FTC Warning About Fake Reviews and Misleading Endorsements

The Federal Trade Commission (FTC) recently put more than 700 companies on notice that they could incur significant civil penalties — up to $43,792 per violation — if they use online testimonials, endorsements, or reviews in ways that could mislead consumers. Among other things, failing to adequately disclose a material connection with a third-party endorser (e.g., influencers) on social media platforms like Instagram, TikTok, Twitter or Facebook can mislead consumers. Accordingly, wineries should remain vigilant about how they portray testimonials, endorsements and reviews of their products online. Below we discuss the FTC’s notice and a few steps that wineries can take to help ensure they are complying with the law.

Summary of the FTC’s Recent Warning Shot

The FTC issued a press release that includes links to its notice, the list of recipients and other resources to help companies comply with the law. The FTC warned that “[t]he rise of social media has blurred the line between authentic content and advertising, leading to an explosion in deceptive endorsements across the marketplace.” According to the FTC, misleading and deceptive practices include:

• Falsely claiming an endorsement by a third-party.
• Misrepresenting that an endorser is an actual user, a current user or a recent user.
• Continuing to use an endorsement without good reason to believe that the endorser continues to subscribe to the views presented.
• Misrepresenting that an endorsement represents the experience, views or opinions of users or purported users.
• Using an endorsement to make deceptive performance claims.
• Failing to disclose an unexpected material connection with an endorser.
• Misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience.

The FTC noted that positive consumer reviews are a type of endorsement so they can be unlawful when a product advertiser does not adequately disclose a material connection with the reviewer if such a connection exists. The FTC also noted that it is not “singling out” or suggesting companies who received the notice engaged in deceptive or unfair conduct. Rather, the FTC distributed the notice widely to warn many companies that “if they use endorsements to deceive consumers, the FTC will be ready to hold them responsible with every tool at its disposal.” In sum, the notice constitutes a warning shot to all industries — including the wine industry — that the FTC will not tolerate online testimonials, reviews6 and endorsements that are misleading or deceptive.

Endorsements on Social Media

There is no doubt that the growth of social media and “influencers” represents a change in how brands, celebrities, spokespersons and consumers interact. That is why it is especially important to remember that testimonials, endorsements and reviews posted on social media or websites must disclose any “material connection” between the endorser and the marketer of a brand.

The FTC has an endorsement guide available with lots of helpful examples. The FTC also posted responses to commonly asked questions about endorsements. Here are just a few key takeaways from those resources:

• “Material connection” includes any connection that “might materially affect the weight or credibility of the endorsement.” In other words, a “material connection” is not just a payment or contract. According to the FTC, “being entered into a sweepstakes or a contest for a chance to win a thousand dollars in exchange for an endorsement could very well affect how people view that endorsement.”
• The disclosure of a material connection must be clear. Disclosures like “Thanks [Brand],” or “#partner” are insufficient to show that a brand sponsored a testimonial, endorsement or review. In contrast, “#ADVERTISEMENT” or “#PAIDCONTENT” are clear.
• The disclosure must be visible to the user. Instagram users on mobile devices typically see only the top three lines of a post unless they click “more.” Thus, the FTC has warned marketers and influencers that when making endorsements on Instagram, they should disclose any material connection above the “more” button.
• The disclosure must be prominent. When a post uses multiple tags, hashtags or links, readers may just skip over them, especially when they appear at the end of a long post — meaning that a disclosure placed in such a string is not likely to be conspicuous enough.

It is also important for advertisers to have reasonable programs in place to train and monitor members of their network (e.g., bloggers and social media influencers). The scope of the program depends on the risk that deceptive practices by network participants could cause consumer harm — either physical injury or financial loss. Here are some elements that the FTC suggests every program should include:

• Given an advertiser’s responsibility for substantiating objective product claims, explain to members of your network what they can (and cannot) say about the products.
• Instruct members of the network on their responsibilities for disclosing their connections to you.
• Periodically search for what your people are saying.
• Follow up if you find questionable practices.

While it is unrealistic to expect marketers to be aware of every single statement that participants in their network make, they still must use reasonable efforts to know what those participants are saying.

More Information

These are just some of the issues and practices of which wineries and other businesses should be aware when engaging in advertising on social media through testimonials, endorsements or reviews. For more information, wineries should refer to the FTC resources cited in this update and on the FTC’s website or seek advice from a qualified professional or attorney.