How to Navigate FTC Regulations: The Secrets to Effective Testimonials and Endorsements

For some, testimonials are what sell their business. The Federal Trade Commission (FTC) is finally catching up to the constantly evolving digital world. For the better part of a decade, the agency lagged a full Internet generation behind advertisers who saw online communications evolving faster than laws governing their fair use. Now the FTC is codifying and enforcing what were once only unwritten rules. As a result, companies caught crossing the bounds of appropriate online behavior now face harsher penalties than ever before.

The Federal Trade Commission (“FTC”) is a U.S. government agency that is vested with the authority of enforcing U.S. consumer protection laws, taking action to prohibit anti-competitive behavior in the marketplace, and preventing fraudulent, deceptive, and unfair business practices. The Federal Trade Commission Act (“FTC Act”) is the primary source of legislative authority that gives the FTC the power to investigate behavior that is likely to harm consumers or obstruct healthy competition. This authority includes and extends to behavior conducted online—such as advertising on social media platforms.

The Federal Trade Commission issued a new regulation (12/1/09) that is changing the rules of business. Specifically, these new rules target “Flogging”, atypical results, and how to specifically be in compliance.

These rules apply to ALL testimonials, endorsements, and affiliates that specify results. The new regulation is an attempt to make companies transparent and to be current which helps customers feel more confident. Before companies were able to be truthful and not tell the whole truth, now it is your responsibility to be careful, thorough, and honest in your marketing. According to the Commission’s guidelines:

“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 and therefore an ‘advertising message.’”

The FTC defines “endorsement” broadly. An “endorsement” refers to any advertising—including verbal statements, demonstrations, depictions of name, signature, likeness, etc.—that a reasonable consumer would believe to reflect the opinions, findings, or experience of a party other than the sponsoring advertiser. The FTC's Guides on Endorsements and Testimonials treat the terms "endorsements" and "testimonials" as identical.

As a broad overview, endorsements must reflect the honest opinions, beliefs, or experiences of the endorser. Endorsements must not contain any statements or representations that would be regarded as deceptive by consumers or that cannot be substantiated by appropriate or relevant evidence. “Endorsers” can include celebrities, companies, bloggers, influencers, or any individual promoting the product; however, being an endorser is dependent upon whether there is a material connection between the individual/entity and the advertiser. The FTC’s goal is to provide truth in advertising, which is increasingly important for social media advertisements with endorsements.

Create Accountability

“Flogging,” or creating supposedly-objective blogs that serve only to promote a product or service; “astroturfing,” where advertisers posing as ordinary consumers share raving, but often misleading, reviews; and paying social media users to knowingly post inaccurate information about a product or service.

This specifically targets bloggers and influencers who use their voice and reach to sway their audience about a particular product or service. When someone is paid to post information about a product or service, they now need to disclose this and can be held personally liable if they don’t. Associate Director of the FTC’s advertising division, Richard Cleland, has said, “If you can’t make the disclosure, you can’t make the ad.”

You Can Still Use Atypical Results, But…

One of the biggest issues surrounding the new FTC Guides is the use of endorsements and testimonials—specifically atypical results in sales copy. The FTC is now saying that you can only use atypical results on the condition that they must be qualified. You can no longer get by with a generic disclaimer such as "results not typical" or "results may vary". This does not affect endorsements or testimonials that don't mention results. There are 2 major requirements for using testimonials that reflect atypical results:

1. The testimonial/endorsement must be current, meaning the person who wrote that testimonial is still experiencing those same results using your product or service.

2. Those results must be qualified. This means you need to include the reason they achieved atypical results using your product or service. If you have results-based testimonials on your sales pages, you need to contact each person to make sure they are still current and accurate.

How to Be Compliant with the FTC

The FTC has offered fairly basic and straightforward guidance to follow moving forward. Companies now scrambling to comply with federal guidelines that carry a stiff $11,000 penalty per infraction, implementation of the following approach is essential:

1. It is imperative to recognize that the enforcement environment has changed entirely. What you may have been able to get away with in the World Wide Web’s Wild West era will no longer work.

2. Educate your online endorsers as to the new rules of the road and provide them with the tools they’ll need to maintain compliance with the FTC. Ensure that they know what is appropriate to share on social media platforms and what isn’t, and provide them with boilerplate disclosure language that fulfills the FTC’s requirements.

3. Monitor what your paid endorsers are saying. Often, paid online endorsers operate as free agents of a sort in that they are not only provided a product to review, but the freedom to review it as they wish. Because you can’t control exactly what they will say, monitoring their posts is absolutely essential.

4. Engage when necessary. Companies must be prepared to correct any misinformation posted to social media by a paid endorser as quickly as possible. If the FTC comes calling, it won’t be enough to simply fall back on your endorser education efforts. The agency is going to want to see that you’ve taken steps to correct the record. While it may seem counterintuitive, consumers will also appreciate your honesty – transforming what could be a trust-damaging episode into one that actually enhances credibility with key consumer audiences.

When you are including testimonials in any form on your website, social media, or any other marketing, you must include a minimum of two of the following three things:

1. Name. The person’s name. Ideally, this will be their First and Last. If due to confidentiality reasons, you can use first name and last initial or just the initials of the person. Only do this IF there are reasonable confidentiality concerns. If you are investigated, you will need to prove who the person is.

2. Job Title. The job title that the person holds or performs within the company. This is particularly important if you are in B2B because confidentiality is often a concern or there are multiple people involved in the process.

3. Company. The full name of the company. If confidentiality is a concern for this, then the industry can be listed. Preference is given to the company name over the industry.

Focus on Building Trust with Your Clients

The FTC guidelines pose a clear question that will be used to determine whether an online communication fits the definition of a sponsored “endorsement”: Is the speaker acting solely independently, in which case there is no endorsement, or is the speaker acting on behalf of the advertiser or its agent to further an overall marketing campaign, in which case there is an endorsement.

While all of this can be scary, the thing to remember is that the changes are only making legal what was considered good marketing practices before. It has never been advised to build a brand on lies and mis-truths as the repercussions were enough to taint your brand for life. Now on top of those risks, the FTC has added some steep fines.

Yes, these are major changes and they will affect how you promote your business, but look at the good things it has done. It will help you get better testimonials from your clients, build better client relationships, and improve your marketing; it could even shorten your sales cycle. Think about it: if consumers feel more protected, and are fed more realistic results and less hype, they'll be less skeptical. And less skepticism will ultimately result in higher conversion rates. So look at these new rules as an opportunity!

UPDATE: February 2020 FTC’s Endorsement Guides

The FTC published a proposed rule in February 2020 for public comment on its revised 2009 Guides regulating endorsements and testimonials in advertising. The FTC Guides aim to provide clarity to individuals and companies utilizing endorsements and testimonials in advertising—including digitalized advertising.

The FTC Guides now require that any material connection be disclosed. This includes whether the endorser—an actual consumer or celebrity—is compensated. The above revisions were intended to provide greater clarity and fairness to consumers when evaluating a product so they are able to make informed decisions about the product. The most important disclosure includes whether the influencer has a “material connection” or relationship with the brand. A material connection can include an employment relationship, financial interest such as receiving compensation for the endorsement, or a personal or family connection.

UPDATE: August 2023 FTC Tackles Fake Reviews

The FTC began exploring in November last year whether fake reviews, payment for positive reviews, and suppressing negative reviews were worthy of a civil penalty. The hope is that the fines alone will deter people from making fake reviews, which in the long run will benefit consumers and marketers.

Samuel Levine, director of the FTC’s consumer protection bureau, said the rule "should help level the playing field for honest companies.” “Our proposed rule on fake reviews shows that we’re using all available means to attack deceptive advertising in the digital age,” he said.

There are multiple reports indicating the prevalence of fake reviews on sites like Yelp, TripAdvisor, Google, and Walmart.com, there is a growing concern about the use of artificial intelligence to create reviews, according to the FTC. Fake reviews cost consumers about 12 cents for each dollar spent, and encourage customers to buy lower-quality products. So what is in this new rule:

• Businesses won't be able to write or sell reviews by someone who doesn't exist, didn't experience the product or service, or misrepresented their experiences. Businesses also won't be able to obtain reviews or disseminate testimonials if they knew or should have known that the reviews were fake or false.

• Repurposing a consumer review written for one product so that it appears to have been written for a substantially different product, also known as "review hijacking."

• Businesses won't be able to compensate or provide other incentives for writing a consumer review, whether it is positive or negative.

• A company's own officers or managers cannot write a review or testimonial about the product or service without clearly disclosing their relationship. It also bars them from soliciting company reviews from company employees or their relatives, depending on whether the businesses knew or should have known of these relationships. Businesses also will be barred from disseminating testimonials by insiders without clear relationship disclosures.

• Businesses cannot create or control a website that claims to have independent opinions about a category of products or services that includes what the business is providing.

• Businesses cannot threaten, intimidate or falsely accuse someone to prevent or remove a negative consumer review. Businesses also cannot suppress negative reviews.

• No selling of false indicators of social media influence, such as fake followers or views. People would also be barred from buying such indicators.