Guiding You Through The FTC’s Regulations For The Internet

My name is Andrew M. Jaffe. I am an Internet and e-commerce attorney in Ohio with more than 20 years of experience. I have heard internet marketers comment that the Federal Trade Commission (FTC) only focuses its attention on the big players and doesn’t waste time on the “little guys.” This comment is hilarious, as these are the same people who spend thousands of dollars and considerable time making sure that their keywords give them top rankings. They think of themselves as flying under the radar when, in actuality, their top rankings are what will draw the attention of the FTC.

The FTC is the main consumer protection agency in the United States. Its mission is to protect the consumer, and it takes that mandate seriously, particularly in the areas of false or deceptive advertising. It has been my experience that the FTC will pursue anyone it can find, regardless of size. To ensure compliance and avoid legal action, you need the counsel of an e-commerce lawyer like me at Andrew M. Jaffe, Attorney at Law.

What To Know About The FTC

The FTC regulates much of what is on the internet, including e-commerce businesses. When the FTC was created in 1914, its purpose was to prevent unfair methods of competition in commerce as part of the battle to “bust the trusts” (like Standard Oil). Over the years, Congress passed additional laws giving the agency greater authority to police anti-competitive practices. In 1938, Congress passed a broad prohibition against “unfair and deceptive acts or practices.” Since then, the FTC has also been directed to administer a wide variety of other consumer protection laws, including the Telemarketing Sales Rule, the Pay-Per-Call Rule, and the Equal Credit Opportunity Act (ECOA).

In 1975, Congress gave the FTC the authority to adopt industry-wide trade regulation rules. Most people don’t realize that the regulations published by our regulatory agencies have the effect of law just as much as laws passed by Congress. When Congress creates a government agency, it grants the agency broad powers, including the ability to promulgate and enforce regulations. The enabling act for the agency provides that these regulations will have the same effect as a law passed by Congress.

Lawyers call this area of law “administrative law,” and there are about 50 U.S. agencies that publish regulations. Besides the FTC, we have the Food and Drug Administration (FDA), the Environmental Protection Agency (EPA), the Federal Communications Commission (FCC), and the Internal Revenue Service (IRS), just to name a few. The regulations are printed in the Code of Federal Regulations (CFR).

The same consumer protection laws that apply to commercial activities in other media apply online as well. The FTC Act’s prohibition on unfair or deceptive acts or practices also encompasses Internet advertising, marketing, and sales.

Section 5 of the FTC Act grants the FTC power to investigate and prevent deceptive trade practices. The FTC has determined that a representation, omission, or practice is deceptive if it is likely to mislead consumers and affect consumers’ behavior or decisions about the product or service.

Why the FTC pursues some marketers and not others is not always clear. Sometimes, the FTC has received complaints about a particular site or product. Other times, the FTC determines that a particular product area is ripe for its regulation. If you go to the FTC’s web page, you will see what areas the FTC is most concerned about. Products such as diet supplements or pills (both organic and medicinal), debt-reduction plans, investment and opportunity plans, and work-from-home schemes all have significant FTC comments. These are the areas that the FTC is most likely to pursue without specific complaints.

The FTC locates individual internet marketers in one of two ways. First, when the FTC finds a website that it wishes to pursue, it checks the “who is” listings of the domain. Since legitimate business people have a true and accurate “who is” listing, the FTC has an easy time finding them. Other marketers are perhaps less scrupulous about their domain listings, and the FTC will follow a transaction to find who receives the money. In both situations, the FTC will have an employee sign up for a product at the website and complete the purchasing transaction. It will then follow the money and focus on who receives the funds. Further, it makes copies of the website, the ordering pages, the confirmation and anything else it can find that can later become evidence of the transaction.

The FTC Act prohibits unfair or deceptive advertising in any medium. That is, advertising must tell the truth and not mislead consumers. A claim can be misleading if relevant information is left out or if the claim implies something that’s not true. For example, a lease advertisement for an automobile that promotes “$0 Down” may be misleading if significant and undisclosed charges are due at lease signing.

In addition, claims must be substantiated, especially when they concern health, safety, or performance. The type of evidence may depend on the product, the claims, and what experts believe is necessary. If your ad specifies a certain level of support for a claim – “tests show X” – then you must have at least that level of support.

Sellers are responsible for claims they make about their products and services. Third parties, such as advertising agencies or website designers, and catalog marketers, also may be liable for making or disseminating deceptive representations if they participate in the preparation or distribution of the advertising or know about the deceptive claims. Further, the FTC recently went so far as to prosecute a company that hit the “Like” button on Facebook for a consumer’s comments on the company’s products when the company could not substantiate the claims made by the consumer.

Advertisements may contain disclosures that prevent an ad from being misleading. However, these disclosures must be clear and conspicuous. In evaluating whether disclosures are likely to be clear and conspicuous in online ads, the FTC will consider the placement of the disclosure and its proximity to the relevant claim.

To make a disclosure clear and conspicuous, advertisers should place disclosures near the triggering claim and, when possible, on the same screen. Advertisers should also use text or visual cues to encourage consumers to scroll down a web page when it is necessary to view a disclosure so it is not hidden “below the fold.” When using hyperlinks to lead to disclosures, place the hyperlink near relevant information and make it noticeable. The courts use the litmus test of “conspicuous” whenever evaluating internet activity.

Further, advertisers should prominently display disclosures so they are noticeable to consumers, and evaluate the size, color, and graphic treatment of the disclosure in relation to other parts of the web page. Websites should repeat disclosures on lengthy websites and in connection with repeated claims.

The FTC periodically joins with other law enforcement agencies to monitor the internet for potentially false or deceptive online advertising claims. If your advertisements don’t comply with the law, then you could face enforcement actions or civil lawsuits. For advertisers under the FTC’s jurisdiction, that could mean orders to cease and desist with fines up to $16,000 per violation and, in some instances, refunds to consumers for actual damages.

Regulations Relevant To The Internet Enforced By The FTC

Listed below are some FTC regulations about specific marketing practices and the promotion of products and services in specific industries. For more information on these topics, see the FTC website. The FTC provides guidelines for most of the regulations below.

• Business Opportunity Rule: If you are advertising a business opportunity, beware: The FTC has strict rules for selling business opportunities and puts “biz ops” in the same category as franchises. The rules are incredibly complicated, and it would take a battery of lawyers weeks to fulfill all the requirements before anyone could offer a business opportunity.

A business opportunity is an agreement in which a purchaser obtains the right to offer, sell, or distribute goods or services under certain conditions. Besides the FTC, 23 states have passed laws regulating the “business opportunity.”

The FTC explains the Business Opportunity Rule to consumers as follows:

A franchise or business opportunity seller must give you a detailed disclosure document at least 10 business days before you pay any money or legally commit yourself to a purchase. You can use these disclosures to compare a particular business with others you may be considering or simply for information. The disclosure document includes:

• Names, addresses, and telephone numbers of at least 10 previous purchasers who live closest to you
• A fully audited financial statement of the seller
• The backgrounds and experiences of the business’s key executives
• The cost of starting and maintaining the business
• The responsibilities that you and the seller will have to each other once you’ve invested in the opportunity

And, these are only a few of the requirements. Worse yet, business opportunities are defined by the FTC to include anything the advertiser calls a business opportunity, including using the “work-from-home” headline.

• Multi-level marketing (MLM): This is a way of selling goods and services through distributors. These plans typically promise that people who sign up as distributors will get commissions two ways – on their sales and on the sales that their recruits have made. MLMs should pay commissions for the retail sales of goods or services, not for recruiting new distributors.

• Pyramid schemes: A form of MLM involving paying commissions to distributors for recruiting new distributors. Pyramid schemes are illegal in most states because the plans inevitably collapse when no new distributors can be recruited. When a plan collapses, most people, except those at the top of the pyramid, lose their money.
• Environmental claims: It’s deceptive to misrepresent, directly or indirectly, that a product offers a general environmental benefit. Your ads should qualify broad environmental claims or avoid them altogether. In addition, your ads should not imply significant environmental benefits if the benefit isn’t significant. Say a trash bag is labeled “recyclable” without qualification. Because trash bags ordinarily are not separated from other trash for recycling at a landfill or incinerator, it is unlikely that they will be used again. Technically, the bag may be “recyclable,” but the claim is deceptive because it asserts an environmental benefit when there is no meaningful benefit.
• “Free” offers: The FTC has long regulated “free offer” advertising and has promulgated the following rules:

1. Free means free. Any limitations must be disclosed within the offer and in close conjunction with the word “free” (i.e. a shipping charge).
2. If it is a combination (i.e., buy one, get one free), then the original purchase price cannot be raised so that the seller recoups more than the original price of one item.
3. “Free introductory offers” must mean that you intend to sell the product, and the ad can run for no more than six months in any 12-month period for which you are selling the products.
4. Synonyms for “free” are also covered (i.e., gift, bonus, etc.)

• Mail and telephone orders (30-day shipping rule): According to the Mail, Internet, or Telephone Order Merchandise Rule, you must have a reasonable basis for stating or implying that a product can be shipped within a certain time. If your ad doesn’t include a shipping statement, then you must have a reasonable basis to believe you can ship within 30 days.

If you can’t ship when promised, then you must notify the customer of the delay and the right to cancel. For definite delays of up to 30 days, you may treat the customer’s silence as an agreement to the delay. For longer or indefinite delays and second and subsequent delays, you must get the customer’s consent. If you don’t, then you must promptly refund all the money the customer paid you without being asked.

You can give updated shipping information over the phone if your Internet ad prompts customers to call to place an order. This information may differ from what you said or implied about the shipping time in your ad. The updated phone information supersedes any shipping representation made in your ad, but you still must have a reasonable basis for the update.

• Negative-option offers: The Negative Option Rule applies to sellers of subscription plans that ship merchandise like books to consumers who have agreed in advance to become subscribers. The rule requires ads to clearly and conspicuously disclose material information about the terms of the plan. Further, once consumers agree to enroll, the company must notify them before shipping to allow them to decline the merchandise. Even if an automatic shipment or continuity program doesn’t fall within the specifics of the rule, companies should be careful to clearly disclose the terms and conditions of the plan before billing consumers or charging their credit cards.
• Warranties: The Pre-Sale Availability of Written Warranty Terms Rule requires that warranties be available before purchase for consumer products that cost more than $15. If your ad mentions a warranty on a product that can be purchased by mail, phone, or computer, then it must tell consumers how to get a copy of the warranty.
• Guarantees: If your ad uses phrases like “satisfaction guaranteed” or “money-back guarantee,” then you must be willing to give full refunds for any reason. You also must tell the consumer the terms of the offer.
• Earnings disclaimer: There are two products that are required by law to have earnings disclaimers: 1) The SEC requires that advertisements for the sale of securities (i.e., stocks, bonds, and condominiums) contain a disclaimer stating that “past performance is no guarantee of future earnings, etc.,” so that prospective purchasers are warned that the stock can go down, too, and 2) The FTC requires earnings disclaimers for franchises and business opportunities.

FTC Guides Concerning Use Of Endorsements And Testimonials In Advertising

The Electronic Code of Federal Regulations

This is the second set of guides that the FTC has published in the past few years regarding endorsements and testimonials in advertising. I have copied the entire guide below for your convenience. Please pay special attention to the examples. They are often far more informative than the words describing the regulations in the section.

Contents
§255.0   Purpose And Definitions
§255.1   General Considerations
§255.2   Consumer Endorsements
§255.3   Expert Endorsements
§255.4   Endorsements By Organizations
§255.5   Disclosure Of Material Connections

§255.0 Purpose And Definitions

(a) The Guides in this part represent administrative interpretations of laws enforced by the Federal Trade Commission for the guidance of the public in conducting its affairs in conformity with legal requirements. Specifically, the Guides address the application of Section 5 of the FTC Act (15 U.S.C. 45) to the use of endorsements and testimonials in advertising. The Guides provide the basis for voluntary compliance with the law by advertisers and endorsers. Practices inconsistent with these Guides may result in corrective action by the Commission under Section 5 if, after investigation, the Commission has reason to believe that the practices fall within the scope of conduct declared unlawful by the statute. The Guides set forth the general principles that the Commission will use in evaluating endorsements and testimonials with examples illustrating the application of those principles. The Guides do not purport to cover every possible use of endorsements in advertising. Whether a particular endorsement or testimonial is deceptive will depend on the specific factual circumstances of the advertisement at issue.

(b) For purposes of this part, an endorsement means any advertising message (including verbal statements, demonstrations, or depictions of the 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. The party whose opinions, beliefs, findings, or experience the message appears to reflect will be called the endorser and may be an individual, group, or institution.

(c) The Commission intends to treat endorsements and testimonials identically in the context of its enforcement of the FTC Act and for purposes of this part. The term “endorsements” is therefore generally used hereinafter to cover both terms and situations.

(d) For purposes of this part, the term product includes any product, service, company, or industry.

(e) For purposes of this part, an “expert” is an individual, group, or institution possessing – as a result of experience, study or training – knowledge of a particular subject, when that knowledge is superior to what ordinary individuals generally acquire.

• Example 1: A film critic’s review of a movie is excerpted in an advertisement. When so used, the review meets the definition of an endorsement because it is viewed by readers as a statement of the critic’s own opinions and not those of the film producer, distributor, or exhibitor. Any alteration in or quotation from the text of the review that does not fairly reflect its substance would be a violation of the standards set by this part because it would distort the endorser’s opinion. [See §255.1(b)]
• Example 2: A TV commercial depicts two women in a supermarket buying a laundry detergent. The women are not identified outside the context of the advertisement. One comments to the other how clean her brand makes her family’s clothes, and the other then comments that she will try it because she has not been fully satisfied with her own brand. This obvious fictional dramatization of a real-life situation would not be an endorsement.
• Example 3: In an advertisement for a pain remedy, an announcer who is not familiar to consumers except as a spokesman for the advertising drug company praises the drug’s ability to deliver fast and lasting pain relief. He purports to speak, not on the basis of his own opinions, but rather in the place of and on behalf of the drug company. The announcer’s statements would not be considered an endorsement.
• Example 4: A manufacturer of automobile tires hires a well-known professional automobile racing driver to deliver its advertising message in television commercials. In these commercials, the driver speaks of the smooth ride, strength, and long life of the tires. Even though the message is not expressly declared to be the personal opinion of the driver, it may nevertheless constitute an endorsement of the tires. Many consumers will recognize this individual as being primarily a racing driver and not merely a spokesperson or announcer for the advertiser. Accordingly, they may well believe that the driver would not speak for an automotive product unless he actually believed in what he was saying and had personal knowledge sufficient to form that belief. Hence, they would think that the advertising message reflects the driver’s personal views. This attribution of the underlying views to the driver brings the advertisement within the definition of an endorsement for the purposes of this part.
• Example 5: A television advertisement for a particular brand of golf balls shows a prominent and well-recognized professional golfer practicing numerous drives off the tee. This would be an endorsement by the golfer, even though she makes no verbal statement in the advertisement.
• Example 6: An infomercial for a home fitness system is hosted by a well-known entertainer. During the infomercial, the entertainer demonstrates the machine and states that it is the most effective and easy-to-use home exercise machine that she has ever tried. Even if she is reading from a script, this statement would be an endorsement, because consumers are likely to believe it reflects the entertainer’s views.
• Example 7: A television advertisement for a housewares store features a well-known female comedian and a well-known male baseball player engaging in light-hearted banter about products each one intends to purchase for the other. The comedian says that she will buy him a Brand X, portable, high-definition television so that he can finally see the strike zone. He says that he will get her a Brand Y juicer so that she can make juice with all the fruit and vegetables thrown at her during her performances. The comedian and baseball player are not likely to be deemed endorsers because consumers will likely realize that the individuals are not expressing their own views.
• Example 8: A consumer who regularly purchases a particular brand of dog food decides one day to purchase a new, more expensive brand made by the same manufacturer. She writes in her personal blog that the change in diet has made her dog’s fur noticeably softer and shinier and that in her opinion, the new food definitely is worth the extra money. This posting would not be deemed an endorsement under the Guides.

Assume that, rather than purchase the dog food with her own money, the consumer gets it for free because the store routinely tracks her purchases, and its computer has generated a coupon for a free trial bag of this new brand. Again, her posting would not be deemed an endorsement under the Guides.

Assume now that the consumer joins a network marketing program under which she periodically receives various products about which she can write reviews if she wants to do so. If she receives a free bag of the new dog food through this program, her positive review would be considered an endorsement under the Guides.

§255.1 General Considerations

(a) Endorsements must reflect the honest opinions, findings, beliefs, or experience of the endorser. Furthermore, an endorsement may not convey any express or implied representation that would be deceptive if made directly by the advertiser. [See §255.2(a) and (b) regarding substantiation of representations conveyed by consumer endorsements.]

(b) The endorsement message need not be phrased in the exact words of the endorser unless the advertisement affirmatively so represents. However, the endorsement may not be presented out of context or reworded so as to distort in any way the endorser’s opinion or experience with the product. An advertiser may use an endorsement of an expert or celebrity only so long as it has good reason to believe that the endorser continues to subscribe to the views presented. An advertiser may satisfy this obligation by securing the endorser’s views at reasonable intervals where reasonableness will be determined by such factors as new information on the performance or effectiveness of the product, a material alteration in the product, changes in the performance of competitors’ products and the advertiser’s contract commitments.

(c) When the advertisement represents that the endorser uses the endorsed product, the endorser must have been a bona fide user of it at the time the endorsement was given. Additionally, the advertiser may continue to run the advertisement only so long as it has good reason to believe that the endorser remains a bona fide user of the product. [See §255.1(b) regarding the “good reason to believe” requirement.]

(d) Advertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers [see §255.5]. Endorsers also may be liable for statements made in the course of their endorsements.

• Example 1: A building contractor states in an advertisement that he uses the advertiser’s exterior house paint because of its remarkable, quick-drying properties and durability. This endorsement must comply with the pertinent requirements of §255.3 (expert endorsements). Subsequently, the advertiser reformulates its paint to enable it to cover exterior surfaces with only one coat. Prior to continued use of the contractor’s endorsement, the advertiser must contact the contractor in order to determine whether the contractor would continue to specify the paint and to subscribe to the views presented previously.
• Example 2: A television advertisement portrays a woman seated at a desk on which rest five unmarked computer keyboards. An announcer says, “We asked X, an administrative assistant for over 10 years, to try these five unmarked keyboards and tell us which one she liked best.” The advertisement portrays X typing on each keyboard and then picking the advertiser’s brand. The announcer asks her why, and X gives her reasons. This endorsement would probably not represent that X actually uses the advertiser’s keyboard at work. In addition, the endorsement also may be required to meet the standards of §255.3 (expert endorsements).
• Example 3: An ad for an acne treatment features a dermatologist who claims that the product is “clinically proven” to work. Before giving the endorsement, she received a write-up of the clinical study in question, which indicates flaws in the design and conduct of the study that are so serious that they preclude any conclusions about the efficacy of the product. The dermatologist is subject to liability for the false statements she made in the advertisement. The advertiser is also liable for misrepresentations made through the endorsement. [See §255.3 regarding the product evaluation that an expert endorser must conduct.]
• Example 4: A well-known celebrity appears in an infomercial for an oven-roasting bag that purportedly cooks every chicken perfectly in 30 minutes. During the shooting of the infomercial, the celebrity watches five attempts to cook chickens using the bag. In each attempt, the chicken is undercooked after 30 minutes and requires 60 minutes of cooking time. In the commercial, the celebrity places an uncooked chicken in the oven-roasting bag and places the bag in one oven. He then takes a chicken roasting bag from a second oven, removes from the bag what appears to be a perfectly cooked chicken, tastes the chicken, and says that if you want perfect chicken every time in just 30 minutes, then this is the product you need. A significant percentage of consumers are likely to believe that the celebrity’s statements represent his own views even though he is reading from a script. The celebrity is subject to liability for his statement about the product. The advertiser is also liable for misrepresentations made through the endorsement.
• Example 5: A skincare product advertiser participates in a blog advertising service. The service matches up advertisers with bloggers who will promote the advertiser’s products on their personal blogs. The advertiser requests that a blogger try a new body lotion and write a review of the product on her blog. Although the advertiser does not make any specific claims about the lotion’s ability to cure skin conditions and the blogger does not ask the advertiser whether there is substantiation for the claim, in her review the blogger writes that the lotion cures eczema and recommends the product to her blog readers who suffer from this condition. The advertiser is subject to liability for misleading or unsubstantiated representations made through the blogger’s endorsement. The blogger also is subject to liability for misleading or unsubstantiated representations made in the course of her endorsement. The blogger is also liable if she fails to clearly and conspicuously disclose that she is being paid for her services. [See §255.5.]

In order to limit its potential liability, the advertiser should ensure that the advertising service provides guidance and training to its bloggers concerning the need to ensure that statements they make are truthful and substantiated. The advertiser should also monitor bloggers who are being paid to promote its products and take steps necessary to halt the continued publication of deceptive representations when they are discovered.

§255.2 Consumer Endorsements

(a) An advertisement employing endorsements by one or more consumers about the performance of an advertised product or service will be interpreted as representing that the product or service is effective for the purpose depicted in the advertisement. Therefore, the advertiser must possess and rely upon adequate substantiation, including, when appropriate, competent and reliable scientific evidence, to support such claims made through endorsements in the same manner that the advertiser would be required to do so if it had made the representation directly – i.e., without using endorsements. Consumer endorsements themselves are not competent and reliable scientific evidence.

(b) An advertisement containing an endorsement relating the experience of one or more consumers on a central or key attribute of the product or service also will likely be interpreted as representing that the endorser’s experience is representative of what consumers will generally achieve with the advertised product or service in actual – albeit variable – conditions of use. Therefore, an advertiser should possess and rely upon adequate substantiation for this representation. If the advertiser does not have substantiation that the endorser’s experience is representative of what consumers will generally achieve, then the advertisement should clearly and conspicuously disclose the generally expected performance in the depicted circumstances, and the advertiser must possess and rely on adequate substantiation for that representation.

The Commission tested the communication of advertisements containing testimonials that clearly and prominently disclosed either “results not typical” or the stronger disclaimer, “These testimonials are based on the experiences of a few people, and you are not likely to have similar results.” Neither disclosure adequately reduced the communication that the experiences depicted are generally representative. Based upon this research, the Commission believes that similar disclaimers regarding the limited applicability of an endorser’s experience to what consumers may generally expect to achieve are unlikely to be effective.

Nonetheless, the Commission cannot rule out the possibility that a strong disclaimer of typicality could be effective in the context of a particular advertisement. Although the Commission would have the burden of proof in a law enforcement action, the Commission notes that an advertiser possessing reliable empirical testing demonstrating that the net impression of its advertisement with such a disclaimer is non-deceptive will avoid the risk of the initiation of such an action in the first instance.

(c) Advertisements presenting endorsements by what are represented, directly or by implication, to be “actual consumers” should utilize actual consumers in both the audio and video or clearly and conspicuously disclose that the persons in such advertisements are not actual consumers of the advertised product.

• Example 1: A brochure for a baldness treatment consists entirely of testimonials from satisfied customers who say that after using the product, they had amazing hair growth and their hair is as thick and strong as it was when they were teenagers. The advertiser must have competent and reliable scientific evidence that its product is effective in producing new hair growth.

The ad will also likely communicate that the endorsers’ experiences are representative of what new users of the product can generally expect. Therefore, even if the advertiser includes a disclaimer such as, “Notice: These testimonials do not prove our product works. You should not expect to have similar results,” the ad is likely to be deceptive unless the advertiser has adequate substantiation that new users typically will experience results similar to those experienced by those offering their testimonies.

• Example 2: An advertisement disseminated by a company that sells heat pumps presents endorsements from three individuals who state that after installing the company’s heat pump in their homes, their monthly utility bills went down by $100, $125, and $150, respectively. The ad will likely be interpreted as conveying that such savings are representative of what consumers who buy the company’s heat pump can generally expect. The advertiser does not have substantiation for that representation because, in fact, less than 20% of purchasers will save $100 or more. Disclosures such as “Results not typical” or “These testimonials are based on the experiences of a few people, and you are not likely to have similar results” are insufficient to prevent this ad from being deceptive because consumers will still interpret the ad as conveying that the specified savings are representative of what consumers can generally expect. The ad is less likely to be deceptive if it clearly and conspicuously discloses the generally expected savings and the advertiser has adequate substantiation that homeowners can achieve those results. There are multiple ways that such a disclosure could be phrased – e.g., “the average homeowner saves $35 per month,” “the typical family saves $50 per month during cold months and $20 per month in warm months” or “most families save 10% on their utility bills.”
• Example 3: An advertisement for a cholesterol-lowering product features an individual who claims that his serum cholesterol went down by 120 points and does not mention having made any lifestyle changes. A well-conducted clinical study shows that the product reduces the cholesterol levels of individuals with elevated cholesterol by an average of 15% and the advertisement clearly and conspicuously discloses this fact. Despite the presence of this disclosure, the advertisement would be deceptive if the advertiser does not have adequate substantiation that the product can produce the specific results claimed by the endorser (i.e., a 120-point drop in serum cholesterol without any lifestyle changes).
• Example 4: An advertisement for a weight-loss product features a formerly obese woman. She says in the ad, “Every day, I drank two Weight Away shakes, ate only raw vegetables, and exercised vigorously for six hours at the gym. By the end of six months, I had gone from 250 pounds to 140 pounds.” The advertisement accurately describes the woman’s experience, and such a result is within the range that would be generally experienced by an extremely overweight individual who consumed Weight Away shakes, only ate raw vegetables, and exercised as the endorser did. Because the endorser clearly describes the limited and truly exceptional circumstances under which she achieved her results, the ad is not likely to convey that consumers who weigh substantially less or use Weight Away under less extreme circumstances will lose 110 pounds in six months. If the advertisement simply says that the endorser lost 110 pounds in six months using Weight Away together with diet and exercise, however, this description would not adequately alert consumers to the truly remarkable circumstances leading to her weight loss. The advertiser must have substantiation, however, for any performance claims conveyed by the endorsement (e.g., that Weight Away is an effective weight loss product).

If, in the alternative, the advertisement simply features “before” and “after” pictures of a woman who says “I lost 50 pounds in six months with Weight Away,” the ad is likely to convey that her experience is representative of what consumers will generally achieve. Therefore, if consumers cannot generally expect to achieve such results, the ad should clearly and conspicuously disclose what they can expect to lose in the depicted circumstances (e.g., “Most women who use Weight Away for six months lose at least 15 pounds”).

If the ad features the same pictures but the person giving the testimonial simply says, “I lost 50 pounds with Weight Away,” and Weight Away users generally do not lose 50 pounds, then the ad should disclose what results they do generally achieve (e.g., “Most women who use Weight Away lose 15 pounds”).

• Example 5: An advertisement presents the results of a poll of consumers who have used the advertiser’s cake mixes as well as their own recipes. The results purport to show that the majority believed that their families could not tell the difference between the advertised mix and their own cakes baked from scratch. Many of the consumers are actually pictured in the advertisement along with relevant, quoted portions of their statements endorsing the product. This use of the results of a poll or survey of consumers represents that this is the typical result that ordinary consumers can expect from the advertiser’s cake mix.
• Example 6: An advertisement purports to portray a “hidden camera” situation in a crowded cafeteria at breakfast time. A spokesperson for the advertiser asks a series of actual patrons of the cafeteria for their spontaneous, honest opinions of the advertiser’s recently introduced breakfast cereal. Even though the words “hidden camera” are not displayed on the screen, and even though none of the actual patrons is specifically identified during the advertisement, the net impression conveyed to consumers may well be that these are actual customers and not actors. If actors have been employed, then this fact should be clearly and conspicuously disclosed.
• Example 7: An advertisement for a recently released motion picture shows three individuals coming out of a theater, each of whom gives a positive statement about the movie. These individuals are actual consumers expressing their personal views about the movie. The advertiser does not need to have substantiation that their views are representative of the opinions that most consumers will have about the movie. Because the consumers’ statements would be understood to be the subjective opinions of only three people, this advertisement is not likely to convey a message of typicality. If the motion picture studio had approached these individuals outside the theater and offered them free tickets if they talked about the movie on camera afterward, then that arrangement should be clearly and conspicuously disclosed. [See §255.5.]

§255.3 Expert Endorsements

(a) Whenever an advertisement represents, directly or by implication, that the endorser is an expert with respect to the endorsement message, then the endorser’s qualifications must, in fact, give the endorser the expertise that they are represented as possessing with respect to the endorsement.

(b) Although the expert may, in endorsing a product, take into account factors not within their expertise (e.g., matters of taste or price), the endorsement must be supported by an actual exercise of that expertise in evaluating product features or characteristics that pertain to the expert’s area of specialty. The product must also be available to an ordinary consumer and the endorsement must be relevant to an ordinary consumer’s use of or experience with the product. This evaluation must have included an examination or testing of the product that’s at least as extensive as someone with the same degree of expertise would normally need to conduct in order to support the conclusions presented in the endorsement. To the extent that the advertisement implies that the endorsement was based upon a comparison, such comparison must have been included in the expert’s evaluation, and, as a result of such comparison, the expert must have concluded that, with respect to those features on which they are expert and which are relevant and available to an ordinary consumer, the endorsed product is at least equal overall to the competitors’ products. Moreover, when the net impression created by the endorsement is that the advertised product is superior to other products with respect to any such feature or features, then the expert must have, in fact, found such superiority. [See §255.1(d) regarding the liability of endorsers.]

• Example 1: An endorsement of a particular automobile by one described as an “engineer” implies that the endorser’s professional training and experience are such that he is well acquainted with the design and performance of automobiles. If the endorser’s field is, for example, chemical engineering, then the endorsement would be deceptive.
• Example 2: An endorser of a hearing aid is simply referred to as “Doctor” during the course of an advertisement. The ad likely implies that the endorser is a medical doctor with substantial experience in the area of hearing. If the endorser is not a medical doctor with substantial experience in audiology, then the endorsement would likely be deceptive. A non-medical “doctor” (e.g., an individual with a PhD. in exercise physiology) or a physician without substantial experience in the area of hearing can endorse the product, but if the endorser is referred to as “doctor,” then the advertisement must make clear the nature and limits of the endorser’s expertise.
• Example 3: A manufacturer of automobile parts advertises that its products are approved by the “American Institute of Science.” From its name, consumers would infer that the “American Institute of Science” is a bona fide independent testing organization with expertise in judging automobile parts and that, as such, it would not approve any automobile part without first testing its efficacy by means of valid scientific methods. If the American Institute of Science is not such a bona fide independent testing organization (e.g., if it was established and operated by an automotive parts manufacturer), then the endorsement would be deceptive. Even if the American Institute of Science is an independent bona fide expert testing organization, the endorsement may nevertheless be deceptive unless the institute has conducted valid scientific tests of the advertised products, and the test results support the endorsement message.
• Example 4: A manufacturer of a non-prescription drug product represents that its product has been selected over competing products by a large metropolitan hospital. The hospital has selected the product because the manufacturer, unlike its competitors, has packaged each dose of the product separately. This package form is not generally available to the public. Under the circumstances, the endorsement would be deceptive because the basis for the hospital’s choice – the convenience of the packaging – is neither relevant nor available to consumers, and the basis for the hospital’s decision is not disclosed to consumers.
• Example 5: A woman who is identified as the president of a commercial “home cleaning service” states in a television advertisement that the service uses a particular brand of cleanser – instead of leading competitors it has tried – because of this brand’s performance. Because cleaning services extensively use cleansers in the course of their business, the ad likely conveys that the president has knowledge superior to that of ordinary consumers. Accordingly, the president’s statement will be deemed to be an expert endorsement. The service must, of course, actually use the endorsed cleanser. In addition, because the advertisement implies that the cleaning service has experience with a reasonable number of leading competitors to the advertised cleanser, the service must, in fact, have such experience, and, on the basis of its expertise, it must have determined that the cleaning ability of the endorsed cleanser is at least equal (or superior, if such is the net impression conveyed by the advertisement) to that of leading competitors’ products with which the service has had experience and that remain reasonably available to it. Because in this example the cleaning service’s president makes no mention that the endorsed cleanser was “chosen,” “selected” or otherwise evaluated in side-by-side comparisons against its competitors, it is sufficient if the service has relied solely upon its accumulated experience in evaluating cleansers without having performed side-by-side or scientific comparisons.
• Example 6: A medical doctor states in an advertisement for a drug that the product will safely allow consumers to lower their cholesterol by 50 points. If the materials the doctor reviewed were merely letters from satisfied consumers or the results of a rodent study, then the endorsement would likely be deceptive because those materials are not what others with the same degree of expertise would consider adequate to support this conclusion about the product’s safety and efficacy.

§255.4 Endorsements By Organizations

Endorsements by organizations, especially expert ones, are viewed as representing the judgment of a group whose collective experience exceeds that of any individual member and whose judgments are generally free of the sort of subjective factors that vary from individual to individual. Therefore, an organization’s endorsement must be reached by a process sufficient to ensure that the endorsement fairly reflects the collective judgment of the organization. Moreover, if an organization is represented as being an expert, then, in conjunction with a proper exercise of its expertise in evaluating the product under §255.3 (expert endorsements), it must utilize an expert or experts recognized as such by the organization or standards previously adopted by the organization and suitable for judging the relevant merits of such products. [See §255.1(d) regarding the liability of endorsers.]

• Example: A mattress seller advertises that its product is endorsed by a chiropractic association. Because the association would be regarded as an expert with respect to judging mattresses, its endorsement must be supported by an evaluation by an expert or experts recognized as such by the organization or by compliance with standards previously adopted by the organization and aimed at measuring the performance of mattresses in general – not designed with the unique features of the advertised mattress in mind.

§255.5 Disclosure Of Material Connections

When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed. For example, when an endorser who appears in a television commercial is neither represented in the advertisement as an expert nor known to a significant portion of the viewing public, then the advertiser should clearly and conspicuously disclose either the payment or promise of compensation prior to and in exchange for the endorsement or the fact that the endorser knew or had reason to know or believe that if the endorsement favored the advertised product, some benefit, such as an appearance on television, would be extended to the endorser. Additional guidance, including that concerning endorsements made through other media, is provided by the examples below.

• Example 1: A drug company commissions research on its product by an outside organization. The drug company determines the overall subject of the research (e.g., to test the efficacy of a newly developed product) and pays a substantial share of the expenses of the research project, but the research organization determines the protocol for the study and is responsible for conducting it. A subsequent advertisement by the drug company mentions the research results as the “findings” of that research organization. Although the design and conduct of the research project are controlled by the outside research organization, the weight consumers place on the reported results could be materially affected by knowing that the advertiser had funded the project. Therefore, the advertiser’s payment of expenses to the research organization should be disclosed in this advertisement.
• Example 2: A film star endorses a particular food product. The endorsement regards only points of taste and individual preference. This endorsement must, of course, comply with §255.1, but, regardless of whether the star’s compensation for the commercial is a $1 million cash payment or a royalty for each product sold by the advertiser during the next year, no disclosure is required because such payments likely are ordinarily expected by viewers.
• Example 3: During an appearance by a well-known professional tennis player on a television talk show, the host comments that the past few months have been the best of her career and that, during this time, she has risen to her highest level ever in the rankings. She responds by attributing the improvement in her game to the fact that she is seeing the ball better than she used to, ever since having laser vision correction surgery at a clinic that she identifies by name. She continues talking about the ease of the procedure, the kindness of the clinic’s doctors, her speedy recovery, and how she can now engage in a variety of activities without glasses, including driving at night. The athlete does not disclose that, even though she does not appear in commercials for the clinic, she has a contractual relationship with it and that her contract pays her for speaking publicly about her surgery when she can do so. Consumers might not realize that a celebrity discussing a medical procedure in a television interview has been paid to do so, and knowledge of such payments would likely affect the weight or credibility that consumers give to the celebrity’s endorsement. Without a clear and conspicuous disclosure that the athlete has been engaged as a spokesperson for the clinic, this endorsement is likely to be deceptive. Furthermore, if consumers are likely to take away from her story that her experience was typical of those who undergo the same procedure at the clinic, the advertiser must have substantiation for that claim.

Assume that, instead of speaking about the clinic in a television interview, the tennis player touts the results of her surgery – mentioning the clinic by name – on a social networking site that allows her fans to read in real time what is happening in her life. Given the nature of the medium in which her endorsement is disseminated, consumers might not realize that she is a paid endorser. Because that information might affect the weight that consumers give to her endorsement, her relationship with the clinic should be disclosed.

Assume that, during that same television interview, the tennis player is wearing clothes bearing the insignia of an athletic wear company with whom she also has an endorsement contract. Although this contract requires that she wear the company’s clothes not only on the court but also in public appearances, when possible, she does not mention them or the company during her appearance on the show. No disclosure is required because no representation is being made about the clothes in this context.

• Example 4: An ad for an anti-snoring product features a physician who says that he has seen dozens of products come on the market over the years and, in his opinion, this is the best one ever. Consumers would expect the physician to be reasonably compensated for his appearance in the ad. Consumers are unlikely, however, to expect that the physician receives a percentage of gross product sales or that he owns part of the company, and either of these facts would likely materially affect the credibility that consumers attach to the endorsement. Accordingly, the advertisement should clearly and conspicuously disclose such a connection between the company and the physician.
• Example 5: An actual patron of a restaurant, who is neither known to the public nor presented as an expert, is shown seated at the counter. He is asked for his “spontaneous” opinion of a new food product served in the restaurant. Assume, first, that the advertiser had posted a sign on the door of the restaurant informing all who entered that day that patrons would be interviewed by the advertiser as part of the TV promotion of its new soy protein “steak.” This notification would materially affect the weight or credibility of the patron’s endorsement, and, therefore, viewers of the advertisement should be clearly and conspicuously informed of the circumstances under which the endorsement was obtained.

Assume, in the alternative, that the advertiser had not posted a sign on the door of the restaurant but had informed all interviewed customers of the “hidden camera” only after the interviews were completed and the customers had no reason to know or believe that their response was being recorded for use in an advertisement. Even if patrons were also told that they would be paid for allowing the use of their opinions in advertising, these facts need not be disclosed.

• Example 6: An infomercial producer wants to include consumer endorsements for an automotive additive product featured in her commercial, but because the product has not yet been sold, there are no consumer users. The producer’s staff reviews the profiles of individuals interested in working as “extras” in commercials and identifies several who are interested in automobiles. The extras are asked to use the product for several weeks and then report back to the producer. They are told that if they are selected to endorse the product in the producer’s infomercial, then they will receive a small payment. Viewers would not expect that these “consumer endorsers” are actors who were asked to use the product so that they could appear in the commercial or that they were compensated. Because the advertisement fails to disclose these facts, it is deceptive.
• Example 7: A college student who has earned a reputation as a video game expert maintains a personal weblog or “blog,” where he posts entries about his gaming experiences. Readers of his blog frequently seek his opinions about video game hardware and software. As it has done in the past, the manufacturer of a newly released video game system sends the student a free copy of the system and asks him to write about it on his blog. He tests the new gaming system and writes a favorable review. Because his review is disseminated via a form of consumer-generated media in which his relationship to the advertiser is not inherently obvious, readers are unlikely to know that he has received the video game system free of charge in exchange for his review of the product. Given the value of the video game system, this fact likely would materially affect the credibility that they attach to his endorsement. Accordingly, the blogger should clearly and conspicuously disclose that he received the gaming system free of charge. The manufacturer should advise him at the time it provides the gaming system that this connection should be disclosed, and it should have procedures in place to try to monitor his postings for compliance.
• Example 8: An online message board designated for discussions of new music download technology is frequented by MP3 player enthusiasts. They exchange information about new products, utilities and the functionality of numerous playback devices. Unbeknownst to the message board community, an employee of a leading playback device manufacturer has been posting messages on the discussion board promoting the manufacturer’s product. Knowledge of this poster’s employment likely would affect the weight or credibility of her endorsement. Therefore, the poster should clearly and conspicuously disclose her relationship to the manufacturer to members and readers of the message board.
• Example 9: A young man signs up to be part of a “street team” program in which points are awarded each time a team member talks to their friends about a particular advertiser’s products. Team members can then exchange their points for prizes, such as concert tickets or electronics. These incentives would materially affect the weight or credibility of the team member’s endorsements. They should be clearly and conspicuously disclosed, and the advertiser should take steps to ensure that these disclosures are being provided.

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