same year, FDA also issued an Untitled Letter to a company over two DTC TV ads that featured Olympic athletes, but purportedly failed to communicate any risk information about the product. This FDA enforcement evidences FDA's focus on direct to consumer and endorser advertisements that the agency believes to either make false or misleading claims or fail to include risks of products.

EU/UK

Companies engaged in the sale of health-related products will also want to consider relevant global restrictions on promotion via social media. In the UK and EU, Directive 2001/83/EC on medicinal products and relevant UK legislation prohibit publishing of advertisements relating to medicinal products that are directed to the general public which include a recommendation by: a scientist; health care professional; or persons who, because of their celebrity, could encourage use of the medicinal product. However, some EU Member States permit endorsements of health care professionals provided they are on-label, objective, truthful, not misleading and based on verifiable data.

There are also general advertising rules set out in Directive 2006/114/EC on misleading and comparative advertising and Directive 2005/29/EC on unfair commercial practices directed at consumers, which were implemented into UK law before Brexit, which also apply to health-related products. For example, these rules prohibit misleading actions or omissions when advertising or selling any products to consumers, including regulated products such as medicines, foods and cosmetics.

In the UK, guidance issued by the UK Advertising Standards Association (ASA) and by the UK Competition and Markets Authority have clarified how these provisions apply to advertising through social media including use of influencers. Advertisements must be clearly identified and consumers must be informed of the commercial relationship between an influencer and the brand he or she is promoting; posts must contain identifiers such as "#ad." The Proprietary Association of Great Britain (PAGB), the UK consumer healthcare trade association, states in guidance that any inclusion of a celebrity within advertising materials, even if not overtly endorsing or recommending the product, is likely to be taken as a celebrity endorsement.

PAGB defines a celebrity as "an actual person who is very well-known in public life and who, because of their celebrity status, could encourage the consumption of a medicinal product." However, as illustrated by an ASA enforcement regarding the promotion of a sleep aid by an "influencer," the definition is a grey area. The conclusion by ASA in this case was challenged by the company on the basis that the blogger had only a "small and niche following" (approximately 30,000 followers). The ASA disagreed, concluding that consumers would understand the blogger to have used and endorsed the medicine concerned and that 30,000 followers indicated that she had the attention of a "significant number" of people. The decision was generally viewed as a very strict interpretation of the term "influencer" in circumstances where the decision to partner with the blogger had been approved in advance by PAGB.

Outside the pharmaceutical sector, use of celebrity endorsements in advertising to consumers is generally permitted. Endorsements should not be misleading, should be transparent and should not amount to unfair commercial practices (e.g., failure to disclose the commercial intent of an endorsement is considered to be a misleading omission). New legislative initiatives in the EU, including the proposal for a Digital Services Act, aim to reinforce the transparency requirements for online advertising at EU level and the protection of consumers. In addition, a recent guidance by the European Commission on the application of the EU law on unfair commercial practices addresses specifically "Influencer Marketing" and highlights the related transparency obligations, including in relation to endorsements.

Key Takeaways

The FTC's proposed updates to the Endorsement Guides and .com Disclosures guidance are consistent with recent FTC guidance and enforcement regarding endorsements and other social media marketing the FTC considers to be deceptive. Over the past few years, the FTC has made clear its intention to scrutinize the use of endorsements and consumer reviews in social media across industries. For example, in 2019, the FTC settled cases with Sunday Riley and Devumi, LLC over purported fake product reviews and social media followers. In 2020, the FTC reached a $15.2 million settlement with Teami, LLC, a marketer of tea and skincare products, to resolve allegations that the company promoted deceptive health claims and that influencers promoting the company's products did not adequately disclose that they were being paid for their endorsements. Then, in October 2021, the FTC put more than 700 companies on notice of potential civil penalties of up to $43,792 per violation for engaging in certain conduct regarding endorsements—citing previously litigated conduct regarding endorsements. Notably, the notice highlighted many of the acts and practices included in the proposed revisions to the Endorsement Guides, including:

In 2022, the FTC has expanded its public enforcement to third-party review management platforms, by both sending cease-and-desist letters to companies that offer review management services to notify them that failing to collect or publish negative reviews violates the FTC Act, and posted new guidance entitled "Soliciting and Paying for Online Reviews: A Guide for Marketers" and "Featuring Online Customer Reviews: A Guide for Platforms." And on January 25, 2022, the FTC announced a proposed settlement and consent agreement with Fashion Nova to resolve allegations that the company "blocked negative reviews of its products from being posted to its website." Under the settlement and consent agreement, Fashion Nova paid $4.2 million and agreed to post all reviews on its website that are not obscene, explicit, racist, unlawful, or unrelated to the product.

The FTC's recent enforcement related to endorsements and the newly amended the Endorsement Guides signal to companies that compliance with the Endorsement Guides is paramount. The guidance, enforcement, and studies described above, in combination with the updates to the Endorsement Guides, suggest a continued focus on advertising by companies on social media and the use of endorsements by the FTC and FDA.

Against this backdrop, companies should anticipate heightened regulatory scrutiny of endorser-based social media advertising by the FTC and FDA. It is advisable that companies reevaluate social media campaigns to ensure compliance with the updates to the Endorsement Guides, with a particular focus on disclosure of material connections, disclosure of typical results, and alignment between testimonials and imagery. In particular, companies should review their endorser monitoring practices, as well as their partnerships with expert endorsers and third party-ranking organizations. Additionally, companies should expect FDA to update its guidance on social media when it concludes its ongoing research on endorsers and DTC promotion.

In the interim, companies should take advantage of the opportunity to submit comments to the FTC to inform the proposed amendments to the Guides and the FTC's approach to the .com Disclosures. The comment period presents an opportunity for companies to seek clarity on new guidance on examples of material connections, examples of disclosures that are clear and conspicuous, the responsibilities of expert endorsers, and an advertisers responsibility for reviews on third-party websites. Interested parties will have 60 days from the date of publication in the Federal Register to file comments related to the proposed amendments to the Endorsement Guides for the FTC to review and consider. Companies have until August 2, to submit comments regarding the FTC's .com Disclosures guidance.

* * * * *

Our team has carefully reviewed the proposed amendments to the Endorsement Guides and request for comment regarding the .com Disclosures and will continue to monitor the FTC's progress in finalizing both documents. In the interim, please feel free to contact any of the authors or your regular Arnold & Porter contact with any questions about the topics discussed in this Advisory.

*Stephanie Sanchez contributed to this Advisory.

Footnote

1. See, FDA OPDP Research.

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