Online Endorsements and the Law

January 8th, 2015

by Leonard A. Bellavia, Esq.

Endorsements by satisfied consumers or local celebrities can have a powerful impact on a business’s sales and market share.  In the past, some businesses would post glowing comment cards, written by happy consumers, in conspicuous places.  Others created “brag books” that sales associates could utilize as a tool to show prospective clients the positive feedback the business received from past and current consumers.  The internet has become an extremely popular place for consumers to post endorsements or negative comments about all sorts of goods and services.  Websites such as Yelp and Dealerrater.com are convenient places for consumers to publish and search for reviews of businesses.  Google has upped the ante by listing reviews on a business’s Google Places page.  When a consumer performs a search on Google that returns your business, the consumer will have access to reviews posted by other individuals.  As you may imagine, it is important for a business to monitor these reviews and encourage consumers to submit endorsements online.

However, you must be very careful of how zealous you are in encouraging consumers to post endorsements of your products or your business.  Some websites will remove listings that they believe are fraudulent.  More important, you should understand that federal law prohibits certain activity regarding endorsements and reviews:

The revised Guides also add new examples to illustrate the long standing principle that “material connections” (sometimes payments or free products) between advertisers and endorsers – connections that consumers would not expect – must be disclosed [emphasis added].

According to the FTC, individuals, groups, and businesses can be “endorsers.”

So, what is a “material connection?”  Suppose you contacted former consumers and asked them to post endorsements of your business on Yelp.  In exchange, you promised to give each consumer a $50 gas card.  Or suppose your business finds a popular local blogger and offers the blogger compensation for endorsing your business, or the products you sell, on his blog or anywhere else.  The FTC would likely view these exchanges as material connections between your business and the endorsers.  If material connections exist between your business and the endorser, the FTC requires full disclosure of this relationship.  Full disclosure may be very difficult if not impossible to maintain on websites you cannot control, and material connections may violate the terms and service agreements of various websites where consumers may post their endorsements.  Failure to disclose material connections means penalties for violating federal law.

You will need to determine whether you wish to solicit online endorsements of your business.  Once you make this decision, the next step is to tailor your solicitation to comply with federal law.

Call us at 631-224-7000 so that we can help guide your business in creating processes that comply with the law while effectively soliciting endorsements online.

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