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FTC Cracks Down on Celeb Endorsements

Celebs must tell when they are being paid — and must justify their claims, even in an ad.

The lucrative world of celebrity product endorsements just got a bit trickier.

Taking aim in part at the appearance of Lauren Bacall and Peggy Fleming on NBC’s “Today” and ABC’s “Good Morning America” — in which each endorsed a drug without revealing they were being paid by a drug company to do so — the Federal Trade Commission Monday morning unveiled new endorsement guidelines that will take effect Dec. 1.

Besides requiring celebrities to reveal any advertiser payments when they tout a product outside of traditional commercials, the new guidelines require that celebrities be able to justify any claims they make about the quality of the products they hype.

No longer acceptable is the excuse that they're just reading a script — they have to actually use the product or have a reason for making any claims that product works.

The guideline also makes clear that celebrity endorsers have to be careful about what they say. Along with advertisers, they would be held liable for false and unsubstantiated claims.

The FTC highlighted disclosure when a celebirty is featured outside a traditional ad envirnoment.

Within normal advertising, regardless of whether the star’s compensation for a commercial is a $1 million cash payment or a royalty for each product sold by the advertiser, no disclosure is required because such payments  are expected by viewers, the FTC said.

The new guideline also requires bloggers who endorse products of significant value to reveal if they got either free copies of the products or other things of value in return. How the payment has to be detailed wasn’t spelled out.

Blogging wasn’t mentioned at all in the FTC’s old endorsement guidelines.

“If there is a link between an advertiser and a disseminator … that has to be spelled out,” said Richard Cleland, assistant director of the FTC’s division of advertising practices. He said the FTC doesn’t see itself policing bloggers but wants to make clear to marketers that the use of bloggers as part of their campaigns would have to be disclosed.

“The test is whether an advertiser is doing something that would effect the credibility of the endorsement in the eyes of the consumers,” he said.

Although changes related to celebrities and bloggers are likely to get the most attention, FTC officials say the biggest change adopted today affects advertising for weight-loss products, exercise equipment and other products that picture a user making wondrous gains.

The new guideline bars advertisers from simply saying “results not typical” message at the ad’s end and requires marketers to make clear what typical results are.   

Reaction to the FTC’s guideline came quickly.

“The guidelines formally reinforce that ethical transparency and disclosure is crucial for marketers and advertisers today. Anything less won’t be tolerated,” said Paul M. Rand, President/CEO of Zocalo Group and president-elect of the Word of Mouth Marketing Association.

He said that while marketers have ultimately responsible for adequate disclosure online, bloggers — particularly those who are more professional “reviewers” — also have some responsibilities.

Adonis Hoffman, general counsel of the American Association of Advertising Agencies and an associate professor at Georgetown University, said that the change has two impacts.

“On the one hand, they will provide greater transparency for consumers, especially in new and cutting edge media campaigns using buzz and viral marketing,” he said. “On the other, the guidelines invariably will make it more costly for marketers to substantiate claims made in certain products and to comply with the new rules.

“At the end of the day, these new guidelines are consistent with what I call a new era of glasnost in marketing, where even arguably subtle marketing relationships are forced into the sunshine by government regulations,” he added.

 

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