Direct-to-Consumer Advertisers Must Overcome 'Tremendous Distrust' on the Hill

Direct-marketing companies that rely on testimonials and consumer endorsements continue to wait with baited breath for the Federal Trade Commission (FTC) to address issues and concerns that came up during the comment period for the proposed changes to FTC endorsement and testimonial guidelines.


The comment period was initially set to end on January 31, but was extended through March 2 to give companies a chance to voice their concerns with the proposed changes. Among the primary changes proposed by the FTC will be the requirement of companies to provide proof of claims made in consumer testimonials and a limiting or removing of the disclaimer of typicality safe harbor. “Some of the changes could be very detrimental to the consumer,” said John P. Feldman, partner in the Advertising, Technology and Media (ATM) Group at the international law firm Reed Smith LLP.

Feldman said one of the chief concerns he has with the proposed changes is that the FTC is setting a precedent on the validity, or invalidity, of disclaimers. In the past, disclaimers have been considered valid as long as they are clear and conspicuous. Given the proposed changes, the FTC is making the case that current disclaimers do not go far enough in protecting the consumer from atypical results. Feldman argues that the FTC needs to clarify its position on disclaimers and to what extent the commission views them as a valid disclosure of information.

Network-marketing companies could be among those that are affected the most by the proposed changes, as the new guidelines will affect marketing surrounding the products as well as the claims that distributors can make about the company’s business model and potential earnings. For example, instead of touting how one person earned $1,000 per week selling noni juice, companies will need to be more forthcoming about what a typical earner can expect to bring in. In the case of new companies that have little or no ability to substantiate their claims based on limited historical data, the guidelines may prevent them from using endorsements altogether. The same can be said for many weight-loss supplement companies that may have a difficult time satisfying the FTC’s substantiation requirements.

One trend to watch for if the proposed changes do become law, according to Feldman, is the potential rise in expert testimonials as opposed to consumer testimonials. Endorsements from experts are easier to substantiate. As Feldman explained, it’s easier for a company to find one college professor who is qualified to evaluate a product and have that person make an assessment based on his or her expertise—as opposed to trying to generate enough clinical data to satisfy the FTC’s definition of what is typical for a given consumer. Companies can even pay for the expert endorsement, so long as that relationship is conspicuously disclosed.

The FTC has not set a date to address the testimonial comments, though Feldman says he expects it to happen soon. The new guidelines could mark the first step in moving to a stricter regulatory environment in Washington, where Feldman said there is already a high level of distrust for direct-to-consumer advertisers. “There is every expectation that this administration is going to be more enforcement driven,” Feldman said. “I also think the FTC is going to seek and get broader latitude in its enforcement jurisdiction. The chairman [Jon Leibowitz] is not shy about taking on new areas.”

Related NBJ links:
Natural Products Foundation Urges full Enforcement of the Law Regarding False Advertising for Dietary Supplements
FDA to General Mills: Cholesterol Claims Render Cheerios a Drug
Court to Whole Foods: FTC Trial Won’t Be Thrown Out

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