Deceptive marketing—how to avoid brand damage and regulatory scrutiny

Marketers seeking to avoid regulatory scrutiny and keep their brands out of the courts in 2023 should focus their compliance efforts on the Big Three topics poised to remain in the spotlight this year:  green claims, influencers and online reviews.  As federal agencies, self-regulatory bodies, courts, and state attorneys general continue to focus on these topics, here is what advertisers need to know.

It’s not easy being green

Green claims tout the environmental benefits of a company, product or service. Brands seeking to match consumers’ values are pushing the legal limits of green claims, such as being “eco-friendly” and “sustainable.” Many companies are now facing accusations of “greenwashing”—providing false, misleading or exaggerated green credentials.

The Federal Trade Commission is updating its Green Guides, which contain its guidance on green advertising. The updated guides will likely provide greater clarity on several green claims, including “recyclable,” “carbon neutral” and “energy efficient.”  The FTC may create a formal rule, which would provide it with greater enforcement mechanisms for violations, including the ability to assess monetary penalties.

The last several years have seen an explosion of greenwashing disputes before the National Advertising Division of the Better Business Bureau (NAD) and courts, which will likely continue in 2023. The NAD notably found that even aspirational green messages require substantiation. In the courts, class actions were brought against several brands for alleged deceptive claims about “sustainability”—which is not currently defined in the Green Guides.

Don’t fall under the influence

Legal departments have been singing the same song for years: Influencers must clearly and prominently disclose material connections with brands. While the FTC has published its endorsement guidance and .com disclosures to aid brands working with influencers, the social media landscape has changed dramatically since those documents were last updated nearly a decade ago.

In spring 2022, the FTC opened public comment for proposed changes to these guides. Understandably, significant changes were proposed, including: a broader definition for “endorsement” that would extend to verbal statements or tags in social media; a broader definition for “endorser” encompassing virtual or metaverse applications; and intermediary liability for disseminating deceptive endorsements. Following the close of public comments, the commission announced that it is exploring rulemaking that would open the door to civil penalties for violations.

The NAD and the courts have also been active. The NAD found that a brand is responsible when nonaffiliated influencers #hashtag it without a disclosure if the brand is inducing would-be influencers to post. The NAD also reiterated the importance of having a robust influencer compliance program, including monitoring and promptly removing non-compliant content. In federal court, LinkedIn recently brought suit against a company selling fake followers based on an alleged breach of the social network’s user agreement, suggesting that platforms may increasingly seek to enforce those terms in the courts.

Handle reviews honestly

Consumer reviews are a major deciding factor in the e-commerce world. Recognizing the importance of honest reviews, FTC proposed changes to its Endorsement Guides to specify that misrepresenting consumers’ opinions is misleading. The commission has also proposed a rule that would enhance enforcement powers over deceptive and unfair review practices. These developments are unsurprising in light of the FTC’s focus in this space, including actions against Roomster as well as Cure Encapsulations, a third-party supplier of fake reviews, for paying another third party to post fake positive reviews; Sunday Riley for having employees post reviews; and Fashion Nova for blocking negative reviews.

The NAD found issue with ranking sites claiming objectivity but boosting affiliate companies over others. And at least some state attorneys general are taking action against brands seeking to limit consumers’ ability to post honest reviews—including a Washington State lawsuit against a surgery center that sought to contractually limit patients’ ability to post negative reviews in violation of the federal Consumer Review Fairness Act.

With this backdrop in mind, here are best practices marketers should prioritize in 2023:

Substantiation is key

Modify broad claims to tout the specific green benefits that your brand can substantiate. Ensure that your green claims are properly narrowed, qualified, and backed with matching substantiation. Make sure that even your aspirational claims are substantiated across the board. An aspirational claim that might be found substantiated by a court could very likely be found lacking by the NAD, FTC or U.S. Securities and Exchange Commission.

Review influencer and agency contracts

With the possibility that the FTC may place liability on intermediaries for their role in disseminating deceptive endorsements, review your influencer and agency contracts with an eye to compliance obligations and indemnifications.

Strengthen your influencer compliance programs

Have a strong compliance program for influencers. Key ingredients include: (1) providing influencers with materials on FTC’s guidance; (2) explicitly instructing influencers to disclose material connections; (3) monitoring posts for compliance and; (4) taking immediate action to revise or delete non-compliant content.

Let reviews speak for themselves

Buying, manufacturing or otherwise manipulating reviews to artificially inflate your brand could be met with an enforcement action. Further, make sure that all incentivized reviews are properly disclosed in a non-misleading manner.