March 04, 2015 | All About Advertising Law

And the Oscar Goes to . . . the FTC?

5 min

This article was originally published in Venable's All About Advertising Law Blog.

February 22, 2015, marked the 87th Academy Awards ceremony. Some people tuned in because they love the movies, others for the fashion and celebrities, but, as for me, I watched it with my wife and was simply counting the minutes until "The Walking Dead" came on. As I watched the celebrities work the red carpet, I did my best to feign interest in cut-away dresses, plunging necklines, jumpsuits matched with capes, and Emma Stone's wardrobe malfunction, which caused her to accidentally flash the crowd (actually, I can't lie, that gaffe did grab my attention). I listened to the interviews that the A-listers gave, describing their dresses or tuxedos, and extolling the responsible designers' brilliance, daringness, and/or overall fashion IQ. They were effusive. Heck, they made me feel like rushing out and buying a new trendy suit myself.

But, then, the advertising and marketing attorney side of me took over – did these actors, actresses, and the designers whose fashion they were shilling violate the Federal Trade Commission's ("FTC") Guides Concerning the Use of Endorsements and Testimonials in Advertising by not explicitly disclosing their relationships? I started stepping through the issues. First, were the celebrities even providing endorsements for their respective designers' products? Absolutely. Under the Guides, an "endorsement" is broadly defined as "any advertising message . . . that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser[.]"

There is no question that the celebrities, in fact, were giving endorsements; the salient issue, thus, becomes whether or not the actors and actresses should have clearly and conspicuously disclosed that they received their attire for free in exchange for identifying the designers and gushing about their clothing. The Guides state that "[w]hen there exists a connection between the endorser and seller of the advertised product that might affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed" in a clear and conspicuous manner. The FTC treats television commercials and other "traditional" advertising media in which a celebrity endorsement appears somewhat uniquely in the Guides – in those situations, the Commission notes that it is likely that consumers understand that well-known celebrities who appear in such commercials and ads have been compensated and, thus, no disclosure typically is required.

But, red carpet and other televised interviews are different. In those cases, the Guides suggest that the celebrity should disclose his or her material connection to the advertiser. Indeed, the Guides provide a hypothetical about a well-known professional tennis player who recently had LASIK surgery on her eyes and who appears on a television talk show to speak about the ease of the procedure, the kindness of the doctors at the clinic where she had the surgery, and the improvement in her life because of the surgery. "The athlete does not disclose that, even though she does not appear in commercials for the clinic, she has a contractual relationship with it, and her contract pays her for speaking publicly about her surgery when she can do so." Under those circumstances, the FTC Guides state that consumers would not necessarily expect that the tennis star has been paid to discuss the medical procedure and knowledge of such payments likely would affect the weight or credibility consumers give to the celebrity's endorsement. Without a disclosure of the material connection between the clinic and the athlete, according to the FTC, "the endorsement is likely to be deceptive" (even if nothing the tennis player says herself is false, deceptive, or misleading).

Indeed, last year, the FTC asserted that a lifestyle and child safety celebrity known as the "Safety Mom" – who made appearances on television talk shows, such as The Today Show with Kathie Lee & Hoda, to describe her home security monitoring system (including with references to the price of the security system, the security company's phone number, and the website at which consumers could obtain additional information) – should have done a better job disclosing during her interviews that she was compensated by the security company (there were a number of instances where the connection was noted in on-screen supers and/or orally by the talk show hosts). That administrative action ultimately settled but serves as a cautionary tale to advertisers about whether to reveal material connections and how they need to be disclosed.

Turning back to the Oscars: A consumer perception survey likely would demonstrate that at least some consumers understand that when Gwyneth Paltrow effusively describes her one-shoulder Ralph Russo Couture dress, Ralph Russo has given her the dress to wear or otherwise compensated her for her appearance and words. The FTC's Guides warn that not all consumers, however, might identify such relationship and, thus, the connection should have been disclosed on the air. Will we all of a sudden see a host of complaints filed against fashion designers and/or movie stars arising out of their endorsement practices? Probably not. But, it is important for advertisers to think critically about whether a connection between the product and its endorser is material; whether consumers would understand that that endorser has been compensated for his or her endorsement; and whether a material connection disclosure needs to be made and how. By the way, Gwyneth, if you do find yourself on the wrong side of such complaint, please, PLEASE, call me to represent you.