Advertising claims, celebrity endorsements and those viral marketing campaigns (aka astroturfing) will face greater disclosure of commercial links and payments under new rules just released in the US by the Federal Trade Commission overnight.
The changes are advisory, but will apply from December 1 and will guide US prosecutors and courts in their way they assess complaints against advertisers and others. In many respects therefore, they will have considerable legal force.
The changes will have a direct impact here, unless a body such as the ACCC decides to incorporate them, but from next year we will see changes in the way many US companies market products in Australia, such as drug companies, where the ads are imported and merely re-voiced.
The FTC continues to shake up American corporate life: its ruling against CSL’s takeover of rival blood products group Talecris is seen as a significant toughening of competition laws in the US, now long-held advertising and marketing practices are going to have to change.
The proposed new rules significantly toughen rules (not changed since 1980) covering advertisers and their use of testimonials in advertising. In some cases, advertisers, celebrities endorsing products, companies, etc, and even some internet bloggers and others will be held liable for all statements they make. Claimed independent research studies into issues, products and the like will have to see disclosure of the relationship between the company or organisation making the claims and the research group.
That would catch many of the so-called medical stories and studies into ailments that are based on what seems to be independent research, but in some cases, has been commissioned by a research institute set up or funded by the company (sometimes a drugs or pharmaceutical group).
Significantly, the changes would capture those celebrities, experts and others who speak about products, companies and services outside traditional advertising, such as on talk shows, in blogs and on the likes of Facebook or Twitter. They will have a duty to disclose their relationships with advertisers.
Companies that sponsor blogs (such as drug groups) or pay bloggers to cover events could face legal risks by being held accountable for the statements of their bloggers.
Many of the new FTC guidelines focus on online word-of-mouth and social-media advertising (social media websites such as Facebook and Twitter where “astroturfing” campaigns have been revealed).
The FTC guidelines state that businesses and reviewers will be liable for any false statements made about a product. If a blogger receives a free sample of a product, makes untruthful claims about it, the blogger could be held liable for false advertising.
The FTC says that adding qualifying phrases, such as “results may vary” will not release the companies and the endorsees of their products from responsibility for their statements. Instead, companies will have to provide the average results achieved by typical consumers.
“Under the revised guides, advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the guides — which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as “results not typical” — the revised guides no longer contain this safe harbor,” The FTC said in its statement.
“The revised guides also add new examples to illustrate the long-standing principle that “material connections” (sometimes payments or free products) between advertisers and endorsers — connections that consumers would not expect — must be disclosed. These examples address what constitutes an endorsement when the message is conveyed by bloggers or other word-of-mouth marketers.
“The revised guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service.
“Likewise, if a company refers in an advertisement to the findings of a research organisation that conducted research sponsored by the company, the advertisement must disclose the connection between the advertiser and the research organisation. And a paid endorsement — like any other advertisement — is deceptive if it makes false or misleading claims.
Celebrity endorsers also are addressed.
“While the 1980 guides did not explicitly state that endorsers as well as advertisers could be liable under the FTC Act for statements they make in an endorsement, the revised guides reflect commission case law and clearly state that both advertisers and endorsers may be liable for false or unsubstantiated claims made in an endorsement — or for failure to disclose material connections between the advertiser and endorsers.
“The revised guides also make it clear that celebrities have a duty to disclose their relationships with advertisers when making endorsements outside the context of traditional ads, such as on talk shows or in social media.”