Advertising Your Business Using Endorsements and Testimonials

Studies have shown that consumers not only read reviews and testimonials before they buy, but they often rely on them. As a result, they can have a significant impact on a business’s bottom line. But they can also raise potential legal issues since truth in advertising laws may prohibit certain advertising practices related to testimonials, endorsements, and online reviews or ratings.

The Federal Trade Commission (FTC) oversees advertising laws and attempts to prevent misleading claims from resulting in physical or financial harm to the consumer. It is the FTC’s job to eliminate “unfair and deceptive” advertising in the marketplace and to ensure that advertising is truthful. The FTC can impose fines or shut down a business’s operations if they are found to violate these rules. In addition, consumers or competitors can sue the business for damages if its advertising is found to be false or misleading, contains defamatory statements, or if it inaccurately compares the company’s product to a competitor’s product.

In addition to being truthful, ratings, reviews, testimonials and endorsements, used in business advertising must reflect the reviewer’s own experience and opinion and the typical experience of consumers who use the product. Further, any claims made in an advertisement, whether made by the company, its employees, or by a reviewer or consumer, must be supported by actual facts. 

If a customer has an unusually positive or otherwise atypical experience with a product or service, their endorsement must clearly disclose that the result is not typical and state what the typical consumer can expect their result to be. According to the FTC, simply saying, “results may vary” is not enough. You cannot use an endorser to assert a claim that a company could not truthfully make on its own.

If your business uses bloggers and social media influencers to help build your business’s reputation, or if you send out samples or free products, provide discounts or anything else of value to consumers in exchange for a review, the FTC requires that the reviewer disclose this affiliation with your company; it is important information consumers use to evaluate the rating or endorsement provided. Without the disclosure, consumers could believe these posts to be objective comments on the product, and may give them more weight than they would have had they known the individuals were compensated for their comments or were otherwise connected to the company.

The disclosure of the reviewer’s connection with the company must be “clear and conspicuous.” In other words, close to the claims they relate to, easily noticeable by and understandable to the consumer, and not buried or hidden, such as in footnotes or small text. Disclosures should be in plain language and made a part of the medium the original message appears in. For example, the disclosure should be made a part of a video about the product, rather than simply being buried in the text-based description that accompanies the video. The Electronic Code of Federal Regulations Guide for Using Endorsements and Testimonials in Advertising provides more specific guidelines for advertisers, and another FTC document, .com Disclosures: How to Make Effective Disclosures in Digital Advertising, specifically addresses online disclosures.

Several recent cases brought by the FTC make it clear that although the individual has a responsibility to disclose sponsored content, the FTC is mainly focused on companies (and their advertisers) that fail to meet the FTCs guidelines for disclosing relationships with paid social media influencers and reviewers and fail to ensure that they follow the FTC’s disclosure guidelines.

Businesses and their advertisers are responsible for their networks and the claims being made about their products, and it is their responsibility to educate members of their networks or their potential reviewers about what they can and cannot say about their products and what can be factually supported. Reviewers and members of a business’s network must be instructed to disclose any connection to the company or advertiser. Businesses should monitor what is being said about their products online, and follow up or correct any misstatements about their products or company that could potentially be misleading.

The FTC, along with other law enforcement agencies, monitor the internet for potentially false or deceptive online advertising claims. Advertisements found to be false or misleading could lead to fines or lawsuits, which could result in the business being required to refund money to consumers, pay punitive damages, or incur other penalties.

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