Even if you are not in the US, it pays to be across these rules as in Australia for example, our regulations relating to misleading and deceptive conduct under the Trade Practices Act could be deemed wide enough to cover similar provisions as those contained in the FTC Guidelines.
I need to preface this by saying I am not a lawyer (I trust Idealaw with that side of my business) and this article is in no way legal advice, so you need to do your own due diligence etc etc (OK – you get the idea about the disclaimers. You need to check this out with your own legal eagles for the impact on your business).
So what has changed? Put simply, a lot of current testimonials and endorsements used by businesses will no longer comply with the rules come 1 December 2009.
Let's start with a quick run through the legal flower field. The Federal Trade Commission is somewhat similar to the ACCC in Australia, and publishes "Guidelines" on what is acceptable business practice on a range of issues. One of the series of Guides relates to the use of testimonials and endorsements (including celebrity endorsements). This guide has recently been updated and extended and now covers significant new areas including blogs, websites, affiliate marketing and new media. We will talk about declaring payments next week.
The guidelines contain the legislative base, as well as more detailed examples that clarify the legislation. You need to read both parts of the Guides to understand what is now required (here's a link to the full guidelines).
When you are reading the guides, the over-arching thing to remember is that the FTC is trying to get truth and transparency in advertising. They want all claims to be backed up with documented proof of sufficient quality that people can then make up their own minds whether or not to buy the product or service.
These changes have an impact on everything from franchise/business opportunity companies, to SEO companies. From skin care products to financial investment firms. The reach is quite extensive.
One of the key areas that were looked at was testimonials. In the past you may have had a client that had superb results and were happy to share their experience with others with a testimonial. There was little regulation about what was said and how the information could be used.
With the new rules relating to testimonials, you now need to include clarifying information or context about the unique circumstances of the case that generated such great results for the customer. This is not such a bad thing as it helps people to understand how they can achieve the same level of results.
Come 1 December we should no longer be seeing "I lost 45kg in 14 days by drinking Dr Snake Oil" without the additional context being provided of "and by exercising 6 hours a day while only eating raw vegetables once a day". A statement of "I lost 45kg in 14 days by drinking Dr Snake Oil combined with regular exercise and a healthy diet" is no longer sufficient – details are required.
If the results they attained were not the average results achieved, in the past you could get away with a little note "results not typical" in your ad or marketing. This type of disclaimer no longer cuts it. Now you need to include information about what the generally expected performance of the product is – based on documented clinical research or market research.
If most people don't achieve the brilliant results identified in the testimonial, you are now required to give information about "generally expected performance" of your product or service. So, in our example you would also need to give a statement of "On a clinical trial of 80 people, 87% lost an average of 2kg drinking Dr Snake Oil", or "the average consumer lost 500g in the first week". This is to give people realistic expectations of what results they can attain from your product or service.
I have a wicked vision of all the fitness machine testimonials stating, "I lost 4cm from my butt by incorporating the machine into my Olympic gym training of 20 hours a day. 85% of people end up using the machine as something to drape dry washing over and only get exercise by moving the machine when they vacuum around it".
But what constitutes sufficient proof of generally expected performance? Well, you are now required to have properly constituted scientific research trials to back up your claims, which need to rely on quantitative data, not qualitative information.
And, if you have an expert (such as a pharmacist, nutritionist etc) who will be endorsing the findings of the trial, the trial must be of sufficient research rigor that other experts in their field would agree that this was a properly constituted trial.
I suspect for the next few months in the US you will not be able to hire a research company no matter the money you throw at them, as they will be busy testing existing products.
This requirement combines with another section relating to transparency of payment, which means if you want to state "independent clinical trials by XYZ science labs found ..." you will now need to also include a statement along the lines of "these trials were paid for by the Snake Oil Company". The testing lab needs to be a bona fide testing organisation (so the Scalp Institute would probably no longer qualify in the USA).
A few other points:
If a company or organisation endorses a product or service, there have to be procedures within the organisation to make a valid assessment of the product or service and the decision needs to fairly reflect the collective view of the organisation. This affects groups such as motoring organisations and Chiropractic Associations and their endorsement of products.
If you use "hidden camera" style of ads of people giving their opinion on your product, you now need to disclose if the people are actors and/or if they were paid for their comments.
There are a raft of rules around celebrity endorsements that both you and the celebrity need to comply with.
To be blunt, while challenging for marketers and business, these are all long overdue changes. It should remove the overhyped screaming headlines and replace them with more valid, well-considered results. It will be tricky for a while, but good marketers and copywriters will be able to work with you to find new effective marketing strategies for your business.
See your lawyer to check the implications for your business.
Review all your testimonial based advertising to ensure it complies by 1 December.
Arrange testing if required to find generally expected performance of your goods or service.
Next week we will look at the other main change – Disclosure of Material Connections (also known as cash for comment and affiliate programs).
HR Tip of the Week: Testimonials can be used to attract quality candidates.
While we are on the subject of testimonials, it is an under-used form of marketing to attract candidates. Having current employees share what they honestly like about the company, their working conditions and their jobs can be very compelling to attract good quality candidates to vacancies.
Showing videos of the working environment and office location is another great addition to your recruitment ads (assuming it all looks great on film).
Just remember to add the appropriate disclaimers on the testimonials.
I am a recent convert to online fruit and veg ordering. A client of mine told me about a start-up company called "Fresh is the Best" operating in Brisbane. I couldn't work out how I could give up choosing each individual piece of fruit from the fruit shop - now I wouldn't go back.
So as a business what makes them great? Because they are small they are responsive, can tailor what I need and deliver when it works for me.
They also have super fast turnaround of produce - so the fruit and veg either comes from the market (or their dad's market garden) that morning and is delivered the same day. This makes the produce amazingly fresh.
The team who run it really know their F&V - only choosing great quality seasonal produce. It actually tastes like things we ate when we were kids and grew our own in the backyard veggie patch.
Oh ... and because there are no massive overheads in terms of rental and buying fruit "on spec", the actual price of the produce is way cheaper than in the stores. It is a win all around.
So far, they haven't put a foot wrong in terms of customer service and product. They are leveraging social media well with a blog and Twitter presence http://twitter.com/freshisthebest.
I just love how when many greengrocers are folding or complaining about the big supermarkets doing them out of business, that a small company is sneaking in with a twist to how things are traditionally done and cleaning up.
Earnings disclaimer: I have no financial interest in this company, they are not my clients and I don't even get so much as a free apple from them in my weekly order. I just personally think they are brilliant .
Forever is a very long time - particularly if you are a teenager and heading onto the net. In this post I share my thoughts on the importance of teaching the next generation about net permanence.
Legal stuff: This newsletter is intended only a general guideline for Australian businesses. You should seek specific advice for your situation rather than relying only on this newsletter
Earnings disclaimer. Some of the content may include advertorial information, which means I may receive financial compensation for the products I recommend. But - unless I know and trust the product, I will not recommend it.
Thanks Ingrid for such an informative piece about this. I agree it'll be a bit of a pain having to be so careful but will make for both a better and safer buying experience for consumers and a fairer playing field for ethical sellers.
Your newsletters are always great value!
Cheers to you
Linda
email
Come 1 December we should no longer be seeing "I lost 45kg in 14 days by drinking Dr Snake Oil" without the additional context being provided of "and by exercising 6 hours a day while only eating raw vegetables once a day". A statement of "I lost 45kg in 14 days by drinking Dr Snake Oil combined with regular exercise and a healthy diet" is no longer sufficient – details are required. 
