ADventures in Law

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Our team recently attended the ANA Masters of Advertising Law Conference and had the great fortune to hear Serena Viswanathan, associate director for the FTC’s Advertising Practices Division, discuss the <a href="https://www.federalregister.gov/documents/2024/08/22/2024-18519/trade-regulation-rule-on-the-use-of-consumer-reviews-and-testimonials" target="_blank" rel="noreferrer noopener">Rule on the Use of Consumer Reviews and Testimonials</a> (Rule). She specifically endorsed (excuse the pun) the FTC’s recently revised FAQs, “<a href="https://www.ftc.gov/business-guidance/resources/consumer-reviews-testimonials-rule-questions-answers" target="_blank" rel="noreferrer noopener">The Consumer Reviews and Testimonials Rule: Questions and Answers</a>” (FAQs), as a great source of insight into how the FTC interprets the Rule. With the holiday season underway and businesses eager to highlight their products and services for enthusiastic gift purchasers, we thought it was the perfect time to dive into the FAQs and take a closer look at consumer reviews. And of course, we want to remind readers that the Rule is in effect and was supported by all five commissioners. 

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One area that Ms. Viswanathan specifically highlighted during her panel was the broader idea that the Rule is not meant to cover all acts or practices related to endorsements and consumer reviews. Instead, it is intended to target specific misrepresentations or deceptive or unfair practices. That being said, Ms. Viswanathan emphasized that while conduct may not be covered under the Rule, it can certainly still be a deceptive or unfair act or practice under Section 5 of the FTC Act. The big difference here, of course, is that civil penalties are available when there is a rule violation.

For example, Section 465.4 of the Rule prohibits businesses from providing compensation or other incentives for its reviews if it is “conditioned expressly or by implication on the writing or creation of consumer reviews expressing a particular sentiment” (i.e., positive or negative). The FAQs on this section make clear that the rule does not prohibit offering incentives for review generally. As long as there is no requirement to express a particular sentiment, businesses are entitled to incentivize reviews. The FAQs (and Ms. Viswanathan in her remarks) highlight that while the act of incentivizing reviews generally is not prohibited by the Rule, the practice is still governed by Section 5 of the FTC Act and businesses must ensure the incentivization of reviews does not run afoul of Section 5 requirements.

Businesses, although permitted to offer incentives under the Rule, are still required to disclose those incentives to consumers and remind their customers of the need to make such a disclosure. So, for example, if a company offers free product in exchange for leaving a review, that must be clearly disclosed to consumers. The Rule also prohibits businesses from <em>implying</em> that the review must be positive in order to get that incentive. The FAQs address how this might work in practice through an example – if a business asked consumers to “Tell us how much you loved your visit to John’s Steakhouse and get a $5 coupon,” this would imply to consumers that they may only receive the incentive (here, the $5 coupon) if the review is positive. Taking the FAQs’ example a bit further, if the offer had stated, “Tell us about your experience at John’s Steakhouse and automatically receive a $5 coupon,” the FTC likely would not take issue with this offer, because there is no implied requirement that the review be positive (or negative)– the consumer will automatically receive the coupon, indicating that the content of the review is not tied to the receipt of the incentive. The FAQS further clarify, however, that just because a business “expects” a review to be positive does not violate this provision of the Rule.

One additional area we wanted to highlight from the FAQs is the additional insight they provide on what is required for a disclosure to be “clear and conspicuous” or “unavoidable” under the Rule. The FAQs provide some helpful guardrails and considerations for businesses: &nbsp;

For purposes of the Rule, the FTC considers a disclosure in the first line of a consumer review to be “unavoidable.”

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Use of the hashtag #ad <em>may </em>be adequate – and its adequacy is largely dependent on the format of the content and general context (i.e., #ad may be clear in the first line of a text-only post, but may not be clear enough in a video ad).

Platform built-in disclosure tools may not be sufficient on their own – the FAQs note that “[s]ome of these tools may generate inadequate disclosures that are fleeting, too hard to read because of poor contrast or small size, or placed in locations too easy to miss.”

To determine whether a visual disclosure “stand[s] out” in a video testimonial, the FTC considers whether viewers “would actually notice it.”

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The &nbsp;FAQs are a great place to look for businesses seeking to get more clarity on the Rule, but remember, just because an act or practice is not a violation of the Rule does not mean it is permitted under Section 5 of the FTC Act.

An Endorsement for the FAQs on the Consumer Reviews and Testimonials Rule