ftc basics webinar by 3 green angels

FTC Blogging Basics

The FTC Toolbox for

Bloggers and Companies

• Only presenters will be speaking, so no need

to worry about muting yourself

• Q&A at end of session. Submit your

questions via the “Questions” section on the

control panel

• Webinar will be available on Vimeo

3 Green Angels: About the Webinar

Housekeeping

This webinar is meant to bring to

awareness to the topic and is not

intended to be used as legal advice. If

you have questions about any of the

info or related matters, please contact

an attorney in your state.


IMPORTANT NOTICE

1) Why disclosure is important

2) Comments from Jennifer Taggart about the FTC

3) Endorsement Guidelines

4) Questions submitted in advance

5) Open Q&A (time permitting)


Agenda

Presented by Jennifer Taggart

• Partner in Los Angeles law firm

– Specialize in consumer and environmental law

• 15 years experience

• Eco Consultant

– CPSIA expert

– XRF testing

– Blogger, social media user

• Co-founder, 3 Green Angels

• Former environmental engineer


Federal Trade Commission (http://www.ftc.gov)

Federal Trade Commission (http://www.ftc.gov)

• Independent agency established in 1914 by Federal Trade

Commission Act (FTC Act)

• Basically, 3 bureaus:

• FTC Bureau of Consumer Protection: protects

consumers against unfair, deceptive or fraudulent

practices

• FTC Bureau of Competition: Prevents anticompetitive

mergers and other anticompetitive business practices in

the marketplace

• FTC Bureau of Economics: Evaluates economic impact

of FTC's actions

3 Green Angels: What is the FTC?

3 Green Angels: What is the FTC?

• Advertising and marketing

• Financial products and practices

• Telemarketing fraud

• Privacy and identity protection

FTC Bureau of Consumer Protection

3 Green Angels: FTC Act

• FTC Act, Section 5, declares unlawful unfair

methods of competition in or affecting commerce,

and unfair or deceptive acts or practices in or

affecting commerce

• The FTC issues rules pursuant to the FTC Act

when the FTC believes that certain unfair or

deceptive acts or practices are prevalent in an

industry

Functions of the FTC Act


• FTC regulates advertising

• The revised Endorsement Guides - Guides Concerning

the Use of Endorsements and Testimonials in Advertising

(published on 10/5/09 and effective 12/1/09) represent

administrative interpretations concerning the application of

Section 5 of the FTC Act (15 USC 45) to the use of

endorsements and testimonials in advertising

• In other words, the Guides are intended to help

advertisers comply with Section 5 of the FTC Act

FTC Act & Guides


Principles of Advertising Law

• Advertising must be truthful and

not misleading

• Advertisers must have evidence to

back up their claims (substantiation)

• Advertisements must not be unfair


What are the Endorsement Guides?

• Endorsement Guides deal with aspects of

advertising - use of testimonials and

endorsements

• The Endorsement Guides adopted in

1972

• Have always required that endorsers

disclose relationships with advertisers

• Revised Endorsement Guides extend

requirements to social media


Effect of Endorsement Guides

• Endorsement Guides are NOT actually binding as law

• Endorsement Guides are administrative interpretations

of the laws administered by the FTC

• To establish violation, FTC must show violation of the

FTC Act

• Violations of Section 5 of the FTC Act are subject to civil

penalties of up to $11,000 per violation

• But, the FTC may bring an enforcement action if a

person or company fails to comply with the Endorsement

Guides if FTC can establish that represents an unfair or

deceptive practice in violation of the FTC Act


What Do Endorsement Guides Require?

• Prohibits deceptive or unsubstantiated representations in

endorsements

• As explained by David Vladeck, Director of FTC

Bureau of Consumer Protection - endorsements

cannot constitute an end run around the substantiation

requirements

• Requires disclosure of material connections between

seller and endorser

• Requirements for “celebrity endorsers”

• Requirements for “experts”


Who is liable?

• Advertiser:

• Subject to liability for false or unsubstantiated

statements made by endorsers ( 255.1(d))

• Subject to liability for failure to disclose material

connections between themselves and their endorsers

( 255.1(d))

• Endorser:

•Liable for statements made in course of

endorsements ( 255.1(d))


What do endorsements have to do?

• Endorsements must reflect endorser’s honest

opinions, findings, beliefs or experience.

• Endorsements may not convey any express or

implied representation that would be deceptive if

made directly by the advertiser

• If advertisement represents that the endorsers

uses the endorsed product, endorser must have

been a bona fide user of it at the time the

endorsement was given


What is an endorsement?

Guidelines define an endorsement to mean “any

advertising message (including verbal statements,

demonstrations, or depictions of name, signature,

likeness or other identifying personal characteristics of

an individual or the name or seal of an organization)

that consumers are likely to believe reflects the

opinions, beliefs, findings, or experiences of a party

other than the sponsoring advertiser, even if the views

expressed by that party are identical to those of the

sponsoring advertiser.” ( 255.0(b))



Example 4 in Guidelines:

Professional auto racing driver hired by tire manufacturer &

talks about smooth ride, strength, and long life of tires. Is

this an endorsement?

Yes because most consumers will recognize individual as a

race car driver, not merely a spokesperson or announcer of

the advertiser. So consumers would believe that the

advertising message reflects the driver’s personal views.




Blogger purchases new dog food and talks about how it

improved her dog’s fur – not an endorsement.

Same blogger gets same new dog food for free because

she receives a coupon from the store based upon her

purchasing habits – not an endorsement.

Same blogger joins network marketing program and, as a

result, periodically gets free products about which can write

reviews if she wants. The new dog food came from that

program – endorsement.


So what does this mean?

Looking at 255.1 Example 5 in Guidelines:

Skin care company participates in blog advertising

service that matches advertisers with bloggers to

review products. Advertiser asks blogger to try new

body lotion and write review of product on blog.

Advertiser does not make any specific claims about

lotion’s ability to cure skin conditions. In review,

blogger writes that lotion cures eczema.


What is potential liability in Example 5?


Advertiser potentially liable for blogger’s misleading/

unsubstantiated statements.

Blogger potentially liable for misleading/

unsubstantiated representation.

Blogger could also be liable if fails to disclose clearly

and conspicuously that she is being paid for services.


Endorsements must have substantiation

Endorsement about performance of an advertised product

or service will be interpreted as representing that product

or service is effective for purpose depicted. (Guidelines

255.2(a).)

Advertiser must possess and rely upon adequate

substantiation to support such claims.


Relevance of substantiation requirement?


Company’s advertisement talks about cost savings from

installing heat pump. 3 different consumers give different

savings in monthly utility bills, but fewer than 20% of

purchasers will save anything close.

“Results not typical” insufficient to save ad from being

deceptive.

Could be saved by clearly and conspicuously disclosing

average monthly savings or what most families will save.


Expert endorsement

If endorsement represents, directly or by implication, that

endorser is expert with respect to endorsement message,

endorser’s qualifications must in fact give the endorser the

expertise that he is representing as possessing with

respect to endorsement. ( 255.3(a))

Endorsement must be supported by actual exercise of

expertise by that expert in evaluating features or

characteristics, although other factors can be taken into

account. ( 255.3(b))


Can bloggers be experts?

Of course.

Expertise can be based upon education or experience.

Perhaps blogger is a tech expert, beauty expert or a

cleaning expert based upon experience.


255.3 Example 3

Ramifications particularly in “green”:

• Manufacturer advertises its auto parts approved by

“American Institute of Science.” From name, consumers

believe “AIS” is a bona fide independent testing

organization & would not approve auto part w/o first testing

by valid scientific methods.

• If AIS is not bona fide independent testing organization

(e.g., established and operated by an auto parts

manufacturer), the endorsement is deceptive.


Disclosure obligations

255.5 requires when a connection exists between seller

(sponsor) and endorser that might materially affect weight

or credibility of endorsement (connection is not reasonably

expected by the consumer), such connection must be fully

disclosed.

Includes disclosure of funded research (Ex. 1),

“sponsored” speaking, including Twitter (Ex. 3) and online

message board posting (Ex. 8)


Complying with disclosure obligations

• Will reader/audience understand relationship

between reviewer and company whose products

are being reviewed?

•If not clear from the context, reviewer should

disclose connection.

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