Transcript Endorsements and Testimonials

Endorsements
Testimonials
Comparative Advertising
Is the Kyle Petty ad for STP an
“endorsement” under the FTC Guides?

“Any advertising message (including verbal
statements, demonstrations, or depictions of
the name, signature, likeness or other
identifying personal characteristics of an
individual or the name or seal of an
organization) which message consumers are
likely to believe reflects the opinions, beliefs,
findings or experience of a party other than
the sponsoring advertiser.” 255.0 (b)
What does that mean, in terms of Petty’s
(a) belief in and (b) use of STP?


“Endorsements must always reflect the
honest opinions, findings, beliefs, or
experience of the endorser.” 255.1 (a)
“Where the advertisement represents that the
endorser uses the endorsed product, then the
endorser must have been a bona fide user of
it at the time the endorsement was given.”
255.1 (c)
Is Kyle Petty an “expert endorser”?

“An individual, group or institution
possessing, as a result of experience,
study or training, knowledge of a
particular subject, which knowledge is
superior to that generally acquired by
ordinary individuals.” 255.0 (d)
What does this mean in terms of Petty’s
use of the product?


“An advertiser may use an endorsement of an
expert or celebrity only as long as it has good
reason to believe that the endorser continues to
subscribe to the views presented.
An advertiser may satisfy this obligation by securing
the endorser's views at reasonable intervals where
reasonableness will be determined by such factors
as new information on the performance or
effectiveness of the product, a material alteration in
the product, changes in the performance of
competitors' products, and the advertiser's contract
commitments.” 255.1 (b)
What does this mean in terms of Petty’s
obligation to evaluate the product?


“His endorsement must be supported by an actual
exercise of his expertise in evaluating product features
or characteristics with respect to which he is expert and
which are both relevant to an ordinary consumer's use of
or experience with the product and also are available to
the ordinary consumer.”
“This evaluation must have included an examination or
testing of the product at least as extensive as someone
with the same degree of expertise would normally need
to conduct in order to support the conclusions presented
in the endorsement.” 255.3 (b)
If Petty was paid for doing the ad, does
that fact have to be disclosed in the ad?


When there exists a connection between the
endorser and the seller of the advertised product
which might materially 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.
An example of a connection that is ordinarily
expected by viewers and need not be disclosed is
the payment or promise of payment to an endorser
who is an expert or well known personality, as long
as the advertiser does not represent that the
endorsement was given without compensation.
255.5
If Petty owned a share of the company,
would that fact have to be disclosed?

When there exists a connection between the
endorser and the seller of the advertised
product which might materially 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. 255.5
What is the product claim implied in the
advertisement?


STP cleans fuel
systems
A clean fuel system is
better than a dirty fuel
system
If either claim is false, is Kyle Petty liable
in any way?



Expert endorsers held to higher standards
than “consumer” or “celebrity” endorsers
Consumer endorser needs to have used the
product as basis for evaluation
Expert endorser required to conduct
independent evaluation of product based on
own expertise
FTC v. Steve Garvey


Former LA Dodger star
Paid endorser for
Enforma Products


“Exercise in a Bottle”
“Fat Trapper”

FTC took position that




Garvey an expert because of status as former
professional athlete
thus liable for making unsubstantiated claims
about product
Court held Garvey not an expert endorser
Was a consumer endorser and claims about
his own experience were accurate (lost
weight)
Dorothy Hamill does testimonial ads for
Vioxx as a treatment for osteoarthritis.
Is she an expert endorser?

“An individual, group or institution
possessing, as a result of experience,
study or training, knowledge of a
particular subject, which knowledge is
superior to that generally acquired by
ordinary individuals.” 255.0 (d)
What is the advertiser’s responsibility in
this (consumer/celebrity) type of claim?

“An advertisement employing an
endorsement reflecting the experience of an
individual or a group of consumers on a
central or key attribute of the product or
service will be interpreted as representing
that the endorser's experience is
representative of what consumers will
generally achieve with the advertised product
in actual, albeit variable, conditions of use.”
255.2 (a)

“Therefore, unless the advertiser possesses
and relies upon adequate substantiation for
this representation, the advertisement should
either:


clearly and conspicuously disclose what the
generally expected performance would be in the
depicted circumstances; or
clearly and conspicuously disclose the limited
applicability of the endorser's experience to what
consumers may generally expect to achieve.”
255.2 (a)
FTC v. Jenny Craig International.
What kind of testimonials were involved?

Testimonials by
consumers about their
success in losing
weight
What was the problem?

“An advertisement employing an
endorsement reflecting the experience of an
individual or a group of consumers on a
central or key attribute of the product or
service will be interpreted as representing
that the endorser's experience is
representative of what consumers will
generally achieve with the advertised product
in actual, albeit variable, conditions of use.”
255.2 (a)
What disclosures were they required to
make?


clearly and conspicuously disclose what the
generally expected performance would be in
the depicted circumstances; or
clearly and conspicuously disclose the limited
applicability of the endorser's experience to
what consumers may generally expect to
achieve
Infomercials

Relate to topic because
a common technique of
infomercials is
endorsement and
testimonial
History of the infomercial



Some identify birth of infomercial with
children’s programming in 1970’s
Kid-Vid became primarily opportunity to sell
toys
Toy-based shows included





He-Man and the Masters of the Universe
GI Joe
Thundarr the Barbarian
Blackstar
Mr. T



Creation of MTV was next step in process
Ads for Coke, Levi’s and Ford used same
techniques as music videos
Michael Jackson promoted Pepsi in his
videos and made Pepsi commercials that
were knock-offs of the videos

Prior to 1984 FCC rules limited number of
commercial minutes per hour




Initially seven minutes
Increased to twelve minutes
Lifting of restrictions gave birth to infomercial
as we know it today
Also known as


“long form marketing”
“direct-response television”
Infomercials today

Infomercials sell a wide variety of products;
they tell us how we can:








Inhibit baldness
Become rich in real estate
Cut rocks with ginsu knives
Cook in woks
Become thin with body cream
Quit smoking without using will-power
Wax our cars so they can resist a flame thrower
Learn to dance so we’ll never be dateless again
Infomercials saturate some cable stations

Lifetime Channel airs ~ 43 hours/week



Nashville Network


42 hours a week
Family Channel


> six hours a day
~ 25% of total programming
28 hours
USA Network

19 hours
There are now channels just for
infomercials



ATV (advertising television) includes
infomercials and “short-form” commercials
24 hours of commercials!
Succeed because they pay cable suppliers to
be included in basic service
TV pitchmen have become pop culture
icons

2002 Forbes Magazine
listed “Top Pitchmen”
Infomercials a rapidly growing form of
marketing


1990 to 1997: went from late-night novelty to
$1billion industry
TV Guide poll:


29% of consumers have purchased product
advertised on infomercial
91.5% of television stations air infomercials
What are the problems associated with
infomercials?
1. Consumers may not understand that they’re
watching a paid advertisement

Early infomercials mimicked format of
investigative programs like 60 Minutes

Actors identified as “reporters” spoke from
what appeared to be anchor desks

What appeared to be unbiased evaluations
of products were pitches for them
How did the government deal with the
problem of deception?

FTC sued two companies; required them to
make disclosures




at the beginning of the infomercial
whenever ordering instructions are given
Other advertisers voluntarily adopted same
disclosure requirements
Some stations have made these disclosures
requirement of buying airtime
2. Infomercials are fertile ground for scams

Many product claims are unsubstantiated

Others outright false

FTC brought 30 cases as of 1997

> 75 companies or individuals were under
FTC order
Some early FTC cases:


October 1993 settled case with David Del
Dotto regarding his “Cash Flow System”
Del Dotto falsely represented that he helped
hundreds of thousands of consumers make
substantial sums of money buying and selling
real estate


June 2003 settled case with Michael S. Levey
infomercial producer and host
Alleged numerous deceptive practices in
promotions selling




EuroTrym Diet Patch
Foliplexx baldness treatment
Y-Bron impotence treatment
Magic Wand kitchen mixer
Some recent FTC cases:


October 2003 sued Telebrands Corp.,
marketer of “Ab Force” electronic muscle
stimulation belt
Alleged falsely claimed product:



Causes loss of weight, inches and fat
Causes well-defined abdominal muscles
Is an effective alternative to regular exercise

July 2003 sued Wellquest International,
maker of:




Bloussant breast enhancement product
EnerX for male virility
D-Snore to relieve snoring
Alleged claims were unsubstantiated, false or
both
Are there too many out there for the FTC
to chase them all down?

Ridiculous Infomercial Review
Comparative Advertising



2003: Battle of soup ads
2004: Battle of beer ads
2005: Battle of sugar ads
What is Comparative Advertising?

"Advertising that compares alternative brands
on objectively measurable attributes or price,
and identifies the alternative brand by name,
illustration or other distinctive information."
(FTC Policy Statement)
Arguments in Support of Comparative
Advertising
1.
2.
3.
4.
Consumers are in better position to judge which
products best suit their needs because comparative ads
provide additional factual information
Prohibition of comparative advertising violates basic
freedoms
 freedom to express one's own opinion and
fundamental freedom of speech
Limiting comparative advertising incompatible with goals
of free enterprise system; thus not in public interest
 comparisons enable consumers to make better
economic decisions
Comparisons likely to force manufacturers to improve
products
History of Comparative Advertising


Recent phenomenon in U.S.
Prior to 1960's most comparative ads made
nebulous claims of superiority and did not
name competitor


referred to "Brand X“
concerned about creating benefits for competing
brand

First comparative ads used by Avis



"We're number two/we try harder“ ads in mid-60's
didn't name Hertz as #1; most consumers were
aware of that fact
1970's saw proliferation of comparative ads
in US
Early obstacles to comparative advertising




trade association codes of conduct prohibited
"disparagement" of competitors' products
three major television networks (ABC, CBS,
NBC) refused to air them
FTC pressured networks into broadcasting
comparative ads
1979 FTC issued "Statement of Policy
Regarding Comparative Advertising"
FTC Policy Statement Regarding
Comparative Advertising

“The Federal Trade Commission has determined
that it would be of benefit to advertisers, advertising
agencies, broadcasters, and self-regulation entities
to restate its current policy concerning comparative
advertising. Commission policy in the area of
comparative advertising encourages the naming of,
or reference to competitors, but requires clarity, and,
if necessary, disclosure to avoid deception of the
consumer. Additionally, the use of truthful
comparative advertising should not be restrained by
broadcasters or self-regulation entities.

The Commission has supported the use of brand
comparisons where the bases of comparison are
clearly identified. Comparative advertising, when
truthful and non-deceptive, is a source of important
information to consumers and assists them in
making rational purchase decisions. Comparative
advertising encourages product improvement and
innovation, and can lead to lower prices in the
marketplace. For these reasons, the Commission
will continue to scrutinize carefully restraints upon its
use.”
The Importance of Truthfulness: U-Haul
v. Jartran



1979 Jartran entered self-move market
dominated by U-Haul
Placed more than 2,000 ads in 160 cities
Ads compared Jartran's prices to various
cities to U-Haul's prices
Problems with ad campaign



Jartran's prices were represented as their normal prices
 in fact were special promotional prices
U-Haul rates quoted by Jartran contained a "distribution
fee" U-Haul charged to cover the expense of returning
one-way rentals from popular drop-off cities to cities with
temporary shortages of rental equipment
 Jartran did not disclose that consumers could avoid
fee by agreeing to drop off rental equipment at another
nearby location or delaying the move
 such fees were applied in < 5% of U-Haul rentals
Jartran's claim that "only Jartran has new trucks" was
false because U-Haul did have some (though not all)
new trucks

In private legal action brought by Jartran,
court awarded Jartran


$20 million in actual damages
$20 million in punitive damages
Comparative Advertising in a Global
Marketplace

Many countries have different view on issue
of comparative advertising



particularly where competitor's trademark is used
Some view practice as tool for weaker companies
to trade on stronger competitor's reputation
Some countries restrict comparative
advertising on certain products only

Canada prohibits comparisons for


drug products (if comparison based on effect)
alcoholic beverages


In some countries, comparative advertising
discouraged for other reasons
In Japan advertising agencies are massive



unlike US, often hold accounts of competing
companies
agencies would risk losing clients
American firms doing business globally need
to be aware of presence of laws prohibiting or
restricting comparative advertising in other
countries
Guidelines for Effective Comparative
Advertising




Intent and connotation of advertisement should be
to inform and never to discredit or unfairly attack
competitors or competing products
If a competitive product is named, it should be one
that is truly significant competition
The competition should be fairly and properly
identified, but not in a manner or tone of voice that
degrades the competitor
If the products and/or services are compared the
similar properties of the service or product should be
compared dimension to dimension, feature to
feature


Identification of competition should be for
honest comparison and not to upgrade by
association
If there is testing to be done it should be done
by an objective testing source


preferably an independent testing source
Competitor's trademark should not be used in
a more prominent fashion than one’s own

could lead to confusion as to source or
sponsorship