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FTC PROPOSES CHANGES TO ADVERTISING GUIDES

The Federal Trade Commission has published a notice seeking public comment on proposed revisions to its Guides Concerning the Use of Endorsements and Testimonials in Advertising. The Guides, 16 C.F.R. Part 255, are designed to assist businesses and others in conforming their endorsement and testimonial advertising practices to the requirements of Section 5 of the Federal Trade Commission Act. Although the Guides interpret laws administered by the FTC, and thus are advisory in nature, proceedings to enforce the requirements of law as explained in the Guides can be brought under the FTC Act.

This notice follows a January 2007 notice in which the FTC sought public comment on the overall costs, benefits and regulatory and economic impact of the Guides, which were last updated in 1980. The FTC concluded that the Guides should be retained, but that a number of revisions are appropriate. Many of the proposed changes are simply clarifications or additional examples of the principles embodied in the existing Guides. Other proposed changes enunciate basic principles that are not expressly set forth in the current Guides, but have been established in FTC enforcement actions. Several represent substantive changes from the current Guides.

The most significant substantive change relates to the use of so-called “disclaimers of typicality” accompanying consumer testimonials that do not represent experiences consumers generally will achieve with the advertised product. As currently written, the Guides provide that if an advertiser does not have adequate substantiation that the endorser’s experience is representative, the advertiser can either (i) clearly and conspicuously disclose what the generally expected performance would be in the depicted circumstances or (ii) disclose that the depicted results are not representative. The FTC has long been concerned about potential deception arising from the use of the second category of disclosures (i.e., “disclaimers of typicality”), but until now has recognized the second option as a safe harbor against claims of deception.

Based upon the FTC staff’s empirical research and its law enforcement experience, the FTC believes that disclaimers are unlikely to be effective and therefore the current safe harbor for disclaimers should be eliminated. As revised, the Guides would provide that when testimonials reflecting consumer experience on a key attribute of the product likely will be interpreted as representative of what consumers generally will achieve, and the advertiser does not possess adequate substantiation for this representation, the advertiser should clearly and conspicuously disclose the generally expected performance in the depicted circumstances.

The Commission seeks comment on all aspects of the proposal by January 30, 2009.

Judy Scheiderer