What Made News?
The FTC is cracking down on misleading endorsements in advertising, and the home security company ADT has the lumps to prove it. Earlier this month, ADT settled FTC charges that it had deceived consumers by failing to disclose that “independent” security experts were in fact paid ADT spokespeople.
Background on the FTC Endorsement Guides
The FTC recently issued revised guidelines that govern the use of endorsements in advertising (the Guides). The Guides set out the general principles that the FTC uses to evaluate whether endorsements will be considered deceptive and therefore illegal under Section 5 of the FTC Act. Specifically, the Guides note that endorsements must reflect the honest opinions and experience of the endorser and that advertisers must disclose any “material connections” between the endorser and the seller of the advertised product. When such a connection exists, for example if the endorser is being paid by the advertising company, then the advertisement must disclose the connection to consumers.
What Crossed the Line?
According to the FTC, ADT paid spokespeople to demonstrate and review the ADT Pulse home security and monitoring system on various television and radio shows around the country, including during an appearance on The Today Show on NBC. The spokespeople — a child safety expert, a home security expert, and a technology expert — offered favorable reviews of ADT’s product without ever disclosing that they had been paid as much as $200,000 by ADT to promote the product. The FTC noted that the alleged experts also sometimes demonstrated non-ADT products, which the Commission says added to the misleading impression that they were providing impartial, expert reviews.
What Does the Settlement Require?
Under the proposed settlement agreement, ADT is prohibited from engaging in similar misrepresentations in the future and is required to clearly and prominently disclose any connections that exist between ADT and endorsers. It is also required to promptly remove any misleading reviews and endorsements from ADT advertising materials. If the company fails to comply with the settlement agreement, it could face a civil penalty of up to $16,000 for each violation.
The ADT settlement comes on the heels of a January FTC announcement of a nationwide sweep against auto dealers that engaged in deceptive or misleading advertising practices. Both announcements are a reminder that advertisers should carefully consider FTC advertising guidance such as the Endorsement Guides before launching any new advertising campaign. Please contact Anthony V. Lupo, Sarah L. Bruno, Matthew R. Mills, or Daniel B. Jasnow with questions.