Agency Warns Marketers on Child-Directed Stealth Advertising

May 21, 2022 - The Federal Trade Commission is considering changes to tighten its guidelines for advertisers against posting fake positive reviews or manipulating reviews by suppressing bad ones—and warns social media platforms about inadequate disclosure tools. The FTC is seeking public comment on the proposed updates to its Endorsement Guides, which reflect the new ways that advertisers now reach consumers to promote products and services, including through social media.

“We’re updating the guides to crack down on fake reviews and other forms of misleading marketing, and we’re warning marketers on stealth advertising that targets kids.” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Whether it’s fake reviews or influencers who hide that they were paid to post, this kind of deception results in people paying more money for bad products and services, and it hurts honest competitors.”

The Endorsement Guides, first enacted in 1980 and amended in 2009, provide guidance to businesses and others to ensure that advertising using endorsements or testimonials is truthful. Advertisers who lie to consumers via endorsements or testimonials may violate the FTC Act. The guides, among other things, state that advertisers need to be upfront with consumers and clearly disclose unexpected material connections between endorsers and a seller of an advertised product. In February 2020, the FTC sought comment on whether changes should be made to the guides. The proposed changes reflect the extent to which advertisers have turned increasingly to the use of social media and product reviews to market their products.

In a notice, along with the proposed revisions to the guides, the FTC has:

• Warned social media platforms that some of their tools for endorsers are inadequate and may open them up to liability;
• Clarified that fake reviews are covered under the guides and added a new principle that in procuring, suppressing, boosting, organizing, or editing consumer reviews, advertisers should not distort or misrepresent what consumers think of their products. This would cover review suppression like in the FTC’s recent Fashion Nova case;
• Clarified that tags in social media posts are covered under the guides and modified the definition of “endorsers” to bring virtual influencers—that is, computer-generated fictional characters—under the guides; and
• Added an example addressing the microtargeting of a discrete group of consumers.

In addition, the FTC also has proposed adding a new section highlighting that child-directed advertising is of special concern and that children may react differently than adults to endorsements in advertising or related disclosures. In order to provide further guidance, the FTC plans to hold a public event on October 19, 2022, focusing specifically on children’s capacity at different ages and developmental stages to recognize and understand advertising content and distinguish it from other content and the need for and effectiveness of disclosures to children.

The Commission voted 5-0 at an open meeting to submit the notice detailing the proposed changes to the guides to the Federal Register. Instructions for filing comments appear in the notice. Comments must be received within 60 days of publication and will be posted on Regulations.gov. Chair Lina M. Khan as well as Commissioners Rebecca Kelly Slaughter, Christine S. Wilson and Alvaro Bedoya issued separate statements.