Where do you find a good plumber? Who can recommend a good Italian restaurant? Who is the best divorce attorney in town? Sometimes these answers are found by asking family, friends, and neighbors, but many people find answers to these questions on social media and review sites such as Google, Yelp, Amazon, Facebook, and TripAdvisor. Customer reviews and testimonials are excellent marketing tools for a business because they build trust and goodwill and showcase your brand’s history. However, before you use them to promote your business, you need to be aware of what you can and cannot do.
The Federal Trade Commission (FTC) is the US government agency charged with protecting consumers. The FTC has a duty to investigate and prevent unfair methods of competition as well as unfair or deceptive actions that affect trade or commerce. Accordingly, the FTC has the authority to regulate how businesses implement tools like client testimonials. If a company or individual wants to advertise using endorsements or testimonials, they must understand and comply with FTC rules and regulations (as well as those from their own state, local, and industry-specific regulating bodies).
First, the FTC defines the term endorsement as a message from a third party “that consumers are likely to believe that reflects the opinions, beliefs, findings or experiences of a party other than the sponsoring advertiser.” A testimonial is a recitation of a personal experience from a customer about the use of the company’s product or services. The FTC treats endorsements and testimonials the same.
The FTC Act aims to prevent consumers from being deceived as a result of the use of the following types of testimonials and endorsements:
- Those that reflect unique, extraordinary, or uncommon results
- Those made without actual knowledge of the goods or services promoted
- Those made by a person or entity sponsored by the business, rather than an independent, objective, unbiased consumer, and the sponsorship is not disclosed to the reader by the business
Given these regulations, how can a business owner use testimonials and endorsements without running afoul of the FTC? The following is a non-exhaustive list that can be used as a reference when promoting your business; however, it is advisable to consult an attorney for legal advice tailored to your unique circumstances:
- Testimonials must be from real customers. Testimonials should not be fabricated. Only use endorsements or testimonials from individuals who have actually used your product or service. False testimonials are false advertising, and their use can result in civil and criminal penalties.
- You must get permission from the customer before using the customer’s name or likeness in a review.
- Testimonials must be accurate. The customer’s testimonial must not make exaggerated claims about the product or service or it will be considered false advertising. Make sure the claim being made by the endorsement is replicable, perhaps using case studies or research. Do not use false or misleading words or twist the words of the endorsement. In addition, the testimonial must be a complete opinion: unfavorable information cannot be left out. You can address the negative comments by responding to the reviewer.
- You may ask your customers to provide reviews and testimonials. You can ask the customer for a review in person, by phone, or even online. Be sure to get the customer’s permission before using the customer’s testimonial.
- You can pay for testimonials or provide free products or services in exchange for the review, but you must fully disclose that the reviewer has been compensated for the review. The reader of the review must understand that the review was made by someone who has been compensated.
- Disclose any relationship you have with the person or entity that is endorsing you or your business. Employees who endorse their employer’s product or service must disclose that they are employees of the business. If an endorser is being paid for the endorsement, a hashtag may be used to disclose the paid relationship.
- Celebrity endorsements are permitted, but the celebrity must actually use your product or service and be familiar with it. Similarly, you can use an expert for an endorsement, but the expert must have the relevant qualifications to support the review.
- Do not copy reviews to your website from sites such as Google, Facebook, and Yelp. The reviews belong to the review site and the customer, and unauthorized use of the reviews is a form of copyright infringement. However, there are often legal ways to link these review sites to your website so that the reader can be directed to your website from the review site and vice versa.
While it may seem like there are a lot of rules to follow, the regulations applicable to the use of testimonials and endorsements largely reflect common practices and good business sense. As a business owner, your job is to make sure the testimonial is honest and provides an accurate representation of your product. If any payments are made or compensation is given (even in the form of free trials) to the endorser, that relationship must be disclosed. Keep in mind that many industries also have specific rules and guidelines that they must follow. It is advisable to consult an attorney to ensure that your business is in compliance with the FTC and any state, local, and industry-specific rules. Call our office today to set up an appointment so we can help ensure that your business promotions comply with the law.
This article is a service of Greg Gordillo, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Schedule your LIFT Session today!