We recap some of the most relevant insights below.

Contrasting Views on FTC Mission and Enforcement Priorities

Earlier this week, we summarized Commissioner Holyoak’s comments to NAD, which criticized the FTC for, in her view, overstepping its congressional authority and oversimplifying complicated data practices.

BCP Director Samuel Levine painted a very different picture of the agency’s positions and accomplishments in his keynote. Levine lauded the Commission for its enforcement actions (calling it the “greatest public interest law firm in the world”), and specifically highlighted some recent FTC settlements relating to junk fees and subscriptions, telemarketing, multi-level marketing, rental practices, and artificial intelligence. Although Levine emphasized the FTC’s proposed click-to-cancel rule and revised Green Guides, he did not provide an update on timing for either.

Holyoak’s and Levine’s contrasting views underscore that, despite promises of unity during the Republican Commissioners’ confirmation hearings earlier this year, the Commission still appears to be divided among party lines, with the Republican Commissioners growing more vocal in their discontent.

Interplay Between FTC Guidance and NAD Decisions

In a discussion with Executive Vice President Mary Engle, John Villafranco explored Engle’s views on how the NAD should react to the FTC’s increasingly more aggressive positions set out in recent guidance and proposed rules. This conversation was particularly timely in light of recent Supreme Court decisions this summer that limit deference granted to administrative agencies.

The key questions explored in this panel were as follows:

• If the FTC’s guides and proposed rules don’t have the force of law, and FTC complaints do not allege violations of guides, but instead refer to Section 5, why should the NAD rely on agency guidance in concluding whether advertising is truthful and accurate?
• And if the FTC takes positions in guidance or in proposed rules that appear to be outside of its statutory authority and/or that federal courts have found to be unsupported, should NAD follow suit?

Engle’s response centered around the need for consistency within the advertising space. She noted that unlike other countries, the U.S. does not have an advertising code to guide what marketers can and can’t say or dictate the types of substantiation required for various claims. Instead, advertising common law has developed over the years through FTC enforcement actions. NAD generally seeks to apply the same interpretations as the FTC in order to create consistency between regulation and self-regulation.

That being said, it is important to keep in mind that guidance and proposed rules generally reflect the views of the current FTC staff and may not be shared by future staff. The panel discussed instances where the FTC has revised or rescinded prior guidance, causing upheaval in industries that had relied on those guidelines for many years. Should NAD simply follow any positions the FTC takes in such guidance documents, it may find itself needing to reverse course and reject its own precedent should the agency take a different view of the issue in the future.

Endorsements and Reviews

Endorsements and reviews continue to be a hot topic for the NAD and FTC. This is not surprising, given that the FTC announced its final rule on “fake reviews” last month, which we wrote about here. Highlights from this year’s influencer marketing panel are included below.

• Speakers stressed that while built-in platform disclosure tools, such as those on Instagram, have come a long way in terms of providing clear and conspicuous disclosures, these disclosures often disappear when the content is “shared” to other platforms—meaning companies and their influencers should not rely solely on these built-in tools to make required disclosures. A recent NAD decision highlights this important takeaway.
• Panelists also emphasized that disclosures indicating a post is sponsored, but that do not make clear who sponsored the post, are likely to be ineffective in the eyes of regulators. In other words, companies and influencers should avoid using tags like #sponsored without making clear what brand is doing the sponsoring. NAD similarly expressed this position in its recent Cariuma decision.
• Lastly, panelists remarked that paid content often requires a disclosure, even if the brand shares the content on its own social media feed. Brands should think twice before removing or excluding disclosures from influencer posts that appear on the brand’s own channels.

Testing and Surveys

As expected, many panels discussed claim substantiation, including what types of tests companies should rely on in substantiating their claims, and whether and when to engage an expert or to commission consumer perception surveys. These discussions provided interesting insights into NAD attorneys’ views on best practices within the NAD forum, including that practitioners should:

• Submit the majority of their supporting evidence in their first submission to NAD—not in their reply—as it sends a message to NAD about the strength of the party’s evidence.

• Consider submitting expert reports when needed and consider utilizing experts in emerging and specialized areas, such as accounting.

• In the absence of an industry standard, make sure that the company is still providing reliable testing along with sufficient information about its methodology.

Puffery

The line between puffery and deceptive advertising continues to be a subject of much discussion among practitioners and marketing professionals. The tension, astutely identified in a panel dedicated exclusively to this topic, is that on the one hand, advertisers argue puffery is not illegal because no reasonable consumer would believe it. In other words, it doesn’t work. On the other hand, advertisers use puffery because (they believe) it is effective in convincing consumers to purchase products. In other words, it works. Panelists reviewed a number of NAD decisions relating to puffery that highlighted the case-specific nature of a puffery analysis. A few takeaways include:

• Whether a claim is puffery often hinges on whether the claim is presented alongside measurable attributes. For example, in cases involving “ultimate” claims, such as the “ultimate energy bar” claim at issue in CLIF Energy Bars, NAD has determined that a claim is not puffery when it is presented in the context of objectively measurable attributes—such as Clif’s description that its energy bar contains “an optimal blend of protein, fat, and carbs.”
• In cases involving “best” claims, like “best tasting,” NAD has frequently found “world’s best” claims more likely to be puffery than mere “best” claims.

Dark Patterns

Dark patterns continue to be a priority for the FTC. While much of the panel’s discussion mirrored the FTC’s guidance, we offer some practice pointers to help you steer clear of deceptive practices:

• When conducting A/B testing, companies should optimize not only for conversions, but also for consumer experience. This is particularly important given the uptick in FTC settlements requiring companies to preserve their A/B testing, as Levine described in his remarks, as well as numerous investigation requests from the FTC involving companies’ A/B testing results in recent years.

• Explain material terms, ensure these terms are clear and conspicuous, and consider how the layout will appear on tablets, mobile devices, and computer screens.

• Monitor and consider chargebacks and consumer complaints, which could be an early indicator of consumer confusion.

• Assess whether default settings (if any) are beneficial to the consumer or the company.

• Assess cancellation methods through the lens of the consumer, making sure to allow cancellation through the same method as sign-up and evaluating the time and difficulty involved with the cancellation process.

Artificial Intelligence

While panelists discussed the ethical implications of artificial intelligence, Commissioner Holyoak took a different approach, explaining her view that the FTC needs to learn more about AI through 6(b) studies, stakeholder dialogue, and targeted enforcement rather than assuming a few, highly visible problems are indicative of larger scale problems. Holyoak counseled caution and information gathering in order to make sound decisions that will not stifle the innovation of AI at its outset.

NAD looked to the Endorsement Guides and noted that the term “endorsement” is broadly defined as “any advertising, marketing, or promotional message for a product that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser.” The Endorsement Guides go on to say that “the name or seal of an organization can be endorsements.”

NAD found that one message reasonably conveyed by the use of the logos in the “As Seen In” box is that the publications have spoken favorably about LegalZoom or given it a positive review. Accordingly, LegalZoom’s inclusion of the logos constitutes an “endorsement” under the Endorsement Guides. NAD held that because consumers wouldn’t expect a relationship between LegalZoom and the publications, LegalZoom should clearly and conspicuously disclose its relationship to them.

It wasn’t enough that some of the publications included disclosures on their own websites explaining that they have a relationship with LegalZoom. The Endorsement Guides state that to be “clear and conspicuous” the disclosure of a material connection between an endorser and the advertiser must be “difficult to miss (i.e., easily noticeable).” A disclosure on another company’s website doesn’t meet this standard since consumers who don’t visit that website would miss the disclosure.

If you want to advertise that your company’s products or services have been featured by a publication or other third-party organization, you need to ask yourself whether you have a “material connection” to that publication or organization. For example, did you pay for them to feature your products or do you have an affiliate relationship in which you pay them a commission for purchases? If so, you may need to figure out how to disclose that.

We wrote in depth about the Commission’s notice of the proposed rulemaking last summer. The final rule largely follows the previously proposed language with one notable exception discussed below. Here’s a summary of what the rule prohibits:

• Businesses are prohibited from writing or selling consumer reviews or testimonials that are from someone who doesn’t exist (such as reviews generated by AI), that are from someone who doesn’t have actual experience with the business or its products, or that mispresent the person’s experience. The rule also prohibits businesses from purchasing or disseminating those types reviews and from procuring those types reviews from employees or their family members.
• Businesses are prohibited from offering incentives to others in exchange for writing reviews that are required to convey a particular sentiment, regardless of whether that sentiment is positive or negative, and regardless of whether that requirement is explicit or implicit.
• Businesses (and their officers and managers) are generally prohibited from writing, soliciting, or disseminating reviews and testimonials from insiders or their relatives, unless those reviews or testimonials clearly disclose the person’s material connections to the business.
• Businesses are prohibited from misrepresenting that a website or entity provides independent reviews or opinions about a category of products or services that includes a company’s own products or services.
• Businesses are prohibited from attempting to suppress negative reviews through means such as groundless threats, intimidation, or false accusations. In addition, if a business’ website suppresses reviews based on their rating or negative sentiment, the rule prohibits that business from misrepresenting that the reviews represent most or all submitted reviews.
• Everyone is prohibited from selling or buying fake indicators of social media influence, such as fake followers or views.

As we noted in our previous post, the initial proposal included a provision that would have prohibited businesses from “using or repurposing a consumer review written or created for one product so that it appears to have been written or created for a substantially different product.” The FTC noted it was not immediately able to resolve a factual dispute regarding the definition of “substantially different product” and thus decided not to finalize that provision.

Violations of the rule carry a maximum civil penalty of almost $52,000 per violation. What constitutes a single violation is not defined, but the FTC notes that “ultimately, courts will also decide how to calculate the number of violations in a given case.” Based on a post announcing the rule, the “FTC will look to use it, when applicable, to go after those who employ these prohibited practices to hoodwink consumers and get an unfair leg up on their competitors.”

Last week, the FTC announced a proposed settlement with CarShield over allegations that the company had made misleading claims about what its vehicle service contracts cover, misrepresented that consumers could get their cars repaired at the shop of their choice, violated the Telemarketing Sales Rule, and used deceptive endorsements. That’s a lot – and it helps to explain the $10 million price tag on the settlement – but for this post, we’re just going to focus on the endorsement issues.

CarShield used a number of celebrities – including Ice-T, Vivica A. Fox, Adrienne Janic, and Ernie Hudson – to promote its service contracts. In some commercials, the celebrities simply talked about how CarShield works. In other commercials, though, the celebrities also talked about their personal experiences with the company’s services. For example, in one commercial, Ice-T says that he protects his own cars with CarShield and that CarShield helps get repairs covered “so I don’t have to.”

According to the FTC’s complaint, though, the celebrities that claimed to be CarShield customers in the commercials were customers only “nominally.” Although the celebrities had vehicle service contracts with the company, some of them never used those contracts to cover repairs. In other cases, the celebrities that did use CarShield for repairs were treated as “preferred customers” by the company and got repairs approved “that would not have been approved for a typical consumer.”

In addition to using celebrity endorsers, many commercials featured consumer endorsers talking about their experience with the company and how much money they saved. For example, in one commercial, a consumer states: “I’ve been a CarShield customer for close to seven years, had three vehicles covered, and they saved me close to $9,000.” According to the FTC’s complaint, a number of those consumers never saved the amounts of money they claimed.

Among other things, the settlement prohibits CarShield from mispresenting that a person has used the company’s services if that person hasn’t and from mispresenting a person’s experiences with those services. That’s no surprise and is consistent with other settlements in this area. For example, take a look at our post about a FTC and state AG settlement over allegations that Google paid iHeartMedia DJs to talk about their experiences with phones they had never actually used.

If you work with celebrities, influencers, or consumer endorsers, this settlement holds some lessons for you. If you provide scripts or talking points for your endorsers, make sure you have cleared all claims and that you aren’t asking the endorsers to talk about personal experiences they haven’t had. And if you’re reviewing content provided by endorsers, make sure you can substantiate any claims they make and that those claims represent what consumers are likely to experience with your product or service.

Maybe that’s what Ice-T was thinking about when he wrote this in his memoir: “Just be yourself. Just be you, dog. The easiest way to get your card plucked around a gangster is to be a fake.” (Polonius said something similar in Act I, Scene 3 of Hamlet.) Or maybe Ice-T was thinking about something else. Either way, there’s probably some good advice there. Being fake can have consequences, ranging from getting your card plucked to paying millions of dollars.

In 2020, Cameo launched a service called Business Cameo that allows companies to pay celebrities to make videos endorsing their products. According to a bipartisan group of 30 state Attorneys General, though, Cameo failed to take steps to ensure the celebrities disclosed that their videos were paid messages. If you read this blog, you already know that’s required under the FTC’s Endorsement Guides and state laws.

To settle the AG investigation, Cameo agreed to implement procedures to ensure that endorsers “clearly and conspicuously” disclose any material connections they have to the companies they promote. (Like the FTC’s Endorsement Guides, the settlement goes into detail about how disclosures should appear so that they are easy to notice and difficult to miss.) The procedures that Cameo agreed to implement include:

• Maintaining a watermark or similar disclosure system to indicate that a video was paid for;
• Requiring users and endorsers to acknowledge that they need to comply with rules related to endorsements;
• Establishing detailed procedures for monitoring videos to ensure compliance; and
• Establishing a system that will allow third parties to report videos that don’t comply.

In addition to changing its practices, the company will pay $100,000 to the states, which was reduced from $600,000 because of their inability to pay the full amount.

Although there are some elements of the settlement that are unique to Cameo’s business model, most of the themes are broadly relevant to other influencer campaigns. For example, companies need to instruct influencers to clearly make the required disclosures. What’s clear to marketers is usually not the same as what’s clear to regulators, so pay attention to what ends up in settlements like this one and in warning letters.

Good instructions aren’t enough, though. You should also establish procedures to monitor posts and address problems. As part of the settlement, Cameo agreed to establish detailed procedures that include reviewing videos from problematic advertisers, as well as a random sampling of other videos. Those procedures may not make sense for you, but make sure you have something in place that’s reasonable for your campaign.

The world of influencer marketing is getting more complicated, but you can contact us if you need help figuring out the rules. You can also contact us if you’d like to see if our celebrity podcast narrator would be willing to record a Cameo message for you. According to Jimmy Kimmel, George Santos charged up to $500 per message. Be warned that our narrator is worth a lot more (and has access to better legal representation.)

Feeling betrayed, Mario and Alin filed a lawsuit against 21st Century Spirits (the makers of Blue Ice Vodka) alleging – among many other things we won’t cover in this post – that 21st Century Spirits and its influencers had made misleading health claims about the vodka and that the influencers hadn’t disclosed that they were being paid by the company to promote the vodka, as they are required to do under the FTC’s Endorsement Guides.

21st Century Spirits argued that they hadn’t made any health claims. An Illinois federal court rejected that argument, citing a post in which an influencer stated: “I make fit-friendly cocktails that have fewer calories than an apple.” The court noted that some consumers would surely interpret this to mean that the vodka is healthy, but that whether that interpretation is reasonable shouldn’t be decided by a judge at the motion to dismiss stage.

With respect to the plaintiffs’ arguments that the influencers didn’t comply with the Endorsement Guides, 21st Century Spirits countered that the Guides are “not law” but merely “advisory in nature.” The court noted that although the Guides are not the source of per se violations of statutes like Florida’s false advertising law, even “interpretations” under the FTC Act are entitled to “due consideration and great weight” when analyzing whether something is deceptive under the law.

21st Century Spirits argued that the influencer posts weren’t “endorsements” under the Endorsement Guides because the influencers merely mentioned the vodka. The court rejected that argument, noting that many influencers overtly promoted the vodka. For example, one influencer posted that “there’s nothing better than relaxing with a smooth @blueicevodkausa cocktail in hand after a long day,” that the vodka “can definitely help you stay fit during quarantine,” and that consumers should have some delivered.

21st Century Spirits also argued that, even if the posts were endorsements, a disclosure wasn’t necessary because a “reasonable consumer” wouldn’t interpret the posts as “honest consumer advice.” The court reframed the argument in a better way, suggesting the company meant that because consumers would reasonably expect that the influencers were paid, a disclosure wasn’t necessary. The court still rejected that argument because it’s not clear whether consumers would have that expectation.

This case isn’t over yet, but there are still some lessons you can learn at this stage. First, to save you the time Mario and Alin spent researching the issue, we’ll tell you that although it’s fine to enjoy vodka periodically, vodka probably shouldn’t form the foundation of your health and fitness plans. (If you remember this post from 2016, you may recall that gin shouldn’t either.) But we’re not just here to give you health tips – we’re here to give you some legal tips, too.

To save you the time that 21st Century Spirits has spent fighting this issue, you need to pay close attention to your influencer campaigns. You need to ensure that your influencers don’t make claims about your products that you can’t support. And you need to ensure that your influencers clearly disclose their connections to your company. Although courts may not interpret the Endorsement Guides as strictly as the FTC will, they’ll likely give some weight to the FTC’s interpretations.

Ms. Fatale posted a video on Instagram demonstrating how the product works and used the platform’s “Paid Partnership” tool, along with “#ad” and “#sponsored,” to indicate that she was working with Fenty Skin. In a recent inquiry, NAD determined that the post did not meet the FTC’s requirement that influencers “clearly and conspicuously” disclose when they are working with a brand.

NAD explained that the FTC has cautioned companies against relying on social media platforms’ disclosure tools and has stated that those tools should be used in conjunction with other disclosures. Although the post did include “#ad” and “#sponsored,” NAD noted that the hashtags appear on the fourth line of the post’s description and that consumers wouldn’t see them unless they clicked to expand the post.

NAD recommended that Fenty Skin require Ms. Fatale to “modify the challenged post to include a clear and conspicuous material connection disclosure in the video demonstration itself.” This is consistent with guidance the FTC provided in warning letters to influencers last year in which staff suggested that the influencers superimpose a disclosure in “much larger text over the videos.”

As part of the same inquiry, NAD found that another influencer – Sarah Novio – had posted a video about the product on her Instagram and TikTok accounts. Ms. Novio wasn’t paid for the posts, but she did receive the product for free. Although she included a “gifted” disclosure on TikTok, she neglected to do so on Instagram, and when Fenty Skin re-posted the video on their account, they didn’t include any disclosure.

During the course of the inquiry, Fenty Skin advised NAD that it asked Ms. Novio to update her Instagram post to include a clear disclosure that she had received the product for free. In addition, Fenty Skin removed the post from its own Instagram page and promised NAD that it would only re-post it if and when Ms. Novio adds the disclosure.

When it comes to applying makeup, you can go for a subtle barely-there look or you can go for something more bold. We won’t judge. But when it comes to influencer disclosures, the barely-there look isn’t going to be enough. FTC and NAD want those to bold and prominent. Yes, some might call that garish and unattractive but, ironically, that will help you avoid unwanted attention.

Naked & Thriving, a family-owned skincare business, also runs The Bare Beauty Babes blog. One post on that blog started, much like this one does, with the question of whether hyaluronic acid can fight signs of aging. Unlike this post, though, that one included an answer to the question. In that post, a dermatologist claimed that she had “tested hundreds of hyaluronic acid serums” and found “5 that actually work.” A Naked & Thriving product came in first.

NAD wrote that endorsements from experts “must be supported by an actual exercise of the expertise that the expert is represented as possessing” in evaluating features which are relevant to an ordinary consumer’s use of a product. NAD requested information about the dermatologist’s expertise and the methodology she used to evaluate the “hundreds” of serums. Apparently, the advertiser didn’t provide it because NAD noted that there was “no evidence in the record” on either point.

The same claims that appeared on the blog also appeared in social media posts which were labelled as “sponsored.” Echoing concerns similar to ones FTC staff expressed in warning letters last year, NAD noted that a “sponsored” disclosure “might be insufficient if the viewer does not know who is the sponsor of the post. That is particularly true where, as here, a health professional is posting and endorsing a product.” The posts should have been more clear that Naked & Thriving was the sponsor.

On a related note, at the start of NAD’s inquiry, the bottom of each page of The Bare Beauty Babes blog included a disclosure in “very small print” stating: “The content on this site is sponsored and The Bare Beauty Babes may earn a portion of sales from products that are purchased through our site as part of our Affiliate Partnerships.” During the course of the inquiry, Naked & Thriving added a more prominent disclosure to the top of each page stating that it owned the blog. It also stopped recommending products.

If you asked us about how to fight signs of aging, we might give you some tips, but we’d probably direct you to consult a reputable health care professional. If you asked a reputable health care professional how to advertise an expert endorsement, they’d probably just direct you to consult us. In that case, we’d be happy to talk to you at length. For now, though, we’ll highlight two lessons you should take away from this decision.

• First, this decision demonstrates why it’s important to document the expertise your experts have and the methodology behind their recommendations. Simply saying that an expert is a doctor, for example, may not be enough.

• Second, this is the latest in growing line of cases in which NAD, FTC, and even competitors are challenging how endorsers (or influencers) disclose that they are working with the companies whose products they promote. Take a look at how your disclosure practices match up with these recent cases.

Keep visiting our blog for the latest in advertising and privacy tips (with occasional beauty tips thrown in for free).

In December 2022, NAD recommended (among other things) that Smile Prep ​“avoid conveying the message that Smile Prep does not give preferential treatment” to its affiliate partners and that it ​“clearly and conspicuously disclose that Smile Prep’s rankings, reviews, and product information of the clear aligners of its affiliate partners are advertising.” Smile Prep appealed the decision, an NARB panel affirmed the decision in March 2023, and the panel opened a compliance inquiry later that year.

Smile Prep made a number of changes to its site in an attempt to comply with the NAD and NARB decisions. For example, with respect to the issues we’re focusing on in this post, Smile Prep included a box at the top of each clear aligner review page on the website that begins with the words ​“Advertising Disclosure” in bold and then explains that: ​“When you buy products and services through our links, we may earn commissions.”

NARB determined that the ​“disclosure is neither clear nor conspicuous.” Among other things, NARB was concerned that ​“by having the disclosure appear on each page of the website, Smile Prep has obscured the fact that the disclosure is meant to apply to references to affiliate partners and their products.” Moreover, it worried that consumers may not understand the disclosure to communicate that the rankings, reviews, and other information about Smile Prep’s affiliate partners are ​“advertising.”

Smile Prep advised NARB that it believed that it was already in compliance with the NAD and NARB decisions and with applicable law, and that it was not willing to make further changes. It further stated that, ​“in the event of a referral, it looked forward to working with the FTC to craft a meaningful and fair approach to the regulation of all affiliate review sites.” Most companies wouldn’t look forward to that, especially after the FTC’s recent update to the Endorsement Guides.

This month, the FTC released a letter in which it noted that “after FTC staff explained the reason for NARB’s referral and its potential consequences, the company agreed to re-engage with NARB and NAD.” The company subsequently took additional steps to comply with the original decisions, including by adding a prominent disclosure explaining that it has an economic motivation for its recommendations. NARB subsequently closed the inquiry.

This case demonstrates that how companies disclose incentivized reviews (including through affiliate review sites) continues to be a hot topic for regulators, NAD, and even competitors. The updated Endorsement Guides include more granular requirements on what it means for a disclosure to be ​“clear and conspicuous” and companies will be evaluated against those requirements. The case also demonstrates the potential consequences of ignoring an NAD or NARB decision.

Wonderbelly engaged a number of influencers to promote its Wonderbelly Antacids on social media. The challenger argued that many of these influencers failed to properly disclose their material connection to Wonderbelly and that even when the influencers did make the necessary disclosures, they were buried among other hashtags or “below the fold” such that consumers would have to click a link to see them.

In response, Wonderbelly agreed to revise its influencer agreements to comply with the FTC’s Endorsement Guides. More specifically, the company will require influencers to include hashtags such as #ad or #WonderbellyPartner at the beginning of each post. The company also promised to require its influencers to verbally disclose their connection to Wonderbelly in video posts. NAD was happy with these changes.

The challenger complained about a post by Demi Moore promoting Wonderbelly which she stated was “not an ad” and failed to disclose that she is an investor in the company. Wonderbelly responded that Ms. Moore almost always discloses that she is an investor in her posts, and that it had advised her to ensure she does that in every post going forward. NAD was happy with that, too, although it cautioned that Ms. Moore should not claim that a post is “not an ad.”

The challenger also complained that when Wonderbelly reposted influencer posts, the original disclosures weren’t carried over to the repost. Wonderbelly argued that the reposts did not require a disclosure, but NAD disagreed. In fact, in the revised Endorsement Guides, the FTC has stated that when reposting material from a paid influencer, an advertiser must clearly and conspicuously disclose its relationship to the influencer in the repost.

There’s nothing surprising in this decision, but it’s worth noting that the challenge was brought by a competitor, rather than having been initiated by the FTC. Companies that take shortcuts hoping that they will stay under the FTC’s radar should remember that competitors have their own radars. And companies that find their competitors aren’t complying with the law should remember that NAD provides a forum to address that.

NAD assessed whether the posts were ads or editorial content and concluded that they fell into the former category. If you want to learn more about how NAD came to that conclusion, you can read the decision. In this post, we’re going to focus on the “sponsored” label. Although advertisers have long thought that to be a “safe” option for a disclosure, this decisions demonstrates that’s not always the case.

Here, NAD was concerned that “while the posts were labeled ‘Sponsored,’ it is not clear whether the posts are sponsored by the publisher or by Cariuma, the brand promoted in the posts.” NAD noted that recent FTC guidance suggests that a “Sponsored” disclosure may not always be enough and in some cases “it would be clearer if the post identified the brand that sponsored the social media post.”

FTC echoed that guidance in November when it sent warning letters to two trade associations and 12 influencers over their posts. Some of the letters expressed concern that although posts were labeled as “sponsored,” it wasn’t clear who sponsored them. “Without knowing who the sponsor of the post is, viewers might not be able to adequately evaluate the weight and credibility to give [the] endorsement.”

In many influencer campaigns, it should be obvious who is sponsoring a post, so it’s likely that a “sponsored” label will be sufficient. But this case demonstrates that using “sponsored” isn’t a “safe harbor,” as some have thought. It needs to be clear who is behind the post. This case also demonstrates that advertisers don’t just have to worry about the FTC – the NAD is focused on this issue, as well.

In 2022, Ferragni announced that she had partnered with Italian pastry company Balocco to create a limited edition pandoro – a traditional Italian Christmas dessert similar to a panettone – and launch a campaign to “support a research project for new therapeutic treatments for children suffering from Osteosarcoma and Ewing Sarcoma” at the Regina Margherita Hospital in Turin.

Last month, the Italian Competition Authority (or “AGCM”) announced that it had concluded that social media posts and press releases promoting the campaign misled consumers by suggesting that purchasing the limited-edition pandoro for around €9 – instead of the non-branded pandoro for around €4 – would result in a charitable donation. In reality, although Balocco had made a fixed donation to the hospital in 2022, proceeds of the sales did not benefit the hospital.

AGCM announced that it would fine Balocco €420,000 and Ferragni’s companies over €1 million over the misleading campaign. Ferragni announced that she is appealing the fine as disproportionate and unfair, but she also acknowledged that she had made “un errore di comunicazione” – a communication error – and promised to donate €1 million to the Regina Margherita Hospital.

This case unfolded in Italy, but the results could have been similar in the US. As we’ve noted before, charitable campaigns – including commercial co-ventures, in which companies suggest that the purchase of a product will benefit a charity – are highly-regulated, and companies can face regulatory scrutiny for getting things wrong. Make sure you ads are clear so that you avoid any communications errors.

Also remember the FTC has noted that anyone who plays a role in disseminating misleading messages could be held liable for those messages. For example, the FTC recently sent warning letters to two associations and their influencers reminding the recipients – including the influencers – that they are ​“on notice that engaging in conduct described therein could subject you to civil penalties of up to $50,120 per violation.”

• Regulators’ Favorite Shade – Dark Patterns: Following the FTC’s 2022 Dark Patterns Report and high profile enforcement action against Epic Games, regulators including the FTC, CFPB, and state AGs continued to bring enforcement and provide guidance on perceived “dark patterns” – primarily related to automatic renewal and continuous service options, but also as to chat bots, disclosures, and marketing practices more broadly. In January, the CFPB released guidance focused on dark patterns in negative option marketing. In March, the NAD joined the discussion in a decision highlighting potential issues with Pier 1’s advertising of discounted pricing only available with a paid subscription and its use of a pre-checked box for enrollment with that same subscription. The FTC continued to lead the charge – with dark patterns allegations playing a key role in a number of enforcement actions, including against Publishers Clearing House, Amazon, and fintech provider Brigit.

• Beyoncé and Taylor Swift Concerts Lead to War on Junk Fees: Okay, the war against junk fees may have predated the fees associated with the pop stars’ mega tours, but it continued in earnest throughout the year. As with dark patterns, the FTC, CFPB and state AGs all took on junk fees at various times. Most notably, the FTC proposed a far-reaching rule that could fundamentally alter how prices and fees are disclosed in businesses across the country. The comment period was just extended until February 7, 2024 for the proposed rule. Not to be outdone, California passed new legislation banning hidden fees and the Massachusetts AG issued draft regulations that would prohibit hidden “junk fees,” enhance transparency in various transactions, and make it easy for consumers to cancel subscriptions.

• Endorsement Guides: In June, the FTC released its long-awaited update to the Endorsement Guides. We noted that the Guides include some significant changes, including new examples of what constitutes an “endorsement,” details about what constitutes a “clear and conspicuous” disclosure, and an increased focus on consumer ratings and reviews. We also examined how the revisions could affect influencer campaigns. In November, we reported that the FTC had sent warning letters to two trade associations and 12 influencers over their posts, giving us a glimpse of enforcement to come. Meanwhile, NAD has also been active in this space and even referred a case to FTC for enforcement. Expect this to be a priority for both FTC and NAD in 2024.

• Green Guides: The FTC’s Green Guides review progressed this year with an initial comment period closing in April, followed by an FTC workshop on “recyclable claims,” which we attended and highlighted here. With its history of hosting several workshops on hot green topics, we expect to hear of more workshops in the new year. California has been active as well with the governor signing a new law in October that aims to regulate carbon claims and make businesses more transparent about their carbon reduction efforts by requiring certain website disclosures (see our summary of the law here). The effective date is the first of the new year, but according to a recent letter from the bill’s sponsor, we expect that California will defer enforcement until January 1, 2025 to give companies time to comply (see here). With ESG efforts continuing to be front and center for most companies, consumers and regulators are holding companies accountable for those claims by questioning messaging about their efforts, aspirations for the future, and basis for the claims (see, for example, here, here, and here).

• State Privacy Laws: It’s getting increasingly hard to remember a time before state privacy laws regulated data sales, targeted advertising, sensitive data, and privacy disclosures. At the start of the year, five states had enacted privacy laws, and now there are 13 comprehensive consumer privacy laws (CA, CO, CT, DE, FL, IN, IA, MT, OR, TN, TX, UT & VA) and an additional two health-focused laws (WA, NV). What does this mean for advertisers? (1) Know who your vendors are and their data practices. (2) Obtain consent before building inferences based on sensitive data, like race/ethnicity, religion, or health. (3) Disclose up-front the collection, use, and disclosure of personal information. (4) Finally, recognize the limitations of third-party data as new regulations and laws take effect.

• Children’s Privacy: Congress, regulators, and advocates focused time and energy on children’s privacy issues in 2023. The House and Senate held hearings focused on children’s safety and privacy. Although the Senate Commerce Committee advanced the Kids Online Safety Act, it never received a floor vote; Senators Markey and Cassidy continued to advocate for approval of the Children and Teens’ Online Privacy Protection Act (COPPA 2.0). The FTC reached settlements with companies about practices it alleged violated the Children’s Online Privacy Protection Act (COPPA) on the Xbox and Alexa platforms and with edtech provider, Edmondo. In September, the FTC released a ​“Staff Perspective” on digital advertising to children, which included recommendations on how to protect kids from the harms of “stealth advertising.” Also in September, a federal court agreed with industry advocates that California’s Age Appropriate Design Act, which imposes a variety of obligations on businesses that provide online services “likely to be accessed by children,” violated the First Amendment. California is appealing the decision, and regulators, including a number of Attorneys General and FTC Commissioner Alvaro Bedoya, have joined the state as amici. One of the most anticipated developments occurred with just 11 days left in the year, when the FTC proposed revisions to the COPPA Rule—more than four years after initiating its review process. Among other things, the proposed Rule would require new, additional consents for third-party disclosures and could affect operators’ approach to “internal operations.” Online services with children’s audiences have lots to consider in 2024 and beyond. Stay tuned for further updates.

• State AG: State Attorneys General continued to make their presence felt in 2023. State AGs continued to go after companies for using fake reviews and false endorsements, enforced and proposed new price gouging rules, pursued telehealth companies for deceptive practices, supported the FTC’s Negative Option Rulemaking while bringing their own auto-renewal actions, continued to impose significant penalties against companies for data breaches, pursued companies for misleading consumer financial practices, and focused efforts on so-called “junk fees.” But two topics continue to be the highest priority of AGs – the impact of developments in AI (which we’ve written about here, here, and here – just to name a few) and protecting the most vulnerable consumers – especially our nation’s youth. The incoming president of the National Association of Attorneys General president, Oregon Attorney General Ellen Rosenblum, has already made protecting youth, especially teens, this year’s presidential initiative. Look for AGs to continue to this focus well into 2024.

• Automatic Renewal: While auto-renewal service sign-up flows remain important, this year, we have seen a transition to cancellation processes being the hottest topic as states enforce their specific requirements and the FTC has drawn attention to “click to cancel” through its proposed rule. But we shouldn’t forget all of the FTC’s other proposals under the negative option rule NPRM, including expanding the scope, requiring more specific disclosures, separate consent for negative option, consent for save offers, and expanded notice requirements. Regardless of whether a federal rule formally comes into play in 2024, as referenced above certainly states have agreed are on board with FTC’s proposals, and they also resolved a multistate investigation this year requiring checkbox consent, online cancellation, and limiting save attempts. And don’t forget Massachusetts is working on its own rulemaking involving online cancellation.

• NAD: This year, NAD issued number of decisions that caught our attention. For example, a decision in February narrows the scope of what claims may be considered puffery. NAD later elaborated on what it thinks advertisers must do in order to substantiate aspirational claims about future goals. NAD also issued a number of decisions involving endorsements – including employee endorsements and disclosure requirements – and even referred a case to FTC for enforcement. In August, NAD held that emojis could convey claims, though NARB later disagreed with how NAD had applied that principle. As always, NAD plays a big role in the advertising law landscape, so companies will want to continue to watch what NAD does in 2024.

• Same Product/Different Label Litigation: We chronicled a Connecticut district court’s denial of a motion to dismiss in a case in which the plaintiff alleged that Beiersdorf, maker of Coppertone sunscreens, engaged in false advertising by selling the same sunscreen formula in two different packages, one of which was labeled as “FACE” and sold in a smaller tube at twice the price of the regular Coppertone Sport Mineral sunscreen. That case is one to watch but it is not the only one of its kind. In fact, 2023 saw several similar cases involving allegedly the same formula marketed as different products with varying price points, such that the plaintiffs alleged that they were misled into purchasing the more expensive item because they believed it was uniquely suited to their needs when, in fact, it was the same as the lower-priced item. These cases involved a range of products, such as baby/adult lotions, infant/children’s acetaminophen, children’s/adult cold remedies, to name a few. So far, decisions are mixed, with some courts being more willing than others to find that the differing prices were justified. Marketers of food and personal care brands that merchandise the same formula in varying iterations will want to remain mindful of these cases as they update packaging and claims.

Keep following us in 2024, and we’ll keep you posted on how these trends develop. In the meantime, have a great holiday!

Last December, NAD recommended (among other things) that Smile Prep “avoid conveying the message that Smile Prep does not give preferential treatment” to its affiliate partners and that it “clearly and conspicuously disclose that Smile Prep’s rankings, reviews, and product information of the clear aligners of its affiliate partners are advertising.” Smile Prep appealed the decision, an NARB panel affirmed the decision this spring, and the panel opened a compliance inquiry this summer.

Smile Prep made a number of changes to its site in an attempt to comply with the NAD and NARB decisions. For example, with respect to the issues we’re focusing on in this post, Smile Prep included a box at the top of each clear aligner review page on the website that begins with the words “Advertising Disclosure” in bold and then explains that: “When you buy products and services through our links, we may earn commissions.”

NARB determined that the “disclosure is neither clear nor conspicuous.” Among other things, NARB was concerned that “by having the disclosure appear on each page of the website, Smile Prep has obscured the fact that the disclosure is meant to apply to references to affiliate partners and their products.” Moreover, it worried that consumers may not understand the disclosure to communicate that the rankings, reviews, and other information about Smile Prep’s affiliate partners are “advertising.”

Smile Prep advised NARB that it believed that it was already in compliance with the NAD and NARB decisions and with applicable law, and that it is not willing to make further changes. It further stated that, “in the event of a referral, it looked forward to working with the FTC to craft a meaningful and fair approach to the regulation of all affiliate review sites.” Most companies wouldn’t look forward to that, especially after the FTC’s recent update to the Endorsement Guides.

The updated Endorsement Guides include more granular requirements on what it means for a disclosure to be “clear and conspicuous” and the FTC reminds advertisers: “Just remember that what’s clear to you may not be clear to everyone visiting your site, and the FTC evaluates ads from the perspective of reasonable consumers.” It will be interesting to what the FTC determines in this case and, if determines that Smile Prep needs to change its disclosures, how that will impact other affiliate review sites.

The Guides and the FAQ both cover a lot of ground, but people who work with influencers may know them best for the ground rules they establish for influencer campaigns, including the requirement that influencers clearly disclose any connections to the companies they endorse. Although that requirement may not be controversial, reasonable minds can disagree about how to comply, and many questions that attorneys who practice in this space get on a regular basis don’t have clear answers. The FTC’s updates address some of those questions, but many marketers won’t like the answers.

In this article for Law360, I highlight some of the most significant updates to the Guides and FAQs that will impact influencer campaigns, including what the FTC thinks about when a disclosure is required, how a disclosure should be presented, and how companies should manage influencer campaigns.

The proposed rule came just one day after the FTC’s release of updated Endorsement Guides, which we reviewed here. As currently drafted, the proposed rule would prohibit:

• Fake or false reviews and testimonials, which are defined to include reviews by reviewers who do not exist, did not use the product or service, or that materially misrepresent their experience with the product or service;
• Repurposing consumer reviews written for one product so that they appear for a “substantially different” product;
• Compensating or otherwise incentivizing or conditioning consumer reviews, whether positive or negative;
• Posting reviews by employees or “insiders” without disclosures regarding their material connection to the company;
• Creating seemingly “independent” review websites that are in fact controlled by the company and are not truly independent;
• Suppressing negative reviews, including by “unjustified” legal threats or “false accusations” or by declining to post negative reviews for a product or service unless for a specified reason unrelated to the negative nature of the review; and
• Selling, distributing, purchasing, or procuring “fake indicators” that misrepresent social media influence.

Many of these practices are already addressed in the FTC’s recently updated Endorsement Guides. Many are also listed in the Commission’s Notice of Penalty Offense letters on endorsements sent to over 700 companies last year, which we discussed here. For those practices that have long been considered deceptive, the proposed rule is clearly intended to open a path to consumer redress and civil penalties.

In other ways, however, the FTC is not just looking to authorize new remedies but also to substantively move the needle on the current legal standard. These efforts raise a host of issues and questions ripe for comment by interested parties, including:

• Should companies be liable for civil penalties based on a negligence theory and is the FTC authorized to do so under their Magnuson-Moss rulemaking authority? The proposed rule draws on concepts of negligence and third-party liability to propose that businesses will be liable directly if they disseminate or cause to be disseminated deceptive reviews (e.g., ones that materially misrepresent the testimonialist’s experience or that fail to disclose the relationship between the business and the testimonialist) if they “knew or should have known” of the facts giving rise to the deception. This new standard raises a number of important questions, which the FTC to its credit specifically seeks input on. Even assuming the FTC is authorized to seek civil penalties based on such a standard, what would this mean in practice for companies when they oversee and review reviews, and how would they show that they “should not have known” about a particular fact.
• What is a “substantially different” product for the purposes of the rule’s prohibition against “review repurposing”? Under the proposed rule, companies may not repurpose consumer reviews from one product and apply it to a “substantially different” product, which is defined as one that “differs from another product in one or more material attributes other than color, size, count, or flavor.” But the proposed rule does not specify which attributes might not be “material” for purposes of review repurposing other than color, size, count or flavor, nor does it consider that other product attributes – similar to flavor – could hinge on consumers’ subjective preferences. For example, what about a cleaning spray that comes in different fragrances? Or the same exact shirt featuring a V-neck and a boat neck? What about a supplement that comes in gummy form and tablet form, where all active ingredients are the same? The agency also does not take into account the benefit consumers experience when viewing different product options listed on the same product page.
• How far-reaching is the prohibition against characterizing reviews as “independent” on company-controlled websites? Proposed section 465.6 would authorize civil penalties where a business “represent[s], expressly or by implication, that a website, organization, or entity that it controls, owns, or operates provides independent reviews or opinions about a category of businesses, products, or services including the business or one or more of its products or services.” While staff’s intent appears to be to prohibit companies from misrepresenting the purported independence of a company-controlled review site, in practice, the language of the proposed rule would prohibit companies from representing that any consumer reviews or opinions featured on their own sites are independent, even if they are.

In addition to these specific issues related to proposed requirements, there are the general questions as to whether a rule is necessary in the first place. As many will remember, the NPRM was preceded by an ANPR in October 2022, in which the agency announced its intent to explore rulemaking in this space. At that time, former Commissioner Wilson – the sole “no” vote on issuing the ANPR – noted that “the harm that results from the deception at issue is speculative in nature” and opined that “the Commission already has a multi-pronged strategy in place to combat [deceptive endorsements or fake reviews].” In her view, “churning out another proposed rule” downplays the impact of other enforcement tools and unnecessarily diverts already-strained staff resources.

The comment period for the NPRM will run for 60 days following the publication of the proposed rule in the Federal Register, and we encourage stakeholders to submit comments addressing the above-mentioned topics and any other areas of concern.

This morning, the FTC announced the final version of the Guides. The final version largely mirrors the version proposed last year, with minor modifications that generally serve to further constrain the discretion that companies have when working with endorsements and reviews.

Here are the key changes appearing in the new Guides:

“Clear and Conspicuous” Definition

Unlike the 2009 Guides, the new Guides include a strict definition of what constitutes a “clear and conspicuous” disclosure. Among other things, the FTC wants disclosures to be “unavoidable.” In the examples, the Guides clarify that disclosures at the bottom of a social media post, where consumers have to click “more” in order to see them, are not unavoidable. (This mirrors the position the FTC has taken in recent settlements.) The Guides further caution companies against simply relying on a social media platform’s built-in disclosure tools if those tools are not sufficiently prominent, legible, or unavoidable. (FTC staff has previously cast doubt on those tools.)

The revised definition also provides that a disclosure must appear through the same means as the triggering claim – i.e., if the triggering claim is made both visually and audibly, then the disclosure must also appear both ways. (We’ve seen the NAD take similar positions in recent cases.)

Express Liability for Endorsers and Intermediaries

While it’s obvious that advertisers can be on the hook for deceptive endorsement practices, the new Guides clarify that all parties in an advertising transaction could share liability for problematic conduct. Intermediaries – such as advertising agencies, public relations firms, and reputation management companies – may be liable for their roles in creating or disseminating what they knew or should have known were deceptive endorsements. And endorsers (such as influencers) themselves can be liable for their representations. (See, for example, the FTC’s recent order against two real estate celebrity endorsers.)

Focus on Consumer Ratings and Reviews

The new Guides focus extensively on companies’ practices surrounding procuring, suppressing, boosting, organizing, editing, and publishing consumer ratings and reviews. Specifically, companies may not treat reviews in any way that distorts or misrepresents consumers’ opinions. Examples of misleading conduct include deleting or suppressing negative reviews, offering incentives in exchange for positive reviews, review gating (i.e., encouraging positive reviews and discouraging negative reviews), and falsely reporting negative consumer reviews as “fake” on a third-party platform without substantiation.

Companies may edit unlawful, harassing, abusive, obscene, vulgar, or sexually explicit content from consumer reviews, but such editing criteria must be applied uniformly to both negative and positive reviews.

In addition, if a company incentivizes consumers to provide numerical/star ratings and then includes those incentivized ratings in the average ratings, such inclusion could be deceptive if the incentivized ratings materially increase the average rating. In such a situation, the company will likely need to provide a clear and conspicuous disclosure regarding the incentivized ratings.

Although the FTC acknowledges that companies generally aren’t responsible for reviews written by ordinary consumers without any connection to the company, companies can be responsible for those reviews if they feature, highlight, repost, retweet, share, or otherwise adopt the reviews as part of their own marketing efforts. In those cases, a review becomes an endorsement and must follow all endorsement requirements. For example, they must be truthful, claims must be substantiated, and the reviews must include any necessary disclosures.

Expanded Disclosure Requirements for Atypical Results

The new Guides add additional guidance regarding atypical results disclosures, specifying that the disclosure used to qualify an atypical result should not itself misrepresent what consumers can expect. The new Guides also include new and revised examples, which reflect more stringent expectations related to disclosures of results that consumers can generally expect.

For example, the FTC uses a hypothetical testimonial in which a consumer claims to have lost 50 pounds in six month. The company adds a disclosure stating: “The typical weight loss of QRS Weight-Loss users who stick with the program for 6 months is 35 pounds.” However, in the FTC’s scenario, only one-fifth of consumers who start the program stick it for six months. Accordingly, “disclosure is inadequate because it does not communicate what the typical outcome is for users who start the program.”

The new Guides also strengthen the FTC’s view that “Results not typical” types of disclaimers are unlikely to be effective in conveying what consumers may generally expect to receive. Specifically, the new Guides delete a previous reference in a footnote stating that “the Commission cannot rule out the possibility that a strong disclaimer of typicality could be effective in the context of a particular advertisement.” The modification sends a clear signal that general disclaimers that do not tell consumer what results they can generally expect to receive are likely to be viewed as insufficient.

Additionally, the new Guides clarify that in order to be effective, disclosures for atypical results “must alter the net impression of an advertisement so it is not misleading.”

Expanded Definition of “Endorsement”

The new Guides expand the definition of “endorsement” to clarify that simply tagging a brand could constitute an endorsement (though the FTC acknowledges that isn’t always the case). In addition, the new Guides specify that a “fake” positive review is considered an endorsement.

Additional Examples for Influencer and Affiliate Marketing

While the Guides have long specified that material connections must be clearly and conspicuously disclosed, the revised provisions include new examples of material connections that necessitate disclosure, including the provision of free or discounted products or the possibility of winning a prize, of being paid, or earning money through affiliate links. Even things with no monetary value – such as the opportunity to appear on television or in media promotions – could constitute a material connection that requires a disclosure.

Increased Scrutiny of “Independent” Review Sites

The new Guides address so-called “independent review sites” that have material connections to various companies, or that offer a pay-to-play ranking system of products or services. The Guides are clear that sites connected to a company cannot be described as “independent” and that sites purporting to rank products or services based on objective criteria must ensure that a company’s payment does not influence its rank. Indeed, the Guides states that marketers could be liable if they pay to advance in the rankings of such purportedly “objective” ranking sites.

Statement of Special Concern Regarding Child-Directed Endorsements

The new Guides include a new section addressing endorsements in advertisements addressed to children. The section states that “[p]ractices that would not ordinarily be questioned in advertisements addressed to adults might be questioned in such cases.” The Guides don’t provide further insight on how such endorsements might be questioned or evaluated, but the FTC claims it is “exploring next steps.”

***

The FTC has also updated its guidance document, “FTC’s Endorsement Guides: What People Are Asking” to respond to additional questions related to the new Guides.

Although the new version of the Guides includes some big changes compared to the previous version, we’ve seen most of this in enforcement actions, warning letters, and various types of business guidance in recent years, including in the proposed edits the FTC announced last year. (One surprise is a new example involving “dog influencers,” which has some of us considering additional revenue streams, but that’s a topic for another day.)

If you’ve been following our tips on this topic, you may already be on your way to compliance with the new Guides. If not, now is the time to evaluate your practices before the FTC does.

Renue By Science sells products with NMN, a supplement that is thought to slow the aging process. Ad Law Access is known for the quality of its content and the youthfulness of its writers, so we don’t have personal experience with the supplement, but some people swear by it. One of those people is an employee of Renue By Science that posts informative YouTube videos on various health topics. In one of the videos, she discusses the current regulatory status of NMN and speaks positively about the supplement, in general. Notably, though, she doesn’t promote any particular brand.

Reasonable minds can disagree over whether a video that discusses a product category without promoting a particular brand constitutes an “endorsement” that would trigger a disclosure requirement under the FTC’s Endorsement Guides. NAD seems to conclude – without much explanation – that it does. One sentence in the decision mentions that the video description included links to sites where the company’s products were sold. It’s likely that impacted NAD’s analysis, but it’s not clear to what extent or whether the conclusion would have been different if the description didn’t have those links.

NAD acknowledged that a written disclosure identifying the speaker as an employee of the company appeared in the video description, above the “show more” link. However, that wasn’t enough to satisfy NAD. Instead, NAD recommended that the company “inform the employee of their obligation to clearly and conspicuously disclose in the video itself that the speaker is an employee.” This recommendation is arguably more stringent than what is required by the FTC’s Endorsement Guides and what appears to be common practice with many influencer campaigns.

NAD’s discussion of the video is contained in one short paragraph of the decision – and it doesn’t seem like the advertiser debated the issues of whether the video constituted an endorsement or whether the disclosure was sufficient – so we don’t have a lot go on. What we do have, though, suggests that NAD is taking a strict position on what employees must do when they promote products that are sold by their companies, even if the company’s products aren’t mentioned specifically. Now may be a good time to look through your employee policies to see if they address these types of issues.

According to the FTC and states, Google hired iHeartMedia and other radio networks in 2019 to have DJs read ads for the Pixel 4 phone. GooglePixel 4 provided scripts that included endorsements written in the first-person. For example: “It’s my favorite phone camera out there, especially in low light, thanks to Night Sight Mode;” “I’ve been taking studio-like photos of everything;” and “It’s also great at helping me get stuff done, thanks to the new voice activated Google Assistant that can handle multiple tasks at once.”

Despite the first-person endorsements, the AG alleged that most of the DJs who made these statements had never used a Pixel 4 phone. Apparently, iHeartMedia recognized the problem and asked Google to provide phones for its DJs. According to the AG’s press release, “When confronted with the reality that Google’s ad campaign violated the law, rather than take corrective action, Google continued its deceptive advertising, prioritizing profits over truthfulness.” The ads were played more than 2,400 times in Dallas, Fort Worth, and Houston.

A notable aspect of the Texas settlement is the monetary payment by Google -- $8 million is going to Texas alone, compared to the combined $9 million Google paid when settling with the FTC and the states of Arizona, California, Georgia, Illinois, Massachusetts, and New York last November. Given the coordination of all the states and FTC on the settlement with iHeartMedia, it is notable that when it came to Google, Texas went at it alone, first by filing suit separate from the multistate effort and then reaching a separate settlement that included significantly more money for Texas than the other states received.

The phenomena of a state holding out from a multistate settlement to obtain a better result, especially when that state is currently in litigation, is not new. In rare situations (most recently in opioid and vaping settlements), Attorneys General have been persuaded to use “most favored nation” clauses in their multistate settlements to help discourage a state from holding out for more money later, but these have been few and far between. This is because ultimately each state is a sovereign entity – a fact that can sometimes be easily overlooked during the course of a multistate negotiation where a small group of states may seemingly be speaking for the whole. At the end of the day, each state will do what is in the best interest of their office and their constituents, which may vary.

Here, Texas’ motivation for holding out may be part of AG Paxton’s efforts to reign in “Big Tech.” While all states are actively engaged in the space, Texas has been a leader in these efforts. Indeed, the Texas AG website has a page devoted to “Big Tech,” which explains why people should be concerned about big technology companies and what the AG is doing about it. And although it settled with Google over these endorsements, it still has at least three other pending lawsuits against Google – challenging its dominance in the adtech chain, accusing it of violating the state’s biometrics laws, and alleging deceptive practices related to location tracking (another example where Texas sat out on a multistate settlement).

When faced with an investigation by multiple Attorneys General, it is critical to understand the objectives and priorities of each office involved, and recognize they may change from state to state. While getting true global peace may be an impossible challenge in some instances, having a deep understanding of each office involved is the best way to find a path to resolution.

• Dark Patterns: Any practices that could manipulate or mislead consumers into taking actions they wouldn’t otherwise take will continue to receive maximum scrutiny from the FTC and state AGs. Over the past year, we saw a new FTC staff report on “dark patterns,” as well as enforcement actions against Vonage and Fareportal. Private plaintiffs (see here and here) as well as consumer advocates are taking note. Companies should give serious consideration in their product interfaces, disclosure and notice design, purchase flows, cancellation methods, auto-renewals, and other consumer communications to any “nudge” activities that could be interpreted as problematic “dark patterns.”

• Individual Liability: The FTC isn’t backing down from its commitment to hold individuals liable in its cases, and did so in numerous matters in 2022 (Drizly, Passport Auto, Napleton, Electrowarmth, Roomster). At the same time, it’s worth noting the absence of individual liability in several recent high-profile cases (Twitter, Facebook, Google, Vonage), suggesting, perhaps, that the agency recognizes there are some challenges and trade-offs to inclusion in certain cases. In any case, given Chair Khan’s repeated remarks emphasizing the need for executive accountability (see here and here), we expect to see a continued effort to include individuals in FTC complaints and orders. This same theme has been echoed by the CFPB, with Director Chopra recently outlining his vision for increased individual accountability and encouraging State Attorneys General to take the same approach.

• Post-AMG Money Woes. The FTC continues to scramble for dollars post-AMG. Some creative initiatives include using its penalty offense authority to extract civil penalties for practices it claims are covered by prior administrative orders (Walmart, Kohl’s, DK Automation). The agency is also turning to Section 19 where possible and has initiated several new Mag-Moss rulemakings to codify certain unfair or deceptive practices (more on that in a separate bullet). In addition, the FTC is partnering with states to obtain monetary relief using state statutes (Google). We can expect to see more creative avenues for obtaining monetary penalties or relief in the new year.

• Green Claims: As more companies develop Environmental, Social, and Governance (“ESG”) goals and advertise their progress towards those goals, we’re starting to see more challenges to those ads. Although defendants have scored some notable victories this year (such as these), NAD often looks at green claims with a more critical eye. (Click here, for example.) We expect this trend to continue in 2023, though the biggest development may be the FTC’s long-awaited update to its Green Guides.

• Automatic Renewals: Programs that automatically renew have been under a lot of scrutiny. Much of the focus has been on the sign-up process and whether companies have used deception or “dark patterns” (see above) when enrolling consumers in recurring billing. Lately, regulators and plaintiffs’ attorneys have also been paying attention to how people cancel. (Click here, for example.) Some regulators have indicated this will be an enforcement priority next year. And big settlements in class actions suggest more of those will be on the way.

• Endorsements and Reviews: This year, the FTC announced its first case involving the failure to post negative reviews. Since then, they have announced proposed updates to the Endorsement Guides, a proposed rule to combat fake reviews, and teamed up with states to challenge misleading endorsements and reviews. (Click here, for example.) Meanwhile, NAD has also focused on how companies advertise reviews. (Click here, for example.) We expect these trends to continue in 2023.

• Mag-Moss Rulemakings: Undeterred by the cumbersome Mag-Moss process, the FTC announced several new ANPRs in 2022: commercial surveillance, earnings claims, reviews and endorsements, and junk fees. New rules may benefit industry by providing clarity and certainty, but they may also do more harm if they turn out to be very prescriptive or unclear (see, for example, our recent write-up regarding the pitfalls of the proposed impersonation scam rule). We’ll be watching to see how much progress the agency is able to make on this ambitious effort in 2023.

• State Attorneys General: While State AGs have always been a major player in advertising enforcement, they continue to gain attention and prominence as part of the post-AMG fallout as the primary regulator who can seek significant monetary remedies for violations of state unfair and deceptive trade practice laws. AGs have collaborated throughout 2022 in pursuing some of the priorities otherwise identified in this list, notably in settling with Google over allegations of dark patterns in its collection of geolocation information, and settlements with Google and iHeartMedia over the use of misleading endorsements for the Pixel mobile phone. But looming in the background is ongoing criticism, largely from Republican Attorneys General, about the National Association of Attorneys General and multistate enforcement generally, that may result in less coordinated multistate activity and more individual state action in 2023. That said, we still predict bipartisan efforts to dominate AG enforcement in particular with high profile consumer protection initiatives, but we will continue to monitor developments in and out of NAAG for any changes in trends.

• Right to Repair: The FTC is focused on ensuring that consumers have options when it comes to repairing products. In 2019, they held a workshop to discuss manufacturer restrictions on repair rights, including provisions that void a warranty if the consumer uses third-party parts or independent service centers. In a 2021 report, they concluded there was “scant evidence to support manufacturers’ justifications for repair restrictions.” After that, they issued a Policy Statement calling for more aggressive enforcement against manufacturers that impose these restrictions. Since then, they entered into three settlements over this issue. While the FTC took action under existing law, federal and state legislatures continue efforts to pass legislation specific to right to repair. Expect these efforts to continue in 2023.

• NAD Jurisdiction: Following a move from CARU, NAD announced that it would expand its jurisdiction to include “resolving complaints or questions concerning national advertising that is misleading or inaccurate due to its encouragement of harmful social stereotyping, prejudice, or discrimination.” So far, we haven’t seen any decisions involving this provision. It will be interesting to see what standards NAD applies and what will happen if advertisers decide not to comply with NAD’s recommendations.

Keep following us in 2023, and we’ll keep you posted on how these trends develop.