Business Without Borders – International Business and Tax Planning Blog

Posts Tagged ‘false’

Endorsements on social networking websites can be a valuable marketing tool for companies.  They can also lead to potential liability according to guidelines issued by the Federal Trade Commission (“FTC”).  Effective December 1, 2009, the FTC issued revisions to its endorsement guidelines which provide guidance on how to avoid deceptive advertising.  Section 5 of the FTC Act (15 U.S.C. 45) prohibits businesses from engaging in unfair or deceptive acts or practices affecting commerce, and the FTC has interpreted this prohibition as covering false and misleading advertising practices.  The newly revised guidelines, called the Guides Concerning the Use of Endorsements and Testimonials in Advertising (16 C.F.R. § 255), address the application of Section 5 to the use of endorsements on the Internet and social networking websites, such as Facebook, Twitter, LinkedIn, MySpace, and personal blogs.

Pursuant to Section 5, advertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for the failure to disclose a material connection between themselves and their endorsers.  Endorsers also may be liable for statements made in the course of their endorsements.  According to the new guidelines, an individual can have a “material connection” with a company not only if he or she is employed by the company whose products or services are discussed, but also if the individual receives free goods, services or special privileges in connection with commenting about a company.

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