Friday, June 14, 2013

FTC Alert: Celebrity Endorsements

Celebrity product endorsements are huge business. Like most federal agencies (actually, like most lawmakers), however, it seems the Federal Trade Commission (FTC) is having a hard time keeping its rules and restrictions current with new technologies. But perhaps it's not the FTC's problem---the issue instead lies with counsel for companies who use celebrities to promote the companies' products.

Here's the deal: the FTC mission regulates advertising in order to protect consumers. If your favorite celeb promotes something, the advertisement must be truthful. But if the consumer does not know the celebrity was paid to promote a product, the consumer does not have complete information about the whether or not the product is actually as the celebrity states. That's the loose background theory at any rate.

Enter the "FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising." The Guides were updated as recently as 2009. (Before that, they were updated in 1980!) The 2009 revisions "add new examples to illustrate the long standing principle that “material connections” (sometimes payments or free products) between advertisers and endorsers – connections that consumers would not expect – must be disclosed."

But with Twitter, companies may be on the outer edges of engaging in legally permissible behavior. Who's at fault? The company doing the advertising or the celebrity they're paying to tweet about the company's product? If you're in-house counsel one day, keep in mind your client is the company, and your client will be at risk if the FTC's celebrity endorsement guidelines are not followed.