Consumer Finance Monitor A Close Look at the Federal Trade Commission’s Updates to its Guides on the Use of Endorsements and Testimonials in Advertising and Proposed Rule on the Use of Consumer Reviews and Testimonials
Our special guest is Michael Ostheimer, Senior Consumer Protection Attorney in the FTC’s Division of Advertising Practices. In June 2023, the FTC updated its guides that set forth the FTC’s position on how Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices, applies to the use of endorsements and testimonials in advertising. The updates are intended to address the increasing use of digital and social media marketing. We begin with a detailed review of the most significant changes made by the updates, such as those concerning the definitions of “endorser” and “endorsement,” the definition of a “clear and conspicuous” disclosure, suppression or boosting of consumer reviews, the use of incentivized and employee reviews and fake negative reviews of competitors, and the potential liability of advertisers, endorsers, and third parties such as advertising agencies. We then discuss how the FTC identifies potential violations and the relief it may seek, including the use of notices of penalty offenses to obtain civil penalties, and look at examples of practices involving endorsements and testimonials challenged by the FTC. We also look at potential sources of legal risk arising from the use of influencer advertising other than the FTC Act and suggest steps companies can take to protect themselves from legal risk when using reviews and testimonials. We conclude with a discussion of the FTC’s proposed new trade regulation rule which would prohibit certain practices involving consumer reviews or testimonials, including many of the practices described as deceptive in the updated guides.
Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, leads the conversation, joined by Aliza Karetnick, a partner in the firm and Practice Leader of the firm’s Commercial Litigation and Dispute Resolution Group.