Ftc Basics Webinar by 3 Green Angels

FTC Blogging Basics

The FTC Toolbox for
Bloggers and Companies

3 Green Angels: About the Webinar

Housekeeping

• 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


IMPORTANT NOTICE

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.


Agenda

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)


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)

3 Green Angels: What is the FTC?

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?

FTC Bureau of Consumer Protection

• Advertising and marketing
• Financial products and practices
• Telemarketing fraud
• Privacy and identity protection

3 Green Angels: FTC Act

Functions of the 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


FTC Act & Guides
• 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


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.

Ftc Basics Webinar by 3 Green Angels

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