FTC sends over 700 letters ahead of potential crackdown on unfair and misleading opinions and approvals

The Federal Trade Commission warned more than 700 companies this week with letters in which it addressed “illegal practices relating to the use of endorsements and testimonials.” In recently sent letters, a template of which was released on Wednesday, the FTC alerted companies ranging from luxury brands and well-known conglomerates to retail platforms, social media sites and consumer clothing entities. , among other things, that they could be subject to civil penalties of up to $ 43,792 per violation in connection with false or misleading claims and / or reviews.

According to the FTC Letter Template, “Businesses use recommendations and testimonials in many forms to advertise and market their products and services, both through traditional and social media, as well as in the form of online notices. line “. While approvals and testimonials are not inherently problematic, the government agency – which is responsible for promoting consumer protection, and eliminating and preventing anti-competitive behavior in the marketplace – asserted that “as evidenced by [its] enforcement and other efforts, some companies use these advertising tools in a way that deceives consumers.

Addressing the types of use of endorsements and testimonials that are likely “misleading or disloyal and are illegal under Section 5 of the Federal Trade Commission Act,” a federal law that broadly prohibits deceptive practices in advertising, the FTC pointed out the following: “False Claiming Third Party Endorsement; misrepresent whether an endorser is a real, current or recent user; use an endorsement to make misleading performance claims; and distort that the endorser experience represents the typical or ordinary experience of consumers.

Also problematic, according to the FTC, with not disclosing an unexpected material connection with an endorser. After all, the agency requires the material connections between brands and publications – and brands and influencers, celebrities, etc. – are “clearly and visibly” disclosed. Such disclosure can take the form of hashtags, such as #Ad or #sponsored, as well as plain language that alerts consumers that an approval is the result of a link between the endorser and the endorser. company in question.

In light of the above, the FTC said receipt of its letters made the questioning companies aware of the illegal nature – and the potential penalties that could follow – of such deceptive approval activities, and the agency government recommends that companies “carefully review the notice and take the necessary steps to ensure that [their] practices do not violate the law.

As for the companies that received the letters, the FTC confirmed that they included sportswear brands like Nike, adidas, Converse and Skechers; fashion and luxury groups Kering, LVMH, Richemont, Tapestry and the owner of Supreme VF Corp. ; luxury brands such as Rolex, Chanel and Tiffany & Co.; retailers like Bloomingdales, Macy’s, Target, eBay, Amazon, and Walmart; and consumer brands Gap, Banana Republic, Aeropostale, Patagonia, Victoria’s Secret and Urban, among others. Also on the list of recipients: Apple, Facebook, Inc. and Google, the online gaming platform Roblox, the brand new Honest Company, and the Kylie Jenner brand of Kylie Cosmetics, LLC. (Jenner, for her part, has been criticized in the past for failing to properly disclose sponsored posts on her personal Instagram account.)

The FTC was quick to note that its staff “are not targeting” companies through their letter or “suggesting that [recipients] have engaged in deceptive or disloyal conduct. Instead, the agency said it “distributes letters and notices widely to large corporations, major advertisers, major retailers, major consumer product companies and major advertising agencies,” apparently in forecast of a possible surge in the repression of illegal practices by the main market players.

While deceptive reviews and approvals have been the focus of the FTC’s attention lately, the agency sent out more than a series of warning letters to influencers and brands in 2017 and alluded to stronger action against major influencers, brands and platforms. , the letters appear to warn companies that the Commission may be considering toughening up the tone in the not-so-distant future. Specifically, attorney for Hunton Andrews Kurth LLP, Phyllis H. Marcus, says that by sending out more than 700 criminal offense notices, the FTC “hopes to create the knowledge needed now to identify recipients later, a strategy has was announced by FTC Commissioner Rohit. Chopra and Director of Consumer Protection Samuel Levine in an October 2020 article, “The Case for Resurrecting the FTC Act’s Penalty Offence Authority”.

“It is clear that following the Supreme Court decision in April 2021, [in which it] rejected the FTC’s ability to use FTC law to obtain restitution and restitution from companies that engage in unfair or deceptive advertising practices, the agency is looking for new ways, in the words of Chopra and Levine, “d ‘Dramatically increase deterrence and reduce the risk of litigation by noticing entire industries of sanction violations, exposing violators to significant civil penalties, while helping to ensure fairness for honest businesses. ”

Going forward, Marcus encourages companies to educate themselves about FTC-approved endorsement and testimonial practices, and to “review their internal policies regarding the use of endorsements and testimonials in advertisements, and ‘ensure they comply with FTC requirements’.

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