The United States Federal Trade Commission (FTC) sent notices to over 700 companies about fake reviews and misleading endorsements. The notice states that receiving the letter does not suggest that the company is engaging in unlawful practices. The communication goes on to note that violating FTC guidelines could result in penalties up to $43,792 per violation.
The FTC notice states that it is not suggesting that the companies have engaged in the deceptive practices.
But the notice itself is ominously titled, “the Federal Trade Commission’s Notice of Penalty Offenses Concerning Deceptive or Unfair Conduct around Endorsements and Testimonials” while also stating the purpose as putting “your company on notice.”
Companies Not Singled Out?
The Federal Trade Commission (FTC) notice claims that the companies are not being singled out.
Yet the FTC seems to have done exactly that by publishing a public list that singles out the companies that were sent the notice.
Many of the companies on the list are some of the most prestigious brands and marketing agencies in the world are on that list.
This is the wording in the sample letter:
“Receipt of the notice puts your company on notice that engaging in conduct described therein could subject the company to civil penalties of up to $43,792 per violation.1
We request that you distribute copies of the notice of penalty offenses and this letter to each of your subsidiaries that sells or markets products or services to consumers in the United
FTC staff is not singling out your company or suggesting that you have engaged in deceptive or unfair conduct.
We are widely distributing similar letters and the notice to large companies, top advertisers, leading retailers, top consumer product companies, and major advertising agencies.”
Endorsements, Influencers and Reviews
An area of concern for the FTC is in the rise of social media and the monetization of endorsements and reviews by influencers.
The FTC announcement described the problem:
“The rise of social media has blurred the line between authentic content and advertising, leading to an explosion in deceptive endorsements across the marketplace. Fake online reviews and other deceptive endorsements often tout products throughout the online world.
Fake reviews and other forms of deceptive endorsements cheat consumers and undercut honest businesses… Advertisers will pay a price if they engage in these deceptive practices.”
Some of the activities that the FTC is warning about involves generating endorsements and reviews in a deceptive or misleading manner.
The list of companies that were sent the warning letter consist of big brands such as 1-800-Flowers and some of the biggest marketing agencies in the world, like The Ogilvy Group LLC.
The FTC announcement stated that action was needed because of the rise of social media and the subsequent commerce in endorsements and reviews that the FTC claims are deceptive.
Social media contests and reviews are two of several kinds of deceptive practices called out by the FTC’s Endorsement Guide.
Social Media Contests
The guidance specifically mentions requiring the public to tweet with a specific hashtag as part of contest as a deceptive practice and offers suggestions of a better way to do it that offers better disclosure that something of value (a chance to win a prize) was the reason for the tweet or post.
Another example is of a YouTube creator that is contracted by Video Game companies to publish reviews by gamers. The FTC guidelines states that it is important to disclose that an exchange of money had occurred.
The FTC guide is largely in the form of a question and answer FAQ.
Here’s the section about the YouTube creator:
“I’m doing a review of a videogame that hasn’t been released yet. The manufacturer is paying me to try the game and review it. I was planning on disclosing that the manufacturer gave me a “sneak peek” of the game. Isn’t that enough to put people on notice of my relationship to the manufacturer?
No, it’s not. Getting early access doesn’t mean that you got paid. Getting a “sneak peek” of the game doesn’t even mean that you get to keep the game. If you get early access, you can say that, but if you get to keep the game or are paid, you should say so.”
Public List of Companies Receiving a Warning
The FTC published a PDF with the names of all the companies who are receiving warnings.
There is a prominent disclosure at the top of the document that states that the list is not meant to indicate that the companies did anything wrong.
This is the statement:
“The fact that a company is on this list is NOT an indication that it has done anything wrong”
There are many well known names on the list across a variety of industries.
Travel and Hospitality Companies Sent a Notice
- TripAdvisor, Inc
- Hilton Worldwide Holdings, Inc.
- Howard Johnson International Inc
- Holiday Inn
- Hyatt Hotels Corp.
- Starwood Hotels and Resorts Worldwide, Inc.
- Ramada Worldwide Inc.
- The Ritz-Carlton Hotel Company, LLC
- Wyndham Hotels & Resorts, Inc
User Reviews and Recommendation Sites:
- Angi Inc.
- HomeAdvisor Inc.
- Yelp, Inc.
Popular Brands that Received Notice
- Airbnb, Inc.
- Apple Inc.
- AutoNation Inc.
- eBay Inc.
- Google Fiber Inc.
- Google LLC
- Microsoft Corp.
- YouTube LLC
- Zillow Group, Inc
Be Aware of the United States FTC Guidelines
The action targets the following but is not limited to these kinds of activities:
“…falsely claiming an endorsement by a third party; misrepresenting whether an endorser is an actual, current, or recent user; using an endorsement to make deceptive performance claims; failing to disclose an unexpected material connection with an endorser; and misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience.”
Businesses that engage in social media and influencer marketing activities, advertising, affiliate marketing and reviews should consider reading the FTC announcement and follow the links to the published guidance on how to properly advertise through these mediums.
PDF: Sample Letter – Unlawful Practices Relating to the Use of Endorsements and Testimonials