What Brands Need to Know About the New FTC Endorsement Guidelines

Welcome to The Fixer Focus, where we share insights and retail industry updates from our Fixer team of experts.  Today’s edition features a key marketing and communications-related regulatory update from Phillips Nazro, our Head of Legal and Client Services.

The Federal Trade Commission, the main U.S. consumer protection government agency, recently released long-anticipated updated guidelines governing the use of endorsements and testimonials in advertising and marketing – everything from social post disclosures, to use of influencers, to customer reviews and ratings, to expansion of what it means for a brand to be endorsed, and therefore regulated (could be as simple as a social tag!), to affiliate marketing practices, and beyond.We’ve complied some key takeaways from the FTC's updated endorsement guides, to keep our clients and retail community up to speed on this hot topic in consumer protection law.

Clear Disclosures are Required

The updated FTC guidelines further emphasize the importance of transparency when it comes to brand-endorser relationships. Brands must ensure that any material connections – including payment, other compensation or even gifting (an age-old practice in fashion!) - between themselves and endorsers (including celebrities, influencers, media, etc.) are clearly disclosed in a way that is easily noticeable and understandable to consumers – e.g. “Sponsored by XYZ” at the top of a social post by an influencer spotlighting a brand’s handbag, not buried under long copy or in a comment that just says “thanks XYZ!".  

Brands May Share Liability with Endorsers

Brands and their partners, including PR, marketing, advertising, and reputation management teams, can be held responsible if an endorser misleads the public about a material connection to a brand, or a product's effectiveness or their own experience with it.

To prevent this, brands need to offer clear guidance to endorsers (and their own marketing and communications teams and partners) on how to avoid making misleading statements and ensure they disclose important information properly – both in endorsement contracts and in development of content and campaigns.

Monitoring and Enforcing Compliance is Essential

The FTC does take enforcement seriously – in 2021, the FTC put over 700 companies across all industries “on notice,” with a letter advising that violations of the then-existing endorsement guidelines could result in significant financial penalties.  In 2022, they brought a highly-publicized enforcement action against Kim Kardashian for failing to disclose her promotional relationship with EthereumMax digital tokens, for which she paid a $1.26 million fine.

With these new guidelines and an anticipated fresh wave of FTC enforcement, it's crucial for brands to proactively monitor and enforce internal compliance with the FTC guidelines, and thoroughly assess, educate, and oversee their influencer and endorsement partners to ensure their compliance as well.

Regular audits and reviews of creative assets and endorsement practices can identify any potential issues before they escalate.  By showing that they take endorsement compliance seriously and creating a record of compliance efforts, brands may reduce the risk of FTC enforcement action. Maintaining compliance with the FTC's updated endorsement guidelines is not only a legal obligation but also a way for brands to build trust with their consumers. By being transparent, genuine, and actively monitoring compliance, brands can mitigate legal risk and create meaningful and authentic connections with their target audience.

The Fixer team regularly advises brands on endorsement best practices and can provide support for contracting with marketing and communications partners and endorsers, conducting creative reviews, auditing existing practices, developing compliance policies and procedures, and enforcing endorser compliance.  Get connected with us to learn more about the FTC requirements and how we can be of service.