John Zasada, Compliance Consulting Director, Financial Institutions Group

On Oct. 13, 2021, the Federal Trade Commission (FTC) sent over 700 companies a Notice of Penalty Offenses, warning them about using endorsements to deceive consumers.

According to the FTC, the rise of social media has caused confusion between authentic content and advertising, leading to an explosion in deceptive endorsements across the marketplace. It indicated the online world is filled with fake online reviews and other deceptive endorsements about products and services. The FTC warned companies they could face significant civil penalties, up to $43,732 per violation.

Among the acts and practices deemed deceptive or unfair includes the following:

  • Make claims which represent, expressly or by implication, that a third party has endorsed a product or its performance when such third party has not in fact endorsed such product or its performance.
  • Misrepresent an endorsement represents the experience, views or opinions of users or purported users of the product.
  • Misrepresent an endorser as an actual user, a current user or a recent user of a product or service.
  • Continue to advertise an endorsement unless the advertiser has good reason to believe the endorser continues to subscribe to the views presented in the endorsement.
  • Use testimonials to make unsubstantiated or otherwise deceptive performance claims even if such testimonials are genuine.
  • Misrepresent explicitly or implicitly through the use of testimonials the experience described by endorsers of a product or service represents the typical or ordinary experience of users of the product or service.

The FTC did state it was not singling out any specific companies that received the letter.

Financial institutions would be wise to review their use of endorsements and ensure they are not unfair or deceptive. If you have more questions about advertising regulations, contact Doeren Mayhew’s regulatory compliance specialists.