The Federal Trade Commission renews commitment to enforcing review and endorsement marketing by sending letters to more than 700 companies, advising them that they could incur significant legal penalties if they use endorsement marketing in ways that fail to comply with the FTC’s guidance on the matter.
In October, the Federal Trade Commission sent thousands of letters with “Notices of Penalty Offenses” to an “array of large companies.” More than 700 of these letters advised companies that they could incur significant legal penalties if they use endorsement marketing in ways that fail to comply with the FTC’s guidance on the matter: civil penalties of up to $43,792 per violation. [1]
As discussed in an earlier post, in April 2021, the Supreme Court hampered the FTC’s ability to use Section 13(b) of the FTC Act to deter deceptive marketers and obtain monetary relief. With the Notices of Penalty Offenses, the FTC has signaled a return to the long dormant Section 45(m)(1)(B) of the FTC Act as an alternative method to maintain its enforcement authority.
To impose penalties with its Penalty Offense Authority, the FTC must prove that the company had “actual knowledge” that the practice was unfair or deceptive. The FTC is attempting to establish such knowledge with the use of the Notice of Penalty Offenses, which specifies the conduct the FTC has determined is in violation of the FTC Act. If a company in receipt of a Notice engages in a practice outlined in the Notice, the FTC can pursue civil penalties.
The unlawful practices targeted by the FTC in its recent letters include: falsely claiming an endorsement by a third party; failing to disclose an unexpected material connection with an endorser; misrepresenting that the experience of the endorser represents a consumer’s typical or ordinary experience; using an endorsement to make deceptive performance claims; misrepresenting that an endorser is an actual, current, or recent user; and continuing to use an endorsement without reason to believe that the endorser continues to believe the represented views.
As mentioned in a previous post, the FTC has become increasingly concerned that consumers cannot distinguish between authentic content and advertising, and that marketers are taking advantage of the ambiguity. In the announcement of its recent swarm of Notices, FTC made clear that it “blanket[ed the] industry” with these Notices to send a “clear message” that companies cannot use “fake reviews and other forms of deceptive endorsements” to “cheat consumers and undercut honest businesses.”
Regardless as to whether a company received a letter, it should review its practices with respect to influencers, endorsements, and reviews. Is your company using, or is planning to use, endorsements as part of a marketing campaign? Don’t hesitate give us a call, or reach out to info@springer-law.com.
[1] The FTC noted that the letters do not necessarily suggest that any of the companies have engaged in deceptive conduct. Instead, the letters are being used to put the companies on notice.
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