May 20, 2019

product-endorsement
Product Endorsement Guidelines

The New York Times recently published an article reporting that certain plastic surgeons and cosmetic dermatologists (collectively, the “Doctors”) may have violated Federal Trade Commission  (“FTC”) and Food and Drug Administration (“FDA”) product endorsement and advertising regulations. In summary, the performance beauty company, Evolus, Inc. (“Evolus”), paid for Doctors to attend an “advisory board meeting” at the Ritz-Carlton in Cancun, Mexico, where it introduced them to its new wrinkle-smoothing injection product, Jeuveau. While attending this “advisory board meeting,” the Doctors were entertained with free gifts, dance parties and fireworks. Many of the Doctors took to their social media accounts to share this extravagant experience with their followers. In the subject social media posts, the Doctors used the company’s hashtag #newtox, often without any disclosure as to their relationship with Evolus. Neither the FTC, nor the FDA, has yet to take action against the Doctors or Evolus.

How does the FTC and FDA regulate product endorsements?

FTC and FDA Guidelines for Product Endorsements

The FTC Endorsement Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Guides”) are a valuable resource for marketers, brands and their influencers. The Guides establish that any material connection between an endorser and an advertiser (whether through a business or family relationship, monetary payment, or the gift of a free product, for example) has to be clearly and conspicuously disclosed to the public, unless it is obvious from the context of the applicable communication that a relationship already exists. These relationships are often obvious in traditional media, but are harder to distinguish on social media. Therefore, the FTC requires complete transparency when a relationship exists between a social media influencer and an advertiser. In order to achieve this, the FTC Guides require endorsers to: 1) always disclose any financial or familial relationship with a brand; 2) ensure that the sponsorship disclosure is situated where it will catch the viewer’s eye; 3) use hashtags that display the nature of the post, i.e., #sponsored, #paid ad, or #promotion; and 4) superimpose disclosures over images appearing on image only platforms, such as Snapchat.

The FDA oversees advertising related to prescription drugs and certain medical devices, including hearing aids. To comply with FDA advertising regulations, endorsers and advertisers must disclose in their drug-related marketing materials: 1) at least one approved use of the subject drug; 2) the generic name of the drug; and 3) all of the risks associated with using the drug (certain circumstances only require the most important risks). The FDA will take action when it believes that the endorser or advertiser, as applicable, is not adequately representing the drug’s benefits or the drug’s risks, regardless of advertising medium.

FTC and FDA Policing of Product Endorsements on Social Media

As marketing has evolved in recent years, so have the FTC and FDA in their efforts to protect consumers from deceptive advertising. Brands, as well as their product endorsers, are now responsible for complying with the Guides and regulations. In 2015, for example, the FDA issued a warning letter to the drug company Duchesnay Inc. (“Duchesnay”), requiring it to remove an Instagram post that was published by Kim Kardashian, one that touted the benefits of the morning sickness drug, Diclegis. The FDA advised Duchesnay that the post needed to be removed because it omitted requisite drug use risk information. In 2016, the FTC took regulatory action against Lord & Taylor, LLC (“Lord & Taylor”) because: 1) fifty Instagram fashion influencers had failed to disclose in their posts that they had been compensated by Lord & Taylor for such advertising; and 2) Lord & Taylor had not otherwise obligated the influencers to make such disclosure. In 2017, the FTC sent more than 90 educational letters to social media influencers and brands to inform them of their respective obligations to disclose the nature of their relationship in online marketing. More recently, influencers, such as Kendall Jenner and Bella Hadid, have been criticized for failing to disclose their relationships with the ill-fated Fyre Festival in their promotional posts.

Given the ubiquity of social media and the presence of advertising within it, it is often unclear as to whether someone is offering opinion or making a product endorsement. To avoid the risk of serious legal and regulatory consequence, sellers and marketers should ensure that their marketing and endorsement practices comply with applicable law and regulation. If you are interested in learning more about this topic, or if you are providing or soliciting product endorsements, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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FTC Investigation Leads to its First Fake Reviews Settlement

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