Legal Aspects of Celebrity Endorsements

Note: This article is not intended as a substitute for due diligence and consulting adequate legal representation when contracting a celebrity to endorse a product. It is highly recommended that you seek appropriate legal counsel when considering doing an endorsement deal with a celebrity.

Why Does the FTC Care About Celebrity Endorsements?

One of the best ways of attracting new customers is through word of mouth advertising. People are more likely to try a new product based one the recommendation of a friend or family member that they trust.

However, celebrities are generally paid to endorse a product and as such, the Federal Trade Commission (FTC) seeks to ensure that everything is on the up and up. The FTC is attempting to make the relationship between a celebrity and the product he or she endorses known up front to the consumer so that the consumer can then make an informed decision about the product.

Endorsement Guidelines Apply to Social Media

Endorsement guidelines in traditional forms of adverting such as print, commercial and radio media also apply to social media.

A blogger who is paid to endorse a product or service on his or her site could be in danger of violating FTC guidelines if he or she does not disclose that they are a paid endorser of a product. The FTC considers this to be deceptive advertising practices. This rules applies to virtually any financial incentive a blogger might have received from the company.

Note that if a blogger has no financial ties to a product or service he or she is advocating, this is NOT a violation of FTC guidelines.

These general guidelines also apply to social media sites such as Facebook, Twitter and Instagram. A good rule of thumb is to simply be transparent to the public about a product or service being advocated.

Disclosures Need to be Clear and Conspicuous

If a celebrity (or anyone else) is paid to somehow endorse your product, the FTC’s perspective is that this fact needs to be disclosed in a clear and conspicuous manner. Just stating on your Facebook page, homepage or having a link on your site or page is not enough. Also, this cannot be in the comments or description of a video, it needs to be in the video itself.

Each time a product is endorsed in any manner in which the endorser is receiving some sort of benefit, this needs to be stated clearly as part of the endorsement. For a Twitter post, this could be as simple as adding #ad.

A Celebrity (or Anyone Else) Can’t Just Say Your Product is Awesome

If a celebrity endorses your product and says that they actually use the product, then this needs to be the case in fact, not just in theory. The FTC also considers this to be deceptive advertising practice.

Additionally, if a celebrity honestly thinks that your product sucks, they cannot communicate for the sole purpose of getting paid that they actually like the product, endorse the product and use the product.

As a note, even someone who reviews a product on your website that is in some way compensated (with free products, give away’s or monetarily) needs to disclose that they were in some way compensated for their review. Even a discount on products or services must be disclosed by the reviewer or the advertiser in order to stay completely within legal guidelines.

Testimonials Must Reflect Expected Results

For a product testimonial to be legitimate, it must make claims that reflect elected results and not merely extraordinary results from using a product. Merely stating “Results not typical” or “Individual results may vary” is not enough to keep you out of trouble.

Remember that the FTC is trying to protect the consumer and that anything that may be construed as an expected result even when it is stated that it might not be a result achieved by the user can land a company in hot water.

Below are some actual examples of companies allegedly making unwarranted or exaggerated claims about their products and services:

Chemence, Inc.

The FTC alleges that Coherence deceived customers by stating that their product is made in the USA, when most of the chemicals (55%) that are essential to the glue itself are manufactured out of the county.

For more information about this case: https://www.ftc.gov/news-events/press-releases/2016/02/ftc-charges-manufacturer-kwik-frame-kwik-fix-krylex-glues-making

DeVry University

The FTC is accusing DeVry University of overstating its claims that their graduates are more likely to find better paying jobs in their fields of study compared to other colleges or universities.

For more information about this case: https://www.ftc.gov/news-events/press-releases/2016/01/ftc-brings-enforcement-action-against-devry-university

Lumosity
The FTC has settled its case with Lumosity for its claims that the product “can help users perform better at work and in school, and reduce or delay cognitive impairment associated with age and other serious health conditions.”

“Lumosity preyed on consumers’ fears about age-related cognitive decline, suggesting their games could stave off memory loss, dementia, and even Alzheimer’s disease,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “But Lumosity simply did not have the science to back up its ads.”

For more information about this case: https://www.ftc.gov/news-events/press-releases/2016/01/lumosity-pay-2-million-settle-ftc-deceptive-advertising-charges

Lipidryl Weight Loss Supplement

“According to the FTC’s complaint, Bioscience Research Institute LLC, the company that sold Lipidryl charged $129.99 for a three-month supply of Lipidryl, which contains African mango seed extract. The FTC complaint charged that ads for Lipidryl falsely claimed that the supplement was clinically proven to cause substantial weight loss (such as 28 pounds in 10 weeks) and reduce users’ waistlines.”

For more information about this case: https://www.ftc.gov/news-events/press-releases/2015/11/ftc-sends-refund-checks-totaling-more-250000-consumers-who-bought

Again, we’d like to note that this article is in no way a substitute for adequate legal counsel and is merely a general overview of some aspects of the legal elements of celebrity endorsements.

For additional information, you can visit the Federal Trade Commision’s website at: https://www.ftc.gov/tips-advice/business-center/guidance/ftcs-endorsement-guides-what-people-are-asking#intro

For assistance in finding the right celebrity for your product or brand CelebrityCred.com can help. For more information on navigating the waters of celebrity endorsements, contact CelebrityCred.com at 1(888)359-4521 or visit CelebrityCred.com.

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