Corporate & Securities Law

Results Not Typical

Apparently, under the proposed changes to the FTC advertising guidelines, a “results not typical” disclaimer for consumer endorsements representing a non-typical experience will no longer be sufficient on the grounds that those types of disclaimers have not been sufficient in deterring deception.   The big change in the rules is as follows:

“If the advertiser does not have substantiation that the endorser’s experience is representative of what consumers will generally achieve, the advertisement should clearly and conspicuously disclose the generally expected performance in the depicted circumstances, and the advertiser must possess and rely on adequate substantiation for that representation.”

Luke Froeb, former Director of the Bureau of Economics at the FTC, chimes in:

In other words, advertisers can use testimonials only if they develop statistical evidence to support testimonial claims, like the kind of evidence required by the FDA for new drug applications. This could prove so costly that it could discourage the use of testimonials in advertisements in products that actually work, like Jenny Craig, whose website uses customized testimonials.

For a discussion of benefits and costs of these kinds of policies, see “Consumer Protection,” an entry in the Encyclopedia of Social Science.

Full post as published by Truth on the Market on August 21, 2009 (boomark / email).