Originally published in TACTICS, April 2012

The Internet enables businesses to reach a wide range of consumers. Beyond the confines of their own websites, businesses are using social media and seeking recognition from popular bloggers to tout their products and services.

The informality of the Internet and the low barrier to entry, however, often lead businesses to forget the legal restrictions applicable to certain commercial speech. In recent years, the Federal Trade Commission (FTC) has made it clear that laws and regulations relating to deceptive advertising and endorsements are applicable to the online environment.

The FTC issued formal guidelines, available on its website (www.ftc.gov), concerning the use of endorsements and testimonials in advertising, including online endorsements. Businesses that do not comply with these guidelines may be subject to liability and enforcement action by the FTC for false and deceptive advertising. Key points include:

  • An endorser's statements must reflect their honest opinions, findings, beliefs or experience.

For example, an endorser may not claim to use a product the endorser does not actually use.

  • If there is a "material connection" between the endorser and the advertiser (the endorser is an employee or relative of the advertiser), then you must disclose this relationship.

If, for example, an employee of a record label writes a positive review of an album released by that label in iTunes, then the review must disclose the employment relationship.

  • If the endorser has received something of value (a free product, a commission, or a gift) in exchange for an endorsement, then you must disclose this fact. For example, if a blogger is given free products in exchange for promoting a clothing line, then the blogger must disclose the compensation.
  • Disclosures should be included even on platforms such as Twitter that limit message length. The FTC recommends using a hashtag such as #paidad, #paid or #ad.
  • All disclosures must be clear and conspicuous. It is generally not sufficient to include a disclosure in an obscure location.

As both advertisers and endorsers may be held liable for failure to comply with the FTC guidelines, advertisers must educate endorsers regarding their obligations. Prudent advertisers will establish an official policy for dealing with bloggers and other online endorsers to help ensure FTC compliance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.