Product Endorsements Gone Wild: Traps For Unwary Companies

Strategy

On October 13, 2021 the Federal Trade Commission issued warning notices to over 700 companies about deceptive endorsements and reviews, including 3M, Apple, BMW, Chevron, Nordstrom, Pfizer and many others. This mass mailing is a shot across the bow to all companies about the use of “deceptive endorsements” and paid reviews.  The complained-of “deception” includes statements related to XYZ.

Having an influencer endorse your product seems like a great idea: after all, since the endorser is a peer of your target audience he or she will be more trusted than messages from the company itself. Indeed, the new generation of influencer is likely to be your target audience as companies routinely harness the media power of popular students to hawk their wares. However, seemingly informal social media messaging pose risks: companies (and endorsers) can be on the hook when the messages go south.

Who is an endorser?

Basically, companies are responsible for the content of anyone who promotes their product in exchange for any kind of benefit from the company. The benefits do not have to be much and the relationship does not have to be formal: influencers who receive free product to post content or reviews are still doing so on the company’s behalf.

Who influences the influencers?

An endorser is legally required to disclose a “material connection” between themselves and the company whose product they endorse with a clear and conspicuous statement in the body of the advertisement. A “material connection” includes receiving money, free product, or merely having a connection to the brand that would not be evident to the viewer (such as being an employee or having a family connection). For example, Cardi B, Jordin Sparks, and other celebrity endorsers last year received a warning letter from the FTC for failing to prominently disclose their sponsorship from Teami tea products in Instagram posts.

What can endorsers say and not say?

An endorsement is the same as any other advertisement. An endorser cannot make claims that the company itself couldn’t say. In addition, the endorser’s message has to be sincere (or sincere enough): the claims have to be the endorser’s actual opinions and reflect the endorser’s actual experience. A “review” from a consumer who has not actually tried the product or who received an undisclosed benefit from the company is misleading.

Trouble can also arise when the endorser states true, but not representative opinions. The FTC has emphatically warned that anecdotal experiences are not evidence of a product’s effectiveness. So, for example, if an endorser truthfully stated that he lost 20 pounds while taking a product, the endorsement would still be misleading if the individual experience is not the expected experience.

Any claims about efficacy therefore must be:

  • the endorser’s experience;
  • backed up my competent, scientific evidence, where necessary; and
  • if not the expected experience, there must be prominent disclosures about what a user’s expected experience would be.
What if it’s a drug?

This is where it gets hairy for companies. The difference between drug and cosmetic regulation is profound: while both are regulated by the FDA, “drugs” require specific label information and may require pre-clearance from the FDA. A product unwittingly marketed as a “drug” is misbranded. However, there is an extremely fine line in the language companies can use when promoting their products.

The FDA considers a cosmetic a drug when the producer makes claims about treating disease or altering the physical structure or function of the body.[1] A cosmetic is a product that cleanses, beautifies, or alters the appearance (the product may also be both).[2] For example:

• Lotions intended to make the user more attractive is a cosmetic, while those intended to affect the structure of the skin may also be a drug;[3]

• A product claiming to restore hair growth, reduce cellulite, or treat cellulite is a drug;

• For anti-aging products, a product claiming to decrease wrinkles or affect collagen is a drug, while those only claiming to make the signs of aging less noticeable is a cosmetic;[4]

• An essential oil or fragrance that claims that the product affects mood or aids with sleep is a drug.

Many advertising claims are close to the line. A lotion is a “cosmetic” if it claims to moisturize, but a company got in trouble for claiming that theirs would “[s]oothe itchy, dry, and flaking skin.” Another was warned about a consumer’s statement that the product would “prevent future breakouts and eliminate blackheads.” Another was successfully sued when it promised “fuller and thicker” eyelashes, among other drug-like claims.[5] This drug/cosmetic distinction is why cosmetics companies stress that their products affect the “appearance” of a condition, rather than the condition itself. Since an endorser’s claims are treated as coming from the company, an unwary influencer can easily expose their sponsor into grave trouble.

Influencer policies

Because of these pitfalls, companies must police those who make endorsements in their name and make reasonable efforts to ensure compliance.  Companies should have written guidelines articulating what endorsers can and can’t say, and provide endorsers with the required disclosures for each kind of product and media post.

Endorsers gone wild can create trouble with regulatory bodies such as the FTC and the FDA, but can also subject your company to lawsuits from consumers and competitors for making false statements or selling misbranded products. Endorsers can also get in legal trouble themselves for making false claims or failing to disclose their relationship with the company.

[1] 21 U.S.C. § 321(g)(1)

[2] 21 U.S.C. § 321(i).

[3] FDA, Soaps & Lotions, https://www.fda.gov/cosmetics/cosmetic-products/soaps-lotions (last visited Oct. 15, 2021).

[4] FDA, Wrinkle Treatments and Other Anti-Aging Products. https://www.fda.gov/cosmetics/cosmetic-products/wrinkle-treatments-and-other-anti-aging-products (last visited Oct. 15, 2021).

[5] Allergan, Inc. v. Athena Cosmetics, Inc., 738 F.3d 1350, 1357 (Fed. Cir. 2013).

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