• FTC staff clarified that businesses can’t be held liable for hosting fake or false reviews on their site, assuming they didn’t write or buy them. Moreover, businesses aren’t required to investigate whether the reviews they host on their site are fake or false. However, the answer is different for testimonials which are, by definition, advertising or promotional messages. If a business uses a testimonial (or highlights a review) that is fake or false, the business could be liable.
• When a business hires an influencer to promote its products or services, it should not provide the text for a testimonial without a reasonable basis to conclude that the text accurately reflects the influencer’s experience. The business should also look for any red flags that may indicate that any testimonial provided by an influencer is false. For example, if the influencer expresses an opinion before using a product, that should be a warning sign.
• If a business gives incentives to people for writing reviews, it can’t require or suggest that the reviews have to express a particular sentiment. For example, asking people to post about how much they loved a product in exchange for a coupon could be problematic. Moreover, that problem can’t be cured with a disclosure.
• Businesses can’t be held liable if employees write reviews without disclosing that they’re employees, if that review was written in response to a general solicitation. If a business encourages employees to write reviews, though, it must inform the employees to clearly disclose their relationship to the company. Notably, the FTC does not expect businesses “to scour every review of the business for possible insider reviews appearing without a disclosure.” However, the business should look out for red flags.
• Similarly, although the Rule “does not impose a general duty for businesses to investigate whether each consumer review of its products is fake or false,” businesses should look out for “indications that purchased reviews are likely to be fake or false, in which case failing to investigate may trigger liability under the ‘should have known’ standard.”
• Certain disclosures have to be “unavoidable,” which staff writes “is an objective standard that turns on whether consumers could have avoided the disclosure.” A disclosure is avoidable when “a consumer must take any action, such as clicking on a hyperlink or hovering over an icon, to see it.” Echoing guidance from the Endorsement Guides, staff wants the disclosure to match the medium in which a review appears. For example, if a review appears in a video, the disclosure should appear in the video itself, not just in the text description.
• The Rule states that testimonials may not need a disclosure if a material relationship with the business is “otherwise clear to the audience.” Staff explains that could be the case if the audience may already be aware that a person is associated with a business or if the context of a testimonial communicates a relationship with the business. For example, the a person giving a testimonial is seen “working in the company’s offices or wearing a company uniform,” the connection may be obvious.
• Staff explains that businesses have some flexibility in how they moderate reviews on their sites as long as the moderation criteria is applied equally to both positive and negative reviews. Staff also writes that “organizing reviews is not suppressing reviews under the rule,” so businesses have some flexibility in how reviews are displayed. For example, displaying reviews according to which have been rated most helpful should not violate the Rule. However, making it hard for people to find negative reviews could be deceptive under Section 5 of the FTC Act.

These (and other) answers provide helpful guidance to businesses as they attempt to comply with the Rule. As FTC staff notes throughout the answers, though, this guidance is primarily focused on the Rule itself. Conduct that doesn’t violate the Rule may still run afoul of the Endorsement Guides or the FTC Act, so it’s important to take those into account in your compliance strategy.

We recap some of the most relevant insights below.

Contrasting Views on FTC Mission and Enforcement Priorities

Earlier this week, we summarized Commissioner Holyoak’s comments to NAD, which criticized the FTC for, in her view, overstepping its congressional authority and oversimplifying complicated data practices.

BCP Director Samuel Levine painted a very different picture of the agency’s positions and accomplishments in his keynote. Levine lauded the Commission for its enforcement actions (calling it the “greatest public interest law firm in the world”), and specifically highlighted some recent FTC settlements relating to junk fees and subscriptions, telemarketing, multi-level marketing, rental practices, and artificial intelligence. Although Levine emphasized the FTC’s proposed click-to-cancel rule and revised Green Guides, he did not provide an update on timing for either.

Holyoak’s and Levine’s contrasting views underscore that, despite promises of unity during the Republican Commissioners’ confirmation hearings earlier this year, the Commission still appears to be divided among party lines, with the Republican Commissioners growing more vocal in their discontent.

Interplay Between FTC Guidance and NAD Decisions

In a discussion with Executive Vice President Mary Engle, John Villafranco explored Engle’s views on how the NAD should react to the FTC’s increasingly more aggressive positions set out in recent guidance and proposed rules. This conversation was particularly timely in light of recent Supreme Court decisions this summer that limit deference granted to administrative agencies.

The key questions explored in this panel were as follows:

• If the FTC’s guides and proposed rules don’t have the force of law, and FTC complaints do not allege violations of guides, but instead refer to Section 5, why should the NAD rely on agency guidance in concluding whether advertising is truthful and accurate?
• And if the FTC takes positions in guidance or in proposed rules that appear to be outside of its statutory authority and/or that federal courts have found to be unsupported, should NAD follow suit?

Engle’s response centered around the need for consistency within the advertising space. She noted that unlike other countries, the U.S. does not have an advertising code to guide what marketers can and can’t say or dictate the types of substantiation required for various claims. Instead, advertising common law has developed over the years through FTC enforcement actions. NAD generally seeks to apply the same interpretations as the FTC in order to create consistency between regulation and self-regulation.

That being said, it is important to keep in mind that guidance and proposed rules generally reflect the views of the current FTC staff and may not be shared by future staff. The panel discussed instances where the FTC has revised or rescinded prior guidance, causing upheaval in industries that had relied on those guidelines for many years. Should NAD simply follow any positions the FTC takes in such guidance documents, it may find itself needing to reverse course and reject its own precedent should the agency take a different view of the issue in the future.

Endorsements and Reviews

Endorsements and reviews continue to be a hot topic for the NAD and FTC. This is not surprising, given that the FTC announced its final rule on “fake reviews” last month, which we wrote about here. Highlights from this year’s influencer marketing panel are included below.

• Speakers stressed that while built-in platform disclosure tools, such as those on Instagram, have come a long way in terms of providing clear and conspicuous disclosures, these disclosures often disappear when the content is “shared” to other platforms—meaning companies and their influencers should not rely solely on these built-in tools to make required disclosures. A recent NAD decision highlights this important takeaway.
• Panelists also emphasized that disclosures indicating a post is sponsored, but that do not make clear who sponsored the post, are likely to be ineffective in the eyes of regulators. In other words, companies and influencers should avoid using tags like #sponsored without making clear what brand is doing the sponsoring. NAD similarly expressed this position in its recent Cariuma decision.
• Lastly, panelists remarked that paid content often requires a disclosure, even if the brand shares the content on its own social media feed. Brands should think twice before removing or excluding disclosures from influencer posts that appear on the brand’s own channels.

Testing and Surveys

As expected, many panels discussed claim substantiation, including what types of tests companies should rely on in substantiating their claims, and whether and when to engage an expert or to commission consumer perception surveys. These discussions provided interesting insights into NAD attorneys’ views on best practices within the NAD forum, including that practitioners should:

• Submit the majority of their supporting evidence in their first submission to NAD—not in their reply—as it sends a message to NAD about the strength of the party’s evidence.

• Consider submitting expert reports when needed and consider utilizing experts in emerging and specialized areas, such as accounting.

• In the absence of an industry standard, make sure that the company is still providing reliable testing along with sufficient information about its methodology.

Puffery

The line between puffery and deceptive advertising continues to be a subject of much discussion among practitioners and marketing professionals. The tension, astutely identified in a panel dedicated exclusively to this topic, is that on the one hand, advertisers argue puffery is not illegal because no reasonable consumer would believe it. In other words, it doesn’t work. On the other hand, advertisers use puffery because (they believe) it is effective in convincing consumers to purchase products. In other words, it works. Panelists reviewed a number of NAD decisions relating to puffery that highlighted the case-specific nature of a puffery analysis. A few takeaways include:

• Whether a claim is puffery often hinges on whether the claim is presented alongside measurable attributes. For example, in cases involving “ultimate” claims, such as the “ultimate energy bar” claim at issue in CLIF Energy Bars, NAD has determined that a claim is not puffery when it is presented in the context of objectively measurable attributes—such as Clif’s description that its energy bar contains “an optimal blend of protein, fat, and carbs.”
• In cases involving “best” claims, like “best tasting,” NAD has frequently found “world’s best” claims more likely to be puffery than mere “best” claims.

Dark Patterns

Dark patterns continue to be a priority for the FTC. While much of the panel’s discussion mirrored the FTC’s guidance, we offer some practice pointers to help you steer clear of deceptive practices:

• When conducting A/B testing, companies should optimize not only for conversions, but also for consumer experience. This is particularly important given the uptick in FTC settlements requiring companies to preserve their A/B testing, as Levine described in his remarks, as well as numerous investigation requests from the FTC involving companies’ A/B testing results in recent years.

• Explain material terms, ensure these terms are clear and conspicuous, and consider how the layout will appear on tablets, mobile devices, and computer screens.

• Monitor and consider chargebacks and consumer complaints, which could be an early indicator of consumer confusion.

• Assess whether default settings (if any) are beneficial to the consumer or the company.

• Assess cancellation methods through the lens of the consumer, making sure to allow cancellation through the same method as sign-up and evaluating the time and difficulty involved with the cancellation process.

Artificial Intelligence

While panelists discussed the ethical implications of artificial intelligence, Commissioner Holyoak took a different approach, explaining her view that the FTC needs to learn more about AI through 6(b) studies, stakeholder dialogue, and targeted enforcement rather than assuming a few, highly visible problems are indicative of larger scale problems. Holyoak counseled caution and information gathering in order to make sound decisions that will not stifle the innovation of AI at its outset.

We wrote in depth about the Commission’s notice of the proposed rulemaking last summer. The final rule largely follows the previously proposed language with one notable exception discussed below. Here’s a summary of what the rule prohibits:

• Businesses are prohibited from writing or selling consumer reviews or testimonials that are from someone who doesn’t exist (such as reviews generated by AI), that are from someone who doesn’t have actual experience with the business or its products, or that mispresent the person’s experience. The rule also prohibits businesses from purchasing or disseminating those types reviews and from procuring those types reviews from employees or their family members.
• Businesses are prohibited from offering incentives to others in exchange for writing reviews that are required to convey a particular sentiment, regardless of whether that sentiment is positive or negative, and regardless of whether that requirement is explicit or implicit.
• Businesses (and their officers and managers) are generally prohibited from writing, soliciting, or disseminating reviews and testimonials from insiders or their relatives, unless those reviews or testimonials clearly disclose the person’s material connections to the business.
• Businesses are prohibited from misrepresenting that a website or entity provides independent reviews or opinions about a category of products or services that includes a company’s own products or services.
• Businesses are prohibited from attempting to suppress negative reviews through means such as groundless threats, intimidation, or false accusations. In addition, if a business’ website suppresses reviews based on their rating or negative sentiment, the rule prohibits that business from misrepresenting that the reviews represent most or all submitted reviews.
• Everyone is prohibited from selling or buying fake indicators of social media influence, such as fake followers or views.

As we noted in our previous post, the initial proposal included a provision that would have prohibited businesses from “using or repurposing a consumer review written or created for one product so that it appears to have been written or created for a substantially different product.” The FTC noted it was not immediately able to resolve a factual dispute regarding the definition of “substantially different product” and thus decided not to finalize that provision.

Violations of the rule carry a maximum civil penalty of almost $52,000 per violation. What constitutes a single violation is not defined, but the FTC notes that “ultimately, courts will also decide how to calculate the number of violations in a given case.” Based on a post announcing the rule, the “FTC will look to use it, when applicable, to go after those who employ these prohibited practices to hoodwink consumers and get an unfair leg up on their competitors.”

From kids on social media to fake reviews and junk fees, state AGs are working across state (and partisan) lines on initiatives that promise to mold the consumer protection landscape for years to come. In this post, we reflect on our conversation with Todd Leatherman, who works at the forefront of these issues as Director of the National Association of Attorneys General (NAAG) Center for Consumer Protection.

Trend 1 – Protecting America’s Online Youth

For state enforcers, children are top-of-mind, especially when it comes to social media. A coalition of 33 state AGs filed a federal lawsuit in California alleging Meta violated state consumer protection laws and the Children's Online Privacy Protection Act. The AGs claim that Meta knowingly designed and deployed addictive and harmful features on its social media platforms, intentionally addicting children and teens and misleading the public about whether its services were safe for younger children. A number of other states have filed similar lawsuits in state courts including Nevada, which also targeted TikTok and Snap. These lawsuits are ongoing and will no doubt affect how social media platforms engage younger consumers.

This year, Oregon AG and NAAG President Ellen Rosenblum chose her Presidential Initiative as: “America’s Youth: AGs Looking Out for the Next Generation.” This initiative and corresponding NAAG Presidential Summit will include programming on technology, physical health, mental and behavioral health, and financial literacy.

On the legislative front, we have seen new laws aimed at protecting young people online. Florida recently passed a law banning social media accounts for minors under 14 and requiring parental consent for 14 and 15-year-olds. Georgia may soon also require minors under 16 obtain parental consent to create an account, following similar restrictions passed in Louisiana, Texas, Arkansas (currently enjoined pending litigation), and Utah. Generals Letitia James of New York and Rob Bonta of California have also advocated for state legislation targeting the addictive features of social media. Given the aforementioned, we expect AGs to tune into emerging issues affecting children for years to come.

Trend 2 – Big Tech’s Advertising Practices

For years, big tech has been a leading issue for bipartisan cooperation among state enforcers. Last year, we saw a $700 million settlement with Google and 53 state AGs over the Google Play Store. This led to significant reforms in Google’s practices, including how consumers access apps and how payments are processed. Currently, 38 state AGs and the Department of Justice have sued Google over alleged anti-trust violations, including monopolizing the search market. The cases were consolidated with closing arguments slated to begin May 1^st.

Since our conversation with Mr. Leatherman, DOJ and 16 other state attorneys general announced a landmark lawsuit against Apple alleging that it monopolized the smartphone market. This includes allegations that Apple intentionally makes it difficult for consumers to switch cellphones and undermines innovation, among other claims.

Trend 3 – Algorithms and AI

The promise and perils of AI have drawn major focus at AG offices across the nation and at NAAG, according to Leatherman. Last year, 54 AGs sent a letter to Congressional leaders encouraging them to study how AI may lead to child sexual abuse and exploitation online. Another collation of 26 AGs submitted a comment to the FCC on the use of AI in robocalls with the FCC later voting to ban robocalls using AI-generated voices. (Revisit our post on Washington’s new AI task force here.)

Now, we’re seeing AGs particularly concerned about racial and gender bias in AI programs used in employment, housing, and financial lending and services. Enforcers are also looking into the marketing of AI, including whether companies are overpromising on what the technology can actually provide. Given how quickly AI is advancing across sectors, we expect to see more scrutiny in the months ahead. And stay tuned for additional information on AGs and AI as our team will be reporting on the NAAG and AGA Southern Region Meeting on Artificial Intelligence and Preventing Child Exploitation occurring in April.

Trend 4 – Fake Reviews

Fake reviews, including misleading influencer content, have drawn AG attention. This year, 22 AGs submitted a letter to the FTC largely supporting a new rule that would govern and ban fake reviews. That rulemaking is ongoing.

States, including New York and Washington, have taken individual action against companies engaged in deceptive review practices. This includes instructing employees or associates to post positive reviews, threatening or intimidating consumers who post negative reviews, or requiring consumers to sign NDAs to receive services. Notably, states are able to enforce the Consumer Review Fairness Act, a federal law.

Trend 5 – Automatic Renewals

States continue to enforce their recently enacted automatic renewal statutes or provisions (for example, laws in California, New York, Washington D.C., and Virginia), which generally impose disclosure requirements, require that companies obtain affirmative consent from consumers, and mandate cancellation mechanisms. This includes requiring an online cancellation option when a consumer signs up for a service online. That said, states do not necessarily need a new law to target these practices as their general consumer protection laws likely apply. AGs may also enforce the federal Restore Online Shoppers' Confidence Act.

Trend 6 – Junk Fees

Companies that advertise one price and then tack on fees should beware. Enforcers are making so-called “junk” or hidden fees a priority. California has passed a new law governing fees and Massachusetts is in the process of instating new regulations governing them. Not to be outdone, the FTC has also proposed a rule on fees with a virtual hearing to take place in late April. (This aligns with the Biden administration’s whole-of-government approach to junk fees with other rulemaking and guidance out of the FCC, CFPB, HUD, and DOT).

That said, AGs take the position they do not necessarily need new legislation to target fees. Pennsylvania has led the way in asserting claims under state consumer protection laws and the Consumer Financial Protection Act against companies that impose fees. Similarly, Connecticut and the FTC have joined forces in litigation against a car dealer that allegedly deceived consumers about the nature of fees and add-ons. And Washington D.C. has warned restaurants that service charges could be unlawful if they are not disclosed before an order is placed.

Trend 7 – Privacy

States continue to pass and enact new privacy laws. Earlier this year, New Hampshire became the 15^th state to pass a comprehensive state privacy law and several other privacy bills are currently making their way through the legislative process. Many of the new laws will become effective this year through 2026, spurring enhanced AG interest in privacy matters.

In California, we saw the first investigative sweep in this arena with General Rob Bonta sending out letters to popular streaming apps and device companies alleging they failed to comply with California’s new privacy law. According to the office, the investigation will focus on opt-out requirements for business that sell or share consumer personal information.

Trend 8 – Veterans

While veterans have long been a priority for state AGs, the uptick in businesses offering to “counsel” or support veterans in applying for government benefits has sparked new AG activity in this space. Last year, a bipartisan group of 44 AGs sent a letter to Congress urging the body to pass legislation that further protects veterans in the application process and the Texas AG’s office sued a company that misled veterans about their ability to help obtain benefits and charged alleged excessive fees in the process.

Trend 9 – Health

In the health space, opioid marketing, vaping, and illegal cannabis products continue to take center stage. While the larger opioid cases have concluded, litigation is far from over. AGs have been leading the way in targeting manufacturers, distributers, and pharmacies that engaged in deceptive marketing tactics around opioids. We’ve also seen a focus on nicotine and cannabis products, particularly those that may appeal to children. A group of 33 AGs sent a letter to the FDA urging more stringent regulations on electronic nicotine delivery products, including on the marketing of e-cigarettes and the use of influencers to promote them. Connecticut and Nebraska have also cracked down on illegal marketing of cannabis products using their state consumer protection laws.

Trend 10 – Rapid Response

Many businesses fail to realize how substantial a role AGs play in emergencies and urgent consumer issues. They face public pressure to respond to events in real-time. For instance, the Taylor Swift concert ticket debacle led to more than 2,600 consumer complaints in Pennsylvania alone.

And, when it comes to a market disruption or natural disaster, some states have specific price gouging laws that provide state AGs enforcement authority. These laws vary by state and it can sometimes be difficult for companies to know when they are in place. We’ve seen a rise in AGs targeting companies following emergency situations for increasing prices on consumer staples and targeting charities that mislead consumers about donations in the time of crisis.

Kelley Drye’s state AG team will continue to monitor consumer protection trends in 2024. To view our full conversation with NAAG’s Todd Leatherman, click here. To stay up-to-date with our AdLaw Access blog, subscribe here.

In December 2022, NAD recommended (among other things) that Smile Prep ​“avoid conveying the message that Smile Prep does not give preferential treatment” to its affiliate partners and that it ​“clearly and conspicuously disclose that Smile Prep’s rankings, reviews, and product information of the clear aligners of its affiliate partners are advertising.” Smile Prep appealed the decision, an NARB panel affirmed the decision in March 2023, and the panel opened a compliance inquiry later that year.

Smile Prep made a number of changes to its site in an attempt to comply with the NAD and NARB decisions. For example, with respect to the issues we’re focusing on in this post, Smile Prep included a box at the top of each clear aligner review page on the website that begins with the words ​“Advertising Disclosure” in bold and then explains that: ​“When you buy products and services through our links, we may earn commissions.”

NARB determined that the ​“disclosure is neither clear nor conspicuous.” Among other things, NARB was concerned that ​“by having the disclosure appear on each page of the website, Smile Prep has obscured the fact that the disclosure is meant to apply to references to affiliate partners and their products.” Moreover, it worried that consumers may not understand the disclosure to communicate that the rankings, reviews, and other information about Smile Prep’s affiliate partners are ​“advertising.”

Smile Prep advised NARB that it believed that it was already in compliance with the NAD and NARB decisions and with applicable law, and that it was not willing to make further changes. It further stated that, ​“in the event of a referral, it looked forward to working with the FTC to craft a meaningful and fair approach to the regulation of all affiliate review sites.” Most companies wouldn’t look forward to that, especially after the FTC’s recent update to the Endorsement Guides.

This month, the FTC released a letter in which it noted that “after FTC staff explained the reason for NARB’s referral and its potential consequences, the company agreed to re-engage with NARB and NAD.” The company subsequently took additional steps to comply with the original decisions, including by adding a prominent disclosure explaining that it has an economic motivation for its recommendations. NARB subsequently closed the inquiry.

This case demonstrates that how companies disclose incentivized reviews (including through affiliate review sites) continues to be a hot topic for regulators, NAD, and even competitors. The updated Endorsement Guides include more granular requirements on what it means for a disclosure to be ​“clear and conspicuous” and companies will be evaluated against those requirements. The case also demonstrates the potential consequences of ignoring an NAD or NARB decision.

• Regulators’ Favorite Shade – Dark Patterns: Following the FTC’s 2022 Dark Patterns Report and high profile enforcement action against Epic Games, regulators including the FTC, CFPB, and state AGs continued to bring enforcement and provide guidance on perceived “dark patterns” – primarily related to automatic renewal and continuous service options, but also as to chat bots, disclosures, and marketing practices more broadly. In January, the CFPB released guidance focused on dark patterns in negative option marketing. In March, the NAD joined the discussion in a decision highlighting potential issues with Pier 1’s advertising of discounted pricing only available with a paid subscription and its use of a pre-checked box for enrollment with that same subscription. The FTC continued to lead the charge – with dark patterns allegations playing a key role in a number of enforcement actions, including against Publishers Clearing House, Amazon, and fintech provider Brigit.

• Beyoncé and Taylor Swift Concerts Lead to War on Junk Fees: Okay, the war against junk fees may have predated the fees associated with the pop stars’ mega tours, but it continued in earnest throughout the year. As with dark patterns, the FTC, CFPB and state AGs all took on junk fees at various times. Most notably, the FTC proposed a far-reaching rule that could fundamentally alter how prices and fees are disclosed in businesses across the country. The comment period was just extended until February 7, 2024 for the proposed rule. Not to be outdone, California passed new legislation banning hidden fees and the Massachusetts AG issued draft regulations that would prohibit hidden “junk fees,” enhance transparency in various transactions, and make it easy for consumers to cancel subscriptions.

• Endorsement Guides: In June, the FTC released its long-awaited update to the Endorsement Guides. We noted that the Guides include some significant changes, including new examples of what constitutes an “endorsement,” details about what constitutes a “clear and conspicuous” disclosure, and an increased focus on consumer ratings and reviews. We also examined how the revisions could affect influencer campaigns. In November, we reported that the FTC had sent warning letters to two trade associations and 12 influencers over their posts, giving us a glimpse of enforcement to come. Meanwhile, NAD has also been active in this space and even referred a case to FTC for enforcement. Expect this to be a priority for both FTC and NAD in 2024.

• Green Guides: The FTC’s Green Guides review progressed this year with an initial comment period closing in April, followed by an FTC workshop on “recyclable claims,” which we attended and highlighted here. With its history of hosting several workshops on hot green topics, we expect to hear of more workshops in the new year. California has been active as well with the governor signing a new law in October that aims to regulate carbon claims and make businesses more transparent about their carbon reduction efforts by requiring certain website disclosures (see our summary of the law here). The effective date is the first of the new year, but according to a recent letter from the bill’s sponsor, we expect that California will defer enforcement until January 1, 2025 to give companies time to comply (see here). With ESG efforts continuing to be front and center for most companies, consumers and regulators are holding companies accountable for those claims by questioning messaging about their efforts, aspirations for the future, and basis for the claims (see, for example, here, here, and here).

• State Privacy Laws: It’s getting increasingly hard to remember a time before state privacy laws regulated data sales, targeted advertising, sensitive data, and privacy disclosures. At the start of the year, five states had enacted privacy laws, and now there are 13 comprehensive consumer privacy laws (CA, CO, CT, DE, FL, IN, IA, MT, OR, TN, TX, UT & VA) and an additional two health-focused laws (WA, NV). What does this mean for advertisers? (1) Know who your vendors are and their data practices. (2) Obtain consent before building inferences based on sensitive data, like race/ethnicity, religion, or health. (3) Disclose up-front the collection, use, and disclosure of personal information. (4) Finally, recognize the limitations of third-party data as new regulations and laws take effect.

• Children’s Privacy: Congress, regulators, and advocates focused time and energy on children’s privacy issues in 2023. The House and Senate held hearings focused on children’s safety and privacy. Although the Senate Commerce Committee advanced the Kids Online Safety Act, it never received a floor vote; Senators Markey and Cassidy continued to advocate for approval of the Children and Teens’ Online Privacy Protection Act (COPPA 2.0). The FTC reached settlements with companies about practices it alleged violated the Children’s Online Privacy Protection Act (COPPA) on the Xbox and Alexa platforms and with edtech provider, Edmondo. In September, the FTC released a ​“Staff Perspective” on digital advertising to children, which included recommendations on how to protect kids from the harms of “stealth advertising.” Also in September, a federal court agreed with industry advocates that California’s Age Appropriate Design Act, which imposes a variety of obligations on businesses that provide online services “likely to be accessed by children,” violated the First Amendment. California is appealing the decision, and regulators, including a number of Attorneys General and FTC Commissioner Alvaro Bedoya, have joined the state as amici. One of the most anticipated developments occurred with just 11 days left in the year, when the FTC proposed revisions to the COPPA Rule—more than four years after initiating its review process. Among other things, the proposed Rule would require new, additional consents for third-party disclosures and could affect operators’ approach to “internal operations.” Online services with children’s audiences have lots to consider in 2024 and beyond. Stay tuned for further updates.

• State AG: State Attorneys General continued to make their presence felt in 2023. State AGs continued to go after companies for using fake reviews and false endorsements, enforced and proposed new price gouging rules, pursued telehealth companies for deceptive practices, supported the FTC’s Negative Option Rulemaking while bringing their own auto-renewal actions, continued to impose significant penalties against companies for data breaches, pursued companies for misleading consumer financial practices, and focused efforts on so-called “junk fees.” But two topics continue to be the highest priority of AGs – the impact of developments in AI (which we’ve written about here, here, and here – just to name a few) and protecting the most vulnerable consumers – especially our nation’s youth. The incoming president of the National Association of Attorneys General president, Oregon Attorney General Ellen Rosenblum, has already made protecting youth, especially teens, this year’s presidential initiative. Look for AGs to continue to this focus well into 2024.

• Automatic Renewal: While auto-renewal service sign-up flows remain important, this year, we have seen a transition to cancellation processes being the hottest topic as states enforce their specific requirements and the FTC has drawn attention to “click to cancel” through its proposed rule. But we shouldn’t forget all of the FTC’s other proposals under the negative option rule NPRM, including expanding the scope, requiring more specific disclosures, separate consent for negative option, consent for save offers, and expanded notice requirements. Regardless of whether a federal rule formally comes into play in 2024, as referenced above certainly states have agreed are on board with FTC’s proposals, and they also resolved a multistate investigation this year requiring checkbox consent, online cancellation, and limiting save attempts. And don’t forget Massachusetts is working on its own rulemaking involving online cancellation.

• NAD: This year, NAD issued number of decisions that caught our attention. For example, a decision in February narrows the scope of what claims may be considered puffery. NAD later elaborated on what it thinks advertisers must do in order to substantiate aspirational claims about future goals. NAD also issued a number of decisions involving endorsements – including employee endorsements and disclosure requirements – and even referred a case to FTC for enforcement. In August, NAD held that emojis could convey claims, though NARB later disagreed with how NAD had applied that principle. As always, NAD plays a big role in the advertising law landscape, so companies will want to continue to watch what NAD does in 2024.

• Same Product/Different Label Litigation: We chronicled a Connecticut district court’s denial of a motion to dismiss in a case in which the plaintiff alleged that Beiersdorf, maker of Coppertone sunscreens, engaged in false advertising by selling the same sunscreen formula in two different packages, one of which was labeled as “FACE” and sold in a smaller tube at twice the price of the regular Coppertone Sport Mineral sunscreen. That case is one to watch but it is not the only one of its kind. In fact, 2023 saw several similar cases involving allegedly the same formula marketed as different products with varying price points, such that the plaintiffs alleged that they were misled into purchasing the more expensive item because they believed it was uniquely suited to their needs when, in fact, it was the same as the lower-priced item. These cases involved a range of products, such as baby/adult lotions, infant/children’s acetaminophen, children’s/adult cold remedies, to name a few. So far, decisions are mixed, with some courts being more willing than others to find that the differing prices were justified. Marketers of food and personal care brands that merchandise the same formula in varying iterations will want to remain mindful of these cases as they update packaging and claims.

Keep following us in 2024, and we’ll keep you posted on how these trends develop. In the meantime, have a great holiday!

Fake Online Reviews

This panel was moderated by Victoria Butler, Consumer Chief of the Florida Attorney General’s Office, and Mike Wertheimer, Consumer Chief of the Connecticut Attorney General’s Office. Panelists included John D. Breyault, Vice President, Public Policy, Telecommunications and Fraud at the National Consumers League, Monica Hernandez, Senior Corporate Counsel at Amazon, Michael Ostheimer, Senior Attorney at the Federal Trade Commission, and Morgan Stevens, Research Assistant at the Center for Data Innovation.

To jumpstart the discussion, Stevens outlined different types of review concerns (some of which we have previously reported):

• Purchasing Reviews through Non-Customer Third Party Services – paying for positive reviews, or for negative reviews for competitors
• Incentivizing Reviews – providing some kind of benefit for a review (i.e. revenue sharing)
• Obtaining Reviews from Family/Friends – asking close connections to post positive representations
• Using fraudulent reviews for social activism reactions
• Paying individual customers for positive reviews or to post negative reviews on competitor sites
• Suppressing or unnecessarily flagging reviews
• Relying on review baiting by only allowing or encouraging positive feedback
• Threatening to use the legal system to attack reviewers
• Harassing reviewers into deleting negative reviews

Stevens cited a 2016 University of Central Florida and Case Western study that showed customers are more likely to consider extremely negative reviews useful than positive reviews. Therefore, regulators are concerned that businesses are willing to pay customers to remove negative reviews as a cost for a “good investment.”

Breyault asserted that platforms have a role to play and have invested a lot in protecting integrity, and the solution to protect integrity of user reviews will require coordination from all stakeholders involved. Consumers need to learn to recognize warning signs of bad reviews and vote with their wallets. Finally, the AG community and the FTC should have the resources necessary to go after bad actors.

Breyault also recommended platforms maintain clear policies that prohibit inauthentic reviews, require that all reviews reflect honest opinions, and allow users to report abuse. The policies should outline clear consequences for violations such as removing related products, terminating, and/or withholding payment. Later, Hernandez echoed the message of working together to combat harms of fake reviews, and stated Amazon has made significant investments and created policies to address the issue.

Ostheimer referenced the updated FTC Endorsement Guides, which cover fake and incentivized reviews. The Guides also provide new specific examples on how and when reviews should include a clear and conspicuous disclosure. In addition to the Guides, Ostheimer emphasized the importance of appropriately training employees and monitoring reviews to ensure compliance.

Understanding the Consumer Impacts of Generative AI

In the final panel for the conference moderated by Rashida Richardson, Assistant Professor of Law and Political Science at Northeastern University School of Law, panelists tackled the role state consumer regulators must play to balance business innovation and consumer safety. This panel included Dr. Solon Barocas, Principal Researcher at Microsoft Research, Sayash Kapoor, a PhD Candidate at the Center for Information Technology Policy, Princeton University, and Ben Rossen, Associate General Counsel for AI Policy and Regulation at OpenAI.

Panelists discussed the concern that generative AI models are not created to be task-specific, leading to potential additional risks if not created and used carefully. For instance, questions can arise as to who owns the data used for training and how are people using generative AI in practice. Panelists also discussed the desire for transparency and aligning consumer expectations.

Rossen noted platforms have already taken a number of steps to mitigate potential harms like hate speech and fraud and called for companies to watch how people are actually using their tools and monitor closely. Rossen referenced President Biden’s recent Executive Order on AI calling for agencies and platforms to evaluate and reduce risks associated with generative AI.

Several panelists noted that the FTC should be able to regulate businesses that falsely claim their generative AI can do something, and general UDAP and Section 5 models can be used as tools to combat discrimination resulting from generative AI where appropriate. Barocas said that AG authority would likely be insulated from a challenge like the CFPB so the AGs have more room to maneuver. Richardson agreed as UDAP is a broader tool for states.

Bottom line

For best practices, remember:

• Fake reviews can take many forms, including not disclosing incentivized reviews, purchasing positive reviews, or suppressing negative reviews.
• Generative AI is here to stay and can provide benefits to consumers. However, consumer protection laws apply to generative AI and companies should be transparent and honest about how they obtain the data for their models, and how they are training the models for potential general use.

According to the Assurance of Discontinuance, the doctor and his wife conducted a variety of schemes to both inflate positive reviews and suppress negative ones. Among their most egregious alleged acts:

The settlement outlines ways in which patients were misled by these deceptive reviews noting that “prospective patients would have been able to ascertain some common complaints voiced by patients . . . including poor bedside manner, poor communication, surprise charges, and not listening to patient concerns.” As such, the prospective patients were “enticed” to book appointments based on “manipulated online profiles.”

The doctor and his practice are required to pay a $100,000 penalty and to take down all fake positive reviews, and use best efforts to notify those with connections asking to remove their reviews. Attorney General Letitia James stressed that these fake reviews were “illegal and unacceptable, particularly for critical services like medical care.”

Takeaways: As we continue to report, state AGs are not slowing down, and are at the front of the fight against fake reviews. But whether it is through a multistate, the FTC, or even a consumer watchdog (like Fake Review Watch which assisted NY AG on this investigation), all eyes are on using any kind of manipulation tactic on reviews.

Stay tuned for our next state AG webinar where we will interview representatives of the National Association of the Attorneys General (NAAG) and the Attorney General Alliance (AGA).

Reviews matter. In a survey conducted by Yelp, 83% of consumers who read reviews say they trust online reviews about local businesses. However, fake reviews may mislead consumers. Recently, there was media attention around a one-night-only restaurant in New York City that arose from fake reviews. The idea for a restaurant spawned from a joke. A group of friends had renamed (on Google Maps) the house they lived in to “Mehran’s Steakhouse” and left reviews about the “restaurant.” It was not an established “restaurant” at the time, though some of the reviews suggested otherwise. “Mehran’s Steakhouse” had 91 reviews and a near-perfect Google rating. The friends set up a website and created a waiting list, where over 900 people signed up. Eventually, the friends put together a one-night-only dining experience. They obtained a liquor license, food handling permits, printed menus, and set up a number of “fake”-themed performances (e.g. fans of the artist, Drake, stood outside the restaurant holding posters to get Drake’s attention, though Drake was not there; a fake proposal occurred in the dining room).

Though this was an isolated and arguably amusing incident, there are greater harms that regulators, such as the FTC and state AGs, consider in how they’re approaching fake reviews.

AGs Comment on Rules for Unfair or Deceptive Reviews in NPRM

In July, the FTC published its NPRM on “banning fake reviews and testimonials.” We have previously summarized the proposed prohibitions of the NPRM.

Last month, a bipartisan group of AGs of 21 states and the District of Columbia led by the D.C., Illinois, and Pennsylvania AGs also submitted a response to the FTC’s NPRM. The comment generally commends the FTC for the proposal and provides recommendations specific to the “Review Suppression” sections of the proposed Rule based on the AGs’ experience from consumer protection cases. The AGs make two main recommendations:

First, the AGs agreed with the FTC that merchants shouldn’t retaliate against consumers who post negative reviews, particularly with threats and/or legal action against the consumer. The AGs stated that such action could have a chilling effect by bullying consumers into removing their reviews. Current language in the NPRM defines unlawful review suppression as including an “unjustified legal threat or a physical threat, intimidation, or false accusation.” The AGs recommend, however, that the FTC change the language from “unjustified” to “unfounded, groundless, or unreasonable,” to provide greater clarity and a more objective legal standard. They also recommend adding a standard to differentiate between enforceable and unenforceable NDA and similar agreements to allow for “bona fide legal threats” regarding enforceable agreements. The AGs provide a reminder that both they and the FTC can enforce the Consumer Review Fairness Act (CRFA) prohibiting certain contracts that impede consumer reviews. Further, the letter notes that AGs, such as the D.C. AG, have taken the position that NDAs used to quash reviews may violate state consumer protection laws, citing the Smile Direct Club action as an example. The AGs point out that using the word “unjustified” in the current version of the rule may present a problem where businesses assert “that their legal threats were justified by their NDAs” which should have been unenforceable by the CRFA in the first place.

Second, the AGs further addressed review suppression and agreed with the FTC that by not posting both positive and negative reviews, a merchant is potentially misleading consumers. As written, the proposed Rule prohibits a company from indicating that reviews are representative when in reality, reviews are being suppressed based on their ratings or their negativity. The AGs recommend deleting the phrase, “based on their ratings or their negativity,” claiming it is both redundant and that it may create an unintended loophole. The AGs point out that without removing that phrase, companies may try to circumvent the Rule by suppressing a review not because it is negative, but because it violates “contracts or policies.” The AGs believe “legitimate suppression” would still be permitted for businesses under other parts of the proposed Rule.

The AGs conclude by strongly endorsing the NPRM and say they “look forward to continuing [their] partnership with the FTC.”

These comments should serve as a reminder and warning that not only are state AGs also paying attention to the impact of consumer reviews and the potential deceptive practices, but are advocating for even stronger positions than the FTC. Whether it be through the Consumer Review Fairness Act or their state UDAP laws, we can anticipate the states will be looking for potential enforcement targets given the increase in consumer reliance on reviews in making purchasing decisions.

Last December, NAD recommended (among other things) that Smile Prep “avoid conveying the message that Smile Prep does not give preferential treatment” to its affiliate partners and that it “clearly and conspicuously disclose that Smile Prep’s rankings, reviews, and product information of the clear aligners of its affiliate partners are advertising.” Smile Prep appealed the decision, an NARB panel affirmed the decision this spring, and the panel opened a compliance inquiry this summer.

Smile Prep made a number of changes to its site in an attempt to comply with the NAD and NARB decisions. For example, with respect to the issues we’re focusing on in this post, Smile Prep included a box at the top of each clear aligner review page on the website that begins with the words “Advertising Disclosure” in bold and then explains that: “When you buy products and services through our links, we may earn commissions.”

NARB determined that the “disclosure is neither clear nor conspicuous.” Among other things, NARB was concerned that “by having the disclosure appear on each page of the website, Smile Prep has obscured the fact that the disclosure is meant to apply to references to affiliate partners and their products.” Moreover, it worried that consumers may not understand the disclosure to communicate that the rankings, reviews, and other information about Smile Prep’s affiliate partners are “advertising.”

Smile Prep advised NARB that it believed that it was already in compliance with the NAD and NARB decisions and with applicable law, and that it is not willing to make further changes. It further stated that, “in the event of a referral, it looked forward to working with the FTC to craft a meaningful and fair approach to the regulation of all affiliate review sites.” Most companies wouldn’t look forward to that, especially after the FTC’s recent update to the Endorsement Guides.

The updated Endorsement Guides include more granular requirements on what it means for a disclosure to be “clear and conspicuous” and the FTC reminds advertisers: “Just remember that what’s clear to you may not be clear to everyone visiting your site, and the FTC evaluates ads from the perspective of reasonable consumers.” It will be interesting to what the FTC determines in this case and, if determines that Smile Prep needs to change its disclosures, how that will impact other affiliate review sites.

As we noted in our original post, Roomster advertised that its platform had “millions of verified listings” in a “safe community with real members worldwide.” To test how well Roomster verified the listings, the regulators listed a room for rent on the platform at an attractive price. Had Roomster attempted to verify the review, it would have learned that the address of the listing was actually a US Postal Office commercial facility. According to the complaint, though, Roomster never asked any questions.

Roomster also allegedly bolstered its false claims by flooding the internet and app stores with tens of thousands of 4- and 5-star reviews, many of which were fake. The complaint alleged that the company bought over 20,000 reviews from AppWinn alone. Emails between Roomster and AppWin showed a detailed plan addressing how and when the reviews should be posted. According to the complaint, the number of positive fake reviews diluted the real reviews, many of which warned of scams on the platform.

Yesterday, the FTC and states announced a settlement that includes some novel requirements. Among other things:

• The defendants are permanently banned from buying or incentivizing consumer reviews and from disseminating reviews where they have a relationship with the reviewer that might affect the review’s weight or credibility. The outright ban on incentivized reviews is surprising since companies are generally allowed to incentivize reviews as long as those incentives are clearly disclosed.

• The defendants are prohibited from misrepresenting any material fact, including that any review is truthful or represents a real user, or that any rental listing is verified, authentic, or available, when that isn’t the case. No surprises there.

• The defendants are required to monitor affiliates to assess their compliance. Notably, the settlement provides a lot of detail about this obligation. For example, the defendants are required to take extensive steps to monitor “all marketing materials” used by affiliate marketers “on at least a monthly basis” and to promptly take steps to address issues that they discover during monitoring.

• The settlement imposes a monetary judgment of $36.2 million and civil penalties totaling $10.9 million payable to the states. These amounts will be suspended after the defendants pay $1.6 million to the states, based upon their inability to pay the full amount. (If the defendants are found to have misrepresented their financial status or to have violated the terms of the order, the full amounts would immediately become due.)

This case demonstrates that the FTC and state AGs continue to focus on the integrity of reviews and that they will work together to seek monetary penalties for misleading practices. The novel provisions in the settlement agreement – such as the ban on incentivized reviews and the detailed monitoring requirements – also suggest that regulators are getting more creative and restrictive in settlement agreements, particularly when complaints involve particularly egregious conduct.

The proposed rule came just one day after the FTC’s release of updated Endorsement Guides, which we reviewed here. As currently drafted, the proposed rule would prohibit:

• Fake or false reviews and testimonials, which are defined to include reviews by reviewers who do not exist, did not use the product or service, or that materially misrepresent their experience with the product or service;
• Repurposing consumer reviews written for one product so that they appear for a “substantially different” product;
• Compensating or otherwise incentivizing or conditioning consumer reviews, whether positive or negative;
• Posting reviews by employees or “insiders” without disclosures regarding their material connection to the company;
• Creating seemingly “independent” review websites that are in fact controlled by the company and are not truly independent;
• Suppressing negative reviews, including by “unjustified” legal threats or “false accusations” or by declining to post negative reviews for a product or service unless for a specified reason unrelated to the negative nature of the review; and
• Selling, distributing, purchasing, or procuring “fake indicators” that misrepresent social media influence.

Many of these practices are already addressed in the FTC’s recently updated Endorsement Guides. Many are also listed in the Commission’s Notice of Penalty Offense letters on endorsements sent to over 700 companies last year, which we discussed here. For those practices that have long been considered deceptive, the proposed rule is clearly intended to open a path to consumer redress and civil penalties.

In other ways, however, the FTC is not just looking to authorize new remedies but also to substantively move the needle on the current legal standard. These efforts raise a host of issues and questions ripe for comment by interested parties, including:

• Should companies be liable for civil penalties based on a negligence theory and is the FTC authorized to do so under their Magnuson-Moss rulemaking authority? The proposed rule draws on concepts of negligence and third-party liability to propose that businesses will be liable directly if they disseminate or cause to be disseminated deceptive reviews (e.g., ones that materially misrepresent the testimonialist’s experience or that fail to disclose the relationship between the business and the testimonialist) if they “knew or should have known” of the facts giving rise to the deception. This new standard raises a number of important questions, which the FTC to its credit specifically seeks input on. Even assuming the FTC is authorized to seek civil penalties based on such a standard, what would this mean in practice for companies when they oversee and review reviews, and how would they show that they “should not have known” about a particular fact.
• What is a “substantially different” product for the purposes of the rule’s prohibition against “review repurposing”? Under the proposed rule, companies may not repurpose consumer reviews from one product and apply it to a “substantially different” product, which is defined as one that “differs from another product in one or more material attributes other than color, size, count, or flavor.” But the proposed rule does not specify which attributes might not be “material” for purposes of review repurposing other than color, size, count or flavor, nor does it consider that other product attributes – similar to flavor – could hinge on consumers’ subjective preferences. For example, what about a cleaning spray that comes in different fragrances? Or the same exact shirt featuring a V-neck and a boat neck? What about a supplement that comes in gummy form and tablet form, where all active ingredients are the same? The agency also does not take into account the benefit consumers experience when viewing different product options listed on the same product page.
• How far-reaching is the prohibition against characterizing reviews as “independent” on company-controlled websites? Proposed section 465.6 would authorize civil penalties where a business “represent[s], expressly or by implication, that a website, organization, or entity that it controls, owns, or operates provides independent reviews or opinions about a category of businesses, products, or services including the business or one or more of its products or services.” While staff’s intent appears to be to prohibit companies from misrepresenting the purported independence of a company-controlled review site, in practice, the language of the proposed rule would prohibit companies from representing that any consumer reviews or opinions featured on their own sites are independent, even if they are.

In addition to these specific issues related to proposed requirements, there are the general questions as to whether a rule is necessary in the first place. As many will remember, the NPRM was preceded by an ANPR in October 2022, in which the agency announced its intent to explore rulemaking in this space. At that time, former Commissioner Wilson – the sole “no” vote on issuing the ANPR – noted that “the harm that results from the deception at issue is speculative in nature” and opined that “the Commission already has a multi-pronged strategy in place to combat [deceptive endorsements or fake reviews].” In her view, “churning out another proposed rule” downplays the impact of other enforcement tools and unnecessarily diverts already-strained staff resources.

The comment period for the NPRM will run for 60 days following the publication of the proposed rule in the Federal Register, and we encourage stakeholders to submit comments addressing the above-mentioned topics and any other areas of concern.

This morning, the FTC announced the final version of the Guides. The final version largely mirrors the version proposed last year, with minor modifications that generally serve to further constrain the discretion that companies have when working with endorsements and reviews.

Here are the key changes appearing in the new Guides:

“Clear and Conspicuous” Definition

Unlike the 2009 Guides, the new Guides include a strict definition of what constitutes a “clear and conspicuous” disclosure. Among other things, the FTC wants disclosures to be “unavoidable.” In the examples, the Guides clarify that disclosures at the bottom of a social media post, where consumers have to click “more” in order to see them, are not unavoidable. (This mirrors the position the FTC has taken in recent settlements.) The Guides further caution companies against simply relying on a social media platform’s built-in disclosure tools if those tools are not sufficiently prominent, legible, or unavoidable. (FTC staff has previously cast doubt on those tools.)

The revised definition also provides that a disclosure must appear through the same means as the triggering claim – i.e., if the triggering claim is made both visually and audibly, then the disclosure must also appear both ways. (We’ve seen the NAD take similar positions in recent cases.)

Express Liability for Endorsers and Intermediaries

While it’s obvious that advertisers can be on the hook for deceptive endorsement practices, the new Guides clarify that all parties in an advertising transaction could share liability for problematic conduct. Intermediaries – such as advertising agencies, public relations firms, and reputation management companies – may be liable for their roles in creating or disseminating what they knew or should have known were deceptive endorsements. And endorsers (such as influencers) themselves can be liable for their representations. (See, for example, the FTC’s recent order against two real estate celebrity endorsers.)

Focus on Consumer Ratings and Reviews

The new Guides focus extensively on companies’ practices surrounding procuring, suppressing, boosting, organizing, editing, and publishing consumer ratings and reviews. Specifically, companies may not treat reviews in any way that distorts or misrepresents consumers’ opinions. Examples of misleading conduct include deleting or suppressing negative reviews, offering incentives in exchange for positive reviews, review gating (i.e., encouraging positive reviews and discouraging negative reviews), and falsely reporting negative consumer reviews as “fake” on a third-party platform without substantiation.

Companies may edit unlawful, harassing, abusive, obscene, vulgar, or sexually explicit content from consumer reviews, but such editing criteria must be applied uniformly to both negative and positive reviews.

In addition, if a company incentivizes consumers to provide numerical/star ratings and then includes those incentivized ratings in the average ratings, such inclusion could be deceptive if the incentivized ratings materially increase the average rating. In such a situation, the company will likely need to provide a clear and conspicuous disclosure regarding the incentivized ratings.

Although the FTC acknowledges that companies generally aren’t responsible for reviews written by ordinary consumers without any connection to the company, companies can be responsible for those reviews if they feature, highlight, repost, retweet, share, or otherwise adopt the reviews as part of their own marketing efforts. In those cases, a review becomes an endorsement and must follow all endorsement requirements. For example, they must be truthful, claims must be substantiated, and the reviews must include any necessary disclosures.

Expanded Disclosure Requirements for Atypical Results

The new Guides add additional guidance regarding atypical results disclosures, specifying that the disclosure used to qualify an atypical result should not itself misrepresent what consumers can expect. The new Guides also include new and revised examples, which reflect more stringent expectations related to disclosures of results that consumers can generally expect.

For example, the FTC uses a hypothetical testimonial in which a consumer claims to have lost 50 pounds in six month. The company adds a disclosure stating: “The typical weight loss of QRS Weight-Loss users who stick with the program for 6 months is 35 pounds.” However, in the FTC’s scenario, only one-fifth of consumers who start the program stick it for six months. Accordingly, “disclosure is inadequate because it does not communicate what the typical outcome is for users who start the program.”

The new Guides also strengthen the FTC’s view that “Results not typical” types of disclaimers are unlikely to be effective in conveying what consumers may generally expect to receive. Specifically, the new Guides delete a previous reference in a footnote stating that “the Commission cannot rule out the possibility that a strong disclaimer of typicality could be effective in the context of a particular advertisement.” The modification sends a clear signal that general disclaimers that do not tell consumer what results they can generally expect to receive are likely to be viewed as insufficient.

Additionally, the new Guides clarify that in order to be effective, disclosures for atypical results “must alter the net impression of an advertisement so it is not misleading.”

Expanded Definition of “Endorsement”

The new Guides expand the definition of “endorsement” to clarify that simply tagging a brand could constitute an endorsement (though the FTC acknowledges that isn’t always the case). In addition, the new Guides specify that a “fake” positive review is considered an endorsement.

Additional Examples for Influencer and Affiliate Marketing

While the Guides have long specified that material connections must be clearly and conspicuously disclosed, the revised provisions include new examples of material connections that necessitate disclosure, including the provision of free or discounted products or the possibility of winning a prize, of being paid, or earning money through affiliate links. Even things with no monetary value – such as the opportunity to appear on television or in media promotions – could constitute a material connection that requires a disclosure.

Increased Scrutiny of “Independent” Review Sites

The new Guides address so-called “independent review sites” that have material connections to various companies, or that offer a pay-to-play ranking system of products or services. The Guides are clear that sites connected to a company cannot be described as “independent” and that sites purporting to rank products or services based on objective criteria must ensure that a company’s payment does not influence its rank. Indeed, the Guides states that marketers could be liable if they pay to advance in the rankings of such purportedly “objective” ranking sites.

Statement of Special Concern Regarding Child-Directed Endorsements

The new Guides include a new section addressing endorsements in advertisements addressed to children. The section states that “[p]ractices that would not ordinarily be questioned in advertisements addressed to adults might be questioned in such cases.” The Guides don’t provide further insight on how such endorsements might be questioned or evaluated, but the FTC claims it is “exploring next steps.”

***

The FTC has also updated its guidance document, “FTC’s Endorsement Guides: What People Are Asking” to respond to additional questions related to the new Guides.

Although the new version of the Guides includes some big changes compared to the previous version, we’ve seen most of this in enforcement actions, warning letters, and various types of business guidance in recent years, including in the proposed edits the FTC announced last year. (One surprise is a new example involving “dog influencers,” which has some of us considering additional revenue streams, but that’s a topic for another day.)

If you’ve been following our tips on this topic, you may already be on your way to compliance with the new Guides. If not, now is the time to evaluate your practices before the FTC does.

Renue By Science sells products with NMN, a supplement that is thought to slow the aging process. Ad Law Access is known for the quality of its content and the youthfulness of its writers, so we don’t have personal experience with the supplement, but some people swear by it. One of those people is an employee of Renue By Science that posts informative YouTube videos on various health topics. In one of the videos, she discusses the current regulatory status of NMN and speaks positively about the supplement, in general. Notably, though, she doesn’t promote any particular brand.

Reasonable minds can disagree over whether a video that discusses a product category without promoting a particular brand constitutes an “endorsement” that would trigger a disclosure requirement under the FTC’s Endorsement Guides. NAD seems to conclude – without much explanation – that it does. One sentence in the decision mentions that the video description included links to sites where the company’s products were sold. It’s likely that impacted NAD’s analysis, but it’s not clear to what extent or whether the conclusion would have been different if the description didn’t have those links.

NAD acknowledged that a written disclosure identifying the speaker as an employee of the company appeared in the video description, above the “show more” link. However, that wasn’t enough to satisfy NAD. Instead, NAD recommended that the company “inform the employee of their obligation to clearly and conspicuously disclose in the video itself that the speaker is an employee.” This recommendation is arguably more stringent than what is required by the FTC’s Endorsement Guides and what appears to be common practice with many influencer campaigns.

NAD’s discussion of the video is contained in one short paragraph of the decision – and it doesn’t seem like the advertiser debated the issues of whether the video constituted an endorsement or whether the disclosure was sufficient – so we don’t have a lot go on. What we do have, though, suggests that NAD is taking a strict position on what employees must do when they promote products that are sold by their companies, even if the company’s products aren’t mentioned specifically. Now may be a good time to look through your employee policies to see if they address these types of issues.

Last year, MPS challenged various claims that 4Patriots made about its food kits at the NAD, and this year, 4Patriots filed its own challenge against MPS. Although much of what’s in NAD’s decisions may not be relevant to companies outside of this niche market, the most recent decision address at least three issues that regularly come up across a broad range of industries.

Made in USA

The MPS website included various claims that products were “Made in USA” alongside patriotic imagery. Because 4Patriots sells similar products, it knows that some of the ingredients in the MPS kits are likely to be imported. NAD summarized the requirements for “Made in USA” claims – which we’ve also summarized here – and recommended that MPS qualify its claims with a clear and conspicuous disclosure explaining that some of the ingredients in its kits are imported.

False Sense of Urgency

4Patriots argued that MPS creates a false sense of urgency by suggesting that sales are about to expire, when that’s not true. MPS provided evidence showing that various sales ended as advertised, and NAD agreed that those examples were not misleading. However, 4Patriots submitted examples of two sales that allegedly continued past their advertised end date.

NAD noted that it “is well-established that when an advertiser represents an offer to be for a limited time, that offer must, in fact, be available for only a limited time, and a reasonable amount of time must pass before the advertiser can make similar claims again.” NAD recommended that MPS “take appropriate steps to ensure that its time-limited claims are in fact limited.”

Reviews

Because the MPS site includes a higher percentage of 5-star reviews than other sites have for MPS products, 4Patriots suggested that MPS manipulates reviews. MPS explained that it posts all verified reviews, as long as they don’t contain offensive language, regardless of whether they are positive or negative. It suggested that some negative reviews on other sites may be related to products sold by unauthorized resellers, who may be selling outdated or sub-standard products.

NAD did not appear to take a side on the dispute about whether MPS had manipulated its reviews – something it likely couldn’t determine based on the record – but it did recommend “that when the advertiser’s website appears to publish all product reviews, that the advertiser post all reviews on its website, subject to its policy preventing reviews with vulgar or offensive language.”

Lessons

There aren’t any surprises in the decision, but there are a few points worth noting:

• Although the FTC has been the main source of Made in the USA complaints (like this one), complaints can also come from competitors. That’s particularly true in cases where competitors use similar ingredients or components that are sourced from similar suppliers and have a good idea of how you operate.

• Creating a sense of urgency can be an effective (and lawful) marketing technique as long as your claims are accurate and sales end when you say they will. But, as we’ve posted before, a false sense of urgency can lead to complaints from consumers, regulators, and competitors.

• The authenticity of reviews has long been a concern of the FTC and other regulators. (Click here, here, and here, for example.) Competitors and consumers are likely to bring more challenges as well, though proving fraud could be difficult without discovery (something that isn’t available in an NAD proceeding).

For more advertising and privacy law survival tips, be sure to check out our blog, our podcast (where you can hear our posts read by our talented host in her mellifluous voice), and other resources.

Routine Wellness makes haircare products, including a shampoo and conditioner that are designed to strengthen hair. My Best Self, a lifestyle blog, published an article entitled “5 Best Shampoos for Women with Hair Loss.” A Routine Wellness product took first place, and Routine Wellness sponsored posts on Facebook and Instagram that linked to the article.

NAD found the social posts as part of their routine monitoring and had concerns about some of the claims in the article. (It’s not clear from the decision which claims caught NAD’s attention.) Even though Routine wellness did not sponsor, approve, or control the claims, NAD took issue with the company linking to those article. Here’s the key part of the decision:

It is well-established that when an advertiser quotes, restates, links to, or otherwise disseminates claims made about its product by a third party, those same third-party claims become advertising claims made by the advertiser for which the advertiser must have substantiation.

According to NAD, when Routine Wellness linked to article, claims made about Routine Wellness’ haircare products in the article “became advertising claims of Routine Wellness for which Routine Wellness must have a reasonable basis of support.” To answer the initial question, this decision suggests you can only link to a review if you can substantiate all claims in that review.

Click here for another case involving haircare reviews and here for a case involving haircare claims.

• Requiring patients to agree, before treatment or even seeing Dr. Sajan, to sign a non-disclosure agreement limiting negative reviews, including for a time expressly stating that consumers could not leave a review that was less than 4 stars, or they would be subject to a $250,000 fine and potentially have their personal health information disclosed:

• After service, if a customer left a negative review, offering cash, free services, and free products to resolve their complaints, but first requiring the signing of a second non-disclosure agreement that required removal of the negative review.
• Creating fake positive reviews, allegedly at the direction of Dr. Sajan, using a VPN to disguise the IP address of the origin of the reviews.
• Manipulating social media reviews by purchasing followers and “likes.”
• Altering “before” and “after” photos used in advertising, for example manipulating photos of patients receiving hair plugs to cover up bald spots.

The suit was filed in federal court, alleging violations of the Consumer Review Fairness Act, the Health Insurance Portability and Accountability Act, and violations of the Washington Consumer Protection Act.

While the allegations against Allure and Sajan may seem extreme, they underscore the importance that businesses put on positive reviews (and the sometimes great lengths they will go to in order to obtain those reviews) and the reasons why enforcers are paying such close attention to the source of reviews. Some important takeaways to keep in mind:

• State Attorneys General have the authority to enforce the CRFA and HIPAA, and are increasingly doing so. While not independently enforceable, Washington also cites to the FTC’s Endorsement Guides, as well as CFPB bulletins, in its action. States may take their cues from federal enforcers, but they certainly can act independently in enforcement efforts.
• Consistent with the recent emphasis that the FTC and CFPB in particular have put on individual liability, Washington also sued Allure’s owner. While the ability to pursue individuals under state law varies from state to state, we expect to see this trend continue by State AGs in 2023.
• Remember: enforcers expect reviews to be fair and honest assessments of your company’s practices. Any manipulation of those reviews may result in scrutiny, an investigation, or even a lawsuit.

Despite these efforts to combat fake and misleading reviews, Samuel Levine, Director of the FTC’s Bureau of Consumer Protection said that the “scourge persists” and announced that the agency is exploring a rule “that would trigger stiff civil penalties for violators.” The FTC doesn’t intend to propose a rule that covers all of the issues addressed in the Endorsement Guides, though. Instead, the FTC is primarily focused on the following topics:

• Fake reviews, including reviews by people who don’t exist, haven’t used a product, or lie about their experience.
• Review “reuse fraud,” such as taking reviews about one product or service and using them for a different product or service.
• Paid reviews, including positive ones about a marketer’s products and negative ones about a competitor’s products.
• Insider reviews, including those written by employees who don’t disclose their connections to the company.
• Suppressing reviews, both on a marketer’s own platform and on other platforms.
• Fake review websites, such as when a marketer sets up a purportedly independent site to review or endorse its own products.
• Buying followers, subscribers, views, or other indicators of social media influence.

Once the Advance Notice of Proposed Rulemaking is published in the Federal Register, the public will have 60 days to submit comments. The FTC will also use public workshop conferences to assist the Commission in drafting a proposed rule.

In 2019, NAD recommended that TaxSlayer stop claiming that it was “Rated #1 in the Tax Prep Software Category on Trustpilot” – even though the claim was literally true – because “Trustpilot’s collection of user reviews did not provide reliable evidence to support the challenged Rated #1 claim or demonstrate the comparative satisfaction of users of tax preparation software.” Check out our previous post for more details about why NAD was concerned with the ratings methodology.

Last month, NAD recommended that CreditAssociates stop claiming that it was “America’s #1 Debt Relief Company” based on Trustpilot reviews – again, even though the claim was literally true – because it continued to have concerns over Trustpilot’s ratings methodology. Some of the concerns are similar to the ones NAD expressed in the TaxSlayer case, while others are a little different and reflect changes on the Trustpilot platform. Here are a couple highlights from NAD’s list of concerns:

• Trustpilot rewards companies that solicit reviews and states that “businesses that regularly invite their customers to write reviews tend to have a higher TrustScore than businesses that don’t.” NAD was concerned that “companies that do not actively solicit reviews in accordance with Trustpilot’s requirements and receive a certain number of reviews will not even be considered as part of the universe of companies against which Credit Associates is compared.”
• Businesses with a free Trustpilot account can solicit up to 100 reviews per month, while businesses with a paid account can solicit 500 or more, depending on the plan they choose. NAD noted that “in essence, the ranking at issue is influenced by a company’s Trustpilot subscription which affords more opportunities to solicit reviews than companies which do not have a paid subscription.”

Notably, although NAD recommended that the company stop the #1 claim, NAD didn’t seem to take issue with a claim that the company had achieved a “4.9 out of 5 based on 8,641 reviews” on Trustpilot. This suggests that companies may be able to make monadic claims based on their ratings on Trustpilot, but both this and the previous TaxSlayer case demonstrate that it may not be possible to make comparative claims based on those ratings.

Roomster advertised that its platform had “millions of verified listings” in a “safe community with real members worldwide.” To test how well Roomster verified the listings, the regulators listed a room for rent on the platform at an attractive price. Had Roomster attempted to verify the review, it would have learned that the address of the listing was actually a US Postal Office commercial facility. According to the complaint, though, Roomster never asked any questions.

To bolster its marketing campaign, the company allegedly flooded the internet and app stores with tens of thousands of 4- and 5-star reviews, many of which were fake. In fact, Roomster bought over 20,000 reviews from AppWinn alone. (More on them later.) Emails between Roomster and AppWin show a detailed plan addressing how and when the reviews should be posted. According to the complaint, the number of positive fake reviews diluted the real reviews, many of which warned of scams on the platform.

Although the case against Roomster is pending, the owner of AppWin agreed to sign a proposed settlement with the FTC and six states. Under the settlement, he has agreed – among other things – to notify the Apple and Google app stores that Roomster paid him for posting reviews, to specifically identify those reviews, and to pay a total of $100,000 to the states. The proposed settlement also bans him from selling consumer reviews or consumer endorsements.

Although our regular readers would never engage in the type of practices alleged in this complaint, the case is worth noting for a number of reasons. Among other things, the case demonstrates that the FTC and state AGs continue to focus on the integrity of reviews. This case involves fake reviews, but regulators have applied similar principles in cases that involved legitimate reviews, when those reviews were incentivized, but the incentives weren’t clearly disclosed. If nothing else, hopefully we’ve saved you from renting a fake room in a post office.