On October 5, 2009, the FTC issued the final revisions to its Guides Concerning the Use of Endorsements and Testimonials in Advertising (the Guides), last revised in 1980, which are designed to assist businesses and others in conforming their endorsement and testimonial advertising practices to the requirements of Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices. The Guides are advisory in nature and reflect situations in which the FTC may exercise its prosecutorial discretion to enforce Section 5. Among other changes, the Guides made a number of revisions that take into account modernized advertising practices that could have a significant impact on Life Sciences companies as the Internet, especially third-party bloggers and social media sites, become more popular marketing outlets. In addition, the FTC will now require more specific disclaimers when an endorser has achieved non-typical results from the use of an advertised product.
“Word of mouth” endorsements through blogs and other online social media
In its revisions, the FTC specifically addressed the phenomenon of “word of mouth” marketing, by which individual endorsers are compensated for communicating with consumers on a direct and personal level, including through blogs, online message boards, and other social media. Emphasizing that such endorsements are no different than those made through more traditional media, the FTC stated that in these situations advertisers are responsible for any representations made, and that the endorsement must disclose any compensation received in consideration for the endorsement.
Somewhat controversially, the Guides indicate that word-of-mouth endorsers — using bloggers as an example — are required to disclose that they received a product or service for free prior to giving a positive endorsement, even if the advertiser did not specifically direct the blogger to recommend it. In these situations, advertisers must also ensure that the statements by bloggers are substantiated, even if the advertiser does not direct the exact content of the endorsement. In doing so, the FTC placed an obligation on advertisers to advise bloggers of their disclosure obligation and to monitor their endorsements, and if the blogger makes unsubstantiated claims or does not make the required disclosures, to cease supplying free products. In either of these scenarios, the FTC would consider both advertiser and the blogger to have violated the FTC Act, though in the Federal Register Notice accompanying the Guides and subsequent interviews, the FTC indicated that its law enforcement activities will focus on advertisers.
In addition to the FTC, the FDA has also been stepping up its enforcement of advertising on the Internet and social media. In the past year, the FDA has sent warning letters to companies for advertising products in “sponsored links” alongside Google search results without including all required disclosures next to the link (though the disclosures could be accessed by clicking on the link). In other statements, the FDA has indicated that third-party comments posted to a pharmaceutical manufacturer’s blog or social networking site containing off-label indications about the manufacturer’s products could be attributed to the manufacturer and invite an action for misbranding. This past November, the FDA held a public hearing on the promotion of medical products using the internet and social media tools, and while it did not tip its hand regarding future enforcement, the hearing is a good indication of the significance of this issue for the FDA going forward.
Other disclosures of material connections
The revised Guides provide some other notable examples of material connections between advertisers and endorsers to clarify when such connections need to be disclosed. Significant to the life sciences companies who sponsor studies of their products, the Guides now include an example that would require an advertiser to disclose in an advertisement its sponsorship of any external study touted in the advertisement. The FTC would require this disclosure, proposed by a coalition of state attorneys general, regardless of whether the research was completely controlled by the outside organization.
Disclosure of generally expected results
Prior to the revisions, the Guides stated that endorsements describing results not representative of those attained by most users of an advertiser’s product would otherwise be acceptable if qualified by a disclaimer stating that “results may vary,” or “results are not typical.” The revised Guides no longer consider such a disclaimer acceptable; instead, they require advertisers making atypical representations to “clearly and conspicuously disclose the generally expected performance in the depicted circumstances.”
This is a significant change in the FTC’s enforcement policy, as an advertiser making claims quantifying the effectiveness of a product must now be aware of the generally expected performance achieved through use of the product, rather than the mere fact that its claim of effectiveness is not typical. Addressing the criticism that it is often difficult or expensive to determine the generally expected performance, the FTC noted that it is acceptable to reasonably extrapolate the expected performance from clinical trials and accepted scientific principles. In the alternative, it advises advertisers to make non-quantitative statements of effectiveness (e.g., “This product is the best!”), or to simply not make claims of effectiveness at all.
Ultimately, the revisions to the Guides propagate the familiar FTC themes of disclosure and substantiation when it comes to endorsements and testimonials. With these revised Guides, the FTC has given notice that endorsements and testimonials are squarely on its radar, and life sciences companies must be diligent in complying with the new rules in order to stay out of the enforcement spotlight.