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Using Testimonials, Endorsements, and Consumer Reviews in Marketing

By Senny Boone    January 5, 2024    

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BACKGROUND

Is it ethical to use celebrities or consumers to endorse your brand? Generally, this is common practice and not unethical if marketers follow best practices and ensure legal compliance. Endorsements are a type of promotion that comes from public figures or influencers, while testimonials are the personal accounts of customer experiences with a product or service.

Finding individuals that support products and services and are willing to speak about your brand publicly can be a valuable part of any marketing campaign and such marketing strategies continue to grow. The use of influencers like well-known celebrities has exploded over time. In 2021, 69.7 percent of U.S. marketers in companies larger than 100 employees used influencers for marketing purposes. On the global level, influencer marketing was valued at 13.8 billion U.S. dollars in 2021. (Statistica, January 2023)

Further, having individuals leave comments regarding their experience with a brand or publisher is a staple of most digital sites. Enabling consumer feedback, good and bad, provides brands with needed authenticity and accountability.

However, having celebrities and supporters work with you to promote your brand without adequate transparency and required disclosures can be problematic, and the rules governing endorsements and reviews can be more restrictive than you may expect. For example, the Federal Trade Commission has been very active in 2023 in updating its guidance, and several recent examples of poor practices are important for marketers to learn from.

RECENT EXAMPLES

Social Media Influencers

In 2022, Kim Kardashian, who has over 330 million followers on Instagram and 73 million on Twitter settled with the Securities and Exchange Commission (SEC) for $1.26 million in charges related to her promotion of the EthereumMax digital token on social media. Although her 2021 post used the #Ad disclosure, the SEC said Kardashian should have also included that she was paid $250,000 for the post. Her post included a link to the EthereumMax website, and she claimed, "Sharing what my friends just told me about the EthereumMax token!" She did not say she was being paid by the company.

Issues regarding celebrity endorsements over the years include some of the following:

  • Whether the celebrity actually used the product they are endorsing.
  • Whether the celebrity made it clear and disclosed that they had received compensation or other item(s) of value for endorsing the product.
  • Whether the celebrity is a credible brand ambassador, especially if they have other scandals attached to their name.
  • Whether the brand has control of the celebrity's support through an agreement and what happens to the brand if the celebrity is not genuinely a user or endorser.

FTC Warns Trade Associations and Influencers — Lack of Disclosures Regarding Aspartame or Sugar

Federal Trade Commission staff have sent warning letters to two trade associations and 12 registered dieticians and other online health influencers warning them about the lack of adequate disclosures in their Instagram and TikTok posts promoting the safety of the artificial sweetener aspartame or the consumption of sugar-containing products.

The letters to the trade groups, the American Beverage Association (AmeriBev) and The Canadian Sugar Institute, expressed concerns that the organizations may have violated the FTC Act by failing to adequately disclose that the influencers were apparently hired to promote the safety of aspartame or the consumption of sugar-containing products, respectively.

Customer Reviews

Receiving authentic positive consumer reviews is always a good result for organizations and business. But what happens to negative reviews? Organizations should be careful if they wish to take down or exclude negative reviews about their products or services. This may be governed by a platform's own takedown criteria for fake reviews or other standards set by the platform and subject to FTC regulation and enforcement. (See Anti-Manipulation Policy for Customer Reviews — Amazon Customer Service and Online Shoe Seller Hey Dude, Inc. to Pay $1.95 Million for Violating FTC's Mail, Internet, and Telephone Order Rule and Suppressing Negative Consumer Reviews | Federal Trade Commission.)

The Consumer Review Fairness Act does not allow the removal of negative reviews by customers since that could be viewed as potentially misleading since a customer is providing their accurate experience. This law passed in 2016 to ensure agreements are not made between a business and its customers that could impede consumer reviews.

The FTC also took recent action against shoe seller, Hey Dude, for violating the FTC's Mail, Internet, and Telephone Order Rule for suppressing negative consumer reviews. The company "chose to have all five-star reviews (the best rating) posted on its website with little scrutiny. In many instances, however, it rejected and did not publish less-favorable reviews." The FTC is seeking the company to publish all reviews it receives, including previously withheld ones and to pay $1.95 million in fines.

Another concern is so called "review hijacking." Review hijacking is a type of fake review that occurs when a brand or retailer repurposes a review from one product and applies it to a substantially different product. Using this tactic could be seen as misleading if the review was not for the original product and should not be utilized.

Marketers and advertisers should ensure they are reviewing the latest rules and guidance before they use testimonials, endorsements and customer reviews with their legal counsel and teams to ensure compliance. A balance is needed to ensure adequate disclosure and transparency is provided to help consumers make informed decisions, and to ensure such decision-making is not based on potentially fake or misleading statements.

RULES & GUIDELINES

Federal Trade Commission

Endorsements and Testimonials in Advertising

The Federal Trade Commission issued its long-awaited revised Endorsement Guides on June 29, 2023—14 years since its last set of updates. They are principles, not laws, but these will be used to evaluate whether the endorsements and testimonials and marketers' use could be false and misleading under the FTC Act (Section 5.)

Customer Reviews

Consumer Review Fairness Act: 15 USC 45b: Consumer Review Protection (house.gov)

Securities and Exchange Commission

On December 22, 2020, the U.S. Securities and Exchange Commission amended its rules under a new marketing rule, Rule 206(4)-1 of the Advisors Act with an effective date of May 4, 2021, and a compliance date of November 4, 2022. This change was intended to provide restrictions and conditions on testimonials and endorsements and promotions by third parties. See The New SEC Marketing Rule: Testimonials and Endorsements (fairviewinvest.com).

ANA Guidelines

ANA guidelines provide that testimonials and endorsements should only be used if they are authorized by the person quoted, are accurate and clearly and conspicuously disclose any material connections. Further any claims made should be substantiated. (See page 22, Article 5, Testimonials and Endorsements.)

We anticipate additional updates to the ANA guidelines and FTC regulations on the use of consumer reviews in the coming year as this area continues to evolve. For example, the use of AI to generate reviews without human intervention leads to questions as to whether such automated processes can provide genuine customer reviews if AI is prompting responses.

CENTER FOR ETHICAL MARKETING RESOURCES AND COMPLAINT FORM

Source

"Using Testimonials, Endorsements, and Consumer Reviews in Marketing." ANA, 1/5/24.

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