FTC Seeks Comment on Proposed Changes to its Endorsement Guides and to its “.com Disclosures” Document

FTC Seeks Comment on Proposed Changes to its Endorsement Guides and to its “.com Disclosures” Document

June 16, 2022, Covington Alert

The Federal Trade Commission recently announced that it is seeking comment on proposed changes to its Guides Concerning the Use of Endorsement and Testimonials in Advertising. The Guides, which are codified at 15 C.F.R Part 255, describe the circumstances under which the use of endorsements and testimonials can run afoul of Section 5 of the FTC Act. Because the FTC’s proposed changes to the Guides have not yet been published in the Federal Register, the deadline for filing comments has not yet been established. Once the proposed changes are published, comments will be due 60 days thereafter.

The FTC separately announced that it also is considering updating and reissuing its guidance for businesses on digital advertising and marketing. This guidance, which appears in an FTC publication titled “.com Disclosures: How to Make Effective Disclosures in Digital Advertising,” is designed to provide businesses with practical information on how to comply with FTC requirements in the Digital Age. To that end, the FTC is seeking comment on specific issues FTC staff might consider in revising the guidance, as discussed further below. Unlike the FTC’s proposed changes to the Guides, the comment deadline for these issues of interest does not depend on Federal Register publication, so the FTC has set the comment deadline for August 2, 2022.

Proposed Changes to the Guides

According to the FTC, the proposed changes to the Guides are intended to more accurately address the ways in which advertisers today reach consumers to promote their products and services, including through the use of social media.

The FTC’s proposed changes include the following:

1. In an effort to combat “stealth advertising” practices directed at children, the FTC has proposed a new section aimed at addressing deceptive endorsements targeted to kids. Separately but relatedly, the FTC staff is holding a public event on October 19, 2022, to gather research and expert opinion on children’s capacities to distinguish ads from other content and whether disclosures can be an appropriate solution in those circumstances.
2. The FTC has proposed amendments that suggest that social media platforms can potentially be liable for Section 5 violations if the tools they provide to endorsers inadequately disclose the material connection between those endorsers and advertisers.
3. The FTC has proposed to clarify that both fake reviews and any review procurement, suppression, boosting, or editing that misrepresents how customers truly feel about a product or service fall within the scope of the Guides. This clarification follows the recent FTC enforcement action against Fashion Nova for allegedly suppressing customer reviews in which customers awarded the company fewer than five stars.
4. The FTC has proposed to expand the definition of “endorsement” to include those made by virtual influencers, such as computer-generated fictional characters, as well as fake endorsers that appear to consumers to be individuals or groups.
5. The FTC has proposed to mandate that where endorsements target specific audiences, the sufficiency of subject disclosures will be evaluated according to that specific audience’s ability to understand such disclosures (e.g. disclosures in ads that are written in Spanish and target a Spanish-speaking audience should also be in Spanish).

Proposed Updates to the “.com Disclosures” Document

In addition to its proposed changes to the Guides, the FTC separately is seeking comment on “ways to modernize” its “.com Disclosures” document to make it even more relevant to the current and emerging digital marketing landscape. The issues on which the FTC is seeking comment include:

1. the use of dark patterns in websites, mobile apps, and digital advertising “that pose unique risks to consumers;”
2. whether the existing “.com Disclosures” document adequately addresses advertising on mobile devices;
3. whether additional guidance is needed to reflect the “multi-party selling arrangements involved in online commerce and affiliate marketing arrangements;”
4. how the guidance on the use of hyperlinks can be strengthened to better protect consumers;
5. the use of sponsored and promoted advertising on social media; and
6. the adequacy of online disclosures when consumers must navigate through multiple webpages.

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The FTC’s proposed changes to the Guides and updates to the “.com Disclosures” document follows other steps the agency has taken to combat deceptive digital practices. In 2021, for example, the FTC released a policy statement indicating that it intended to “ramp up” enforcement against dark patterns in the context of online subscriptions, as well as a Notice of Penalty Offense against the use of fake reviews and other misleading endorsements. 

 If you have any questions concerning the material discussed in this client alert, please contact the members of our firm.