Big FTC Penalties on Google and iHeart for Deceptive Endorsements in Broadcast Commercials Mandate Care in Crafting Your Local Advertising
December 9, 2022
All media companies, including broadcasters, webcasters, podcasters and others, need to consider carefully their advertising production after the big penalties imposed on Google and iHeart for broadcast commercials where local DJs promoted the Pixel 4 phone. Promotions included statements that clearly implied that the announcers had used the phone, including statements that it was “my favorite camera” and “I’ve been taking studio-like photos” with the phone. But, according to the announcements of the settlement with the Federal Trade Commission and seven state attorneys general (see the FTC press release and blog article), the announcers had not in fact used the phone. Google will pay the states penalties of $9 million, and iHeart will pay about $400,000 (see example of the state Court filings on the settlement, this one for Massachusetts, for Google and iHeart). Each will enter into consent orders with the FTC (Google order here and iHeart here) requiring 10-year recordkeeping and compliance plans to train employees, maintain records of advertising with endorsements, and reports to be filed periodically with the FTC.
The mission of the FTC is to protect the public from deceptive or unfair business practices and from unfair methods of competition. In that role, the FTC regulates deceptive advertising practices. Over a decade ago, we highlighted the FTC’s update of its policies on “testimonial and endorsement advertising” that made clear that the FTC required that any sort of “celebrity” (interpreted broadly) endorser had to have a basis for the claims that they were making in their pitches for a product. This notice also made clear that any statements made about the experience in using a product had to be accurate and, when making claims about the performance of a product, the endorser had to accurately state performance that users can expect to obtain when they use the product. Just using a “your results may vary” disclaimer was not enough. In the 2009 proceeding, the FTC emphasized the applicability of these standards to online promotions, requiring disclosures for not only traditional advertising but also for social media influencers and others who are paid to promote products through online channels. Such payments (or any other valuable consideration the influencer receives) must be disclosed when pitching a product.
More recently, the FTC last year, perhaps foreshadowing last week’s action, issued a notice that we wrote about here, reminding businesses that prohibited practices “include, but are not limited to: 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.” In other words, when an endorser says something about a product, the FTC is expecting that the endorser used the product and that the statements it makes about the product are accurate and reflect what consumers can expect from that product. A similar reminder was sent to social media influencers in 2017 (see our article here).
So the bottom line for all media companies is that, when you are receiving anything from any company to promote their product, you need to disclose the consideration that you received. And when you make statements about a product, you need to have a reasonable basis for the statements. Endorsers, particularly “celebrity” endorsers which include media hosts, cannot represent that they have used a product and obtained specific results when they have not received those results. There are many nuances to these rules, and FTC has issued many sets of guidance on the requirements (see their webpage highlighting some of that guidance). Familiarize yourself with these guidelines. And, as we wrote here, especially at this time of year when so much advertising is coming your way, watch out for other legal issues that can arise. Be careful in today’s wild world of advertising!
David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access). There are no additional costs for the call; the advice is free as part of your MAB membership.