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All media companies, including broadcasters, webcasters, podcasters and others, need to consider carefully their advertising production after the big penalties imposed on Google and iHeart for broadcast commercials where local DJs promoted the Pixel 4 phone.  Promotions included statements that clearly implied that the announcers had used the phone, including statements that it was “my favorite camera” and “I’ve been taking studio-like photos” with the phone.  But, according to the announcements of the settlement with the Federal Trade Commission and seven state attorneys general (see the FTC press release and blog article), the announcers had not in fact used the phone.  Google will pay the states penalties  of $9 million, and iHeart will pay about $400,000 (see example of the state Court filings on the settlement, this one for Massachusetts, for Google and iHeart).  Each will enter into consent orders with the FTC (Google order here and iHeart here) requiring 10-year recordkeeping and compliance plans to train employees, maintain records of advertising with endorsements, and reports to be filed periodically with the FTC.

The mission of the FTC is to protect the public from deceptive or unfair business practices and from unfair methods of competition.  In that role, the FTC regulates deceptive advertising practices.  Over a decade ago, we highlighted the FTC’s update of its policies on “testimonial and endorsement advertising” that made clear that the FTC required that any sort of “celebrity” (interpreted broadly) endorser had to have a basis for the claims that they were making in their pitches for a product.  This notice also made clear that any statements made about the experience in using a product had to be accurate and, when making claims about the performance of a product, the endorser had to accurately state performance that users can expect to obtain when they use the product.  Just using a “your results may vary” disclaimer was not enough.  In the 2009 proceeding, the FTC emphasized the applicability of these standards to online promotions, requiring disclosures for not only traditional advertising but also for social media influencers and others who are paid to promote products through online channels.  Such payments (or any other valuable consideration the influencer receives) must be disclosed when pitching a product.
Continue Reading Big FTC Penalties on Google and iHeart for Deceptive Endorsements in Broadcast Commercials Mandate Care in Crafting Your Local Advertising

On December 1, 2009,  FTC revised Guidelines went into effect updating policies dealing with advertising using testimonials and endorsements, specifically affecting celebrity endorsements and sponsorship disclosure.  These revised guidelines directly impact the established practices of broadcasters and new media companies.  These revised endorsement and testimonial guidelines effectively ban the old standard “results not typical” disclaimer so commonly in use in connection with a great deal of testimonial advertising, confirm independent liability for the “endorser” (including celebrities) for false product or service claims, and expand and clarify the need for disclosure of “material connections”, that is consideration (money and other “freebies”) received by new media companies in connection with reviews or other online coverage of products or services.  It is vital that media companies, in particular new media, understand the key provisions of these guidelines to make sure that they don’t become a target of any FTC enforcement action.  The FTC has indicated that for now at least, its focus will be on enforcement in the new media world (bloggers, social media, viral campaigns) and other “non-traditional” advertising (celebrity guests on news and entertainment shows, endorsements by media personnel such as on-air DJ’s).

Like all FTC Guidance concerning advertising, the revised guidelines are specific regulations, but instead they set out standards (in essence a safe harbor) that outline how the FTC will review advertising to determine if it is “false and deceptive” or otherwise misleading to the consumer in violation of Section 5 of the FTC Act.  The revised guidelines provide specific examples as to how they will apply to insure sufficient disclosure so that the listener has all the background necessary to be able to evaluate the strength of the endorsement for him or herself.  For broadcast advertising, the new guidelines make clear that endorsers can themselves be liable for misleading statements made during a product pitch.  So a radio announcer paid to try a diet plan or some other product and to report about its results on the air needs to be sure not only that his statements are truthful, but that the “results” claimed are in line with what the advertiser can actually prove for the product through clinical study and research.  The radio pitchman cannot turn a blind eye to claims that are inherently incredible.  In the past, a simple disclosure that "your results may vary" or "these results are not necessarily typical" was sufficient.  Today, that disclaimer is no longer enough.  Instead, the new guidelines state that any testimonial about the results of using a product be accompanied with a disclosure of the results that a typical user can expect to get from the product.  So the announcer must be informed as to what results can be expected by the typical user, and that these results are objectively verifiable, so that the proper disclosure can be made.  As the announcer (or the station) can now be liable for statements made in such testimonials, stations should take care to be prepared to make the required disclosures. …

Continue Reading New FTC Guidelines on Endorsements and Sponsorship Disclosure – Broadcasters and New Media Companies Beware