Are Paid Testimonials Legal? What About Fake Testimonials?

are paid testimonials legal
Are paid testimonials illegal? Are fake testimonials legal as long as you have a disclaimer? Internet lawyer, Aaron Kelly, explains the legalities of fake and paid testimonials.

FTC Guidelines For Online Testimonials

It’s a common question: Can I get in trouble for using fake testimonials?  What about paid testimonials without proper disclosures? The simple answer is, “Yes”. However, there are ways to legally include reviews and testimonials on a website; you just have to know what needs to surround the content. Below, we’ll go over the basics of false advertising under United States law, review a few fake and paid testimonial case studies, and then conclude with a brief discussion about international considerations.

The FTC In Twenty Seconds

If you reside in the United States (or court customers in the United States), the Federal Trade Commission is the government body of which you should be most aware. The FTC is the regulatory agency tasked with prohibiting “unfair and deceptive acts or practices in commerce.” They’re also the authors of the Dot Com Disclosures (a.k.a., The Online Marketers’ Bible).  If you’re going to land in legal quicksand as a result of fake testimonials or false advertising, there’s a 99% chance that the people doing the prosecuting with be the FTC.

What Constitutes False Advertising in the United States?

U.S. law codifies false advertising as:

“a means of advertisement other than labeling, which is misleading in a material respect; and in determining whether an advertisement is misleading, there shall be taken into account (among other things) not only representations made or suggested by statement, word, design, device, sound, or any combination thereof, but also the extent to which the advertisement fails to reveal facts material in the light of such representations or material with respect to consequences which may result from the use of the commodity to which the advertisement relates under the conditions prescribed in said advertisement, or under such conditions as are customary or usual.”

In other words, false advertising in the United States is not just about the actual aspects of a given ad; regulations also consider missing information and how omitted material can lead to consumer deception.

What the FTC says About Disclosing Ads on Twitter

“The FTC isn’t mandating the specific wording of disclosures. However, the same general principle – that people have the information they need to evaluate sponsored statements – applies across the board, regardless of the advertising medium. A hashtag like “#paid ad” uses only 8 characters. Shorter hashtags – like “#paid” and “#ad” – also might be effective.”

The overall impression a marketing piece conveys is important in the eyes of U.S. regulators.  While one statement may not, by itself, get you in trouble, the combination of the statements, images, and claims may be considered deceptive when looked at as a whole.  So why is this important?  Well, the excuse “I didn’t mean it that way” doesn’t matter any more, and will not convince regulatory agencies to cut your a break.

For example, the overall impression that landed marketers in hot water for hocking Acai was the claim that they could lose weight without diet and exercise, that they could burn fat easily, that they could feel more energized, that they lost XX amount of weight in a week, and then showed before and after stock photos of dramatic weight loss.  Any of these aren’t necessarily problematic alone, but taken together they give the overall impression that if you took Acai you could sit at home and lose 10 pounds while eating a tub of butter and watching Dr. Oz reruns.  That just doesn’t work anymore.

Does The FTC Consider Fake & Paid Testimonials Illegal?

The FTC released a set of “common sense” guidelines when it comes to online advertising. The commission lays out the main foundations of the guideline as such:

  • Endorsements must be truthful and not misleading.
  • If the advertiser doesn’t have proof that the endorser’s experience represents what consumers will achieve by using the product, the ad must clearly and conspicuously disclose the generally expected results in the depicted circumstances.

If there’s a connection between the endorser and the marketer of the product that would affect how people evaluate the endorsement, it should be disclosed.  It’s common sense to think that if someone is paid to provide a particular statement, they may be biased and the FTC wants to make sure that people understand that.

If we apply the above points, it’s safe to argue that the one cut-and-dry rule of online testimonials and reviews is that if it’s 100% fake (i.e., you make up a fake news reporter, complete with a picture you pulled off Google images, who claims to have tried the product and lost a significant amount of weight), then it is not compliant. Same thing goes for any paid testimonials if they are not properly disclosed – paid being defined as any material exchange for a positive review.

Here’s another example: you cannot give someone free hosting for a positive testimonial about your new software and not mention that fact in the review. Now, let’s say you have three friends named Jane, John, and Jackie. If each of them uses your software, and writes an unsolicited positive review, then it’s legal. It’s best, though, not to include unsolicited testimonials from family members.

An FTC spokesperson explained, “While decisions will be reached on a case-by-case basis, the online post by a person connected to the seller, or someone who receives cash or in-kind payment to review a product or service, should disclose the material connection the reviewer shares with the seller of the product or service.”

Case Tactic Outcome
Lifestyle Lift – 2009 Employees wrote positive reviews of the company and were instructed to do so; emails found by the AG’s office proved that employees were instructed to write anonymous reviews in the voice of satisfied customers. Settled with the NY AG’s office for $300,000; Andrew Cuomo , the AG at the time, said that the “attempt to generate business by duping consumers was cynical, manipulative and illegal.”
Reverb Communications – 2010 Paid for positive reviews on iTunes. Had to delete all paid testimonials and agreed not to do it anymore. Didn’t have to pay, as reverb was one of the first to be brought up on charges after the 2009 FTC guideline changes for online testimonials.
Acai Berry Debacle – 2011 Niche market where many affiliates set up “fake news” websites with fake customer testimonials. FTC launched national crack-down on the activity; froze accounts of affiliate marketers; clearly stated their position that hawking acai berries with fake reviews would result in legal troubles and fines.

So, Be Straight, Can I Legally Get Away With Fake Testimonials If I have a Nearby Link to a Disclaimer?

You’re crafty, so you may be thinking, “can’t I just pay someone for a testimonial, and then put them up on my website, and then simply have a disclaimer in the site’s terms of service – which nobody reads anyway?” While having a link disclaimer may protect in some areas, the FTC has hammered home the point that a link to a disclosure that all your testimonials are paid is insufficient.

Proper disclosure dictates both clear and conspicuous disclaimers within close proximity of the statement being made.  So using before and after photos of someone who was paid, along with their statement, but burying the “disclaimer” in the footer won’t cut it.

To comply, you should put the disclaimers in close proximity to the content being annotated. You cannot make the text a similar color to the background; the word must be readable without squinting. If the FTC deems that a “significant minority” of the population would not be able to clearly make out the word, it’s considered not in legal compliance.  Any other disclaimers you may have can be at the bottom but as long as the person is giving the opportunity to read them and they stand out (use bold and all caps for the heading).

Lastly, we regularly see people utilizing paid testimonials from fiverr.  Be careful.  While you may think that your properly disclosed “paid” video testimonial from a “real” person on fiverr is compliant, be warned that unless the person has actually used the product in question you’re just toeing that line.  A testimonial from a person who is not actually a bona fide user of the product, but is making claims about it, may land both you and that person in trouble.  It is, however, a legal gray area if the person is a bona fide, actual user, of the product and is making statements about their actual experiences of the product (so long as you disclose this fact).  Nonetheless, you should still only use actual users of the product who have signed testimonial affidavits and where you have made proper disclosures.

International Considerations

If you market to consumers outside of the United States, it’s important to comply with various international standards – especially in the EU. For example, in the United Kingdom, “falsely representing oneself as a consumer” is listed as one of the 22 prohibitions in the “Consumer Protection From Unfair Trading” regulations. If breeched, perpetrators can be fined up to £5000 or a jail sentence of up to two years in some instances.

Another type of law to look out for in various countries are “monetary advantage by deception” rules.

Making sure that you’re online marketing efforts are compliant should be a top priority of anybody doing business online – -whether you’re an affiliate marketer, a brick-and-mortar business owner with a Web presence, a startup, or an Internet entrepreneur. Contact the online marketing lawyers at Kelly / Warner today to arrange a consultation.

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