Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

FTC Warning - Online Endorsements Can Lead to Costly Enforcement

Author: Scarinci Hollenbeck, LLC

Date: November 30, 2021

Key Contacts

Back
FTC Warning - Online Endorsements Can Lead to Costly Enforcement

A product endorsement by a celebrity or a social media influencer can be invaluable in growing sales of new products...

A product endorsement by a celebrity or a social media influencer can be invaluable in growing sales of new products. The profits from these sales, however, can quickly disappear if your advertisement draws the ire of regulators like the Federal Trade Commission (the “FTC”).

The FTC recently issued warning letters to hundreds of companies alerting them to widespread illegal practices in the use of endorsements. The recipients included top consumer products companies, leading retailers and retail platforms, and major advertising agencies.

“Fake reviews and other forms of deceptive endorsements cheat consumers and undercut honest businesses,” Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, said in a related press statement. “Advertisers will pay a price if they engage in these deceptive practices.”

FTC Notice of Penalty Offenses 

The warning letters took the form of FTC Notice of Penalty Offenses (the “Notice”). Under Section 45(m)(1)(B) of the FTC Act, the FTC may notify companies that certain acts or practices have been found in administrative decisions (other than consent orders) to be deceptive or unfair. As the FTC explained in a blog post discussing the Notice, companies that receive a Notice are now deemed to have “actual knowledge” that those practices violate the law. If the company engages in that conduct in the future, the statute allows the FTC to sue the company, seeking civil penalties of up to $43,792.00 per violation. 

The Notice sent to the companies outlines a number of practices that the FTC has determined to be unfair or deceptive in prior administrative cases, including:

  • Claiming – directly or by implication – that a third party has endorsed a product or its performance when that’s not the case (this includes fake reviews);
  • Misrepresenting that an endorsement reflects the experience, views, or opinions of users or purported users;
  • Misrepresenting an endorser as an actual, current, or recent user of a product;
  • Continuing to advertise an endorsement unless the advertiser has good reason to believe the endorser continues to subscribe to the views presented in the endorsement;
  • Using testimonials to make unsubstantiated or otherwise deceptive performance claims – even if the testimonial is genuine;
  • Failing to disclose a connection between an endorser and seller of a product if that connection might materially affect the weight or credibility of the endorsement or review and if consumers wouldn’t reasonably expect that connection; and
  • Misrepresenting – explicitly or implicitly – that the experience of an endorser represents the typical or ordinary experience of users of the product.

The FTC emphasized that recipients of the Notice are not alleged to have engaged in any wrongdoing, noting that “the fact that a company received a Notice was not based on a review of its advertising and in no way suggests that the company has violated the law.” Nonetheless, the FTC’s actions still send a clear message that it plans to step up enforcement of Section 5 in this area.

FTC Using New Tools to Police Online Advertisements

The FTC’s reliance on the Notice suggests that the agency is shifting gears in the wake of the Supreme Court’s decision in AMG Capital Mgmt. v. FTC, which limited the FTC’s ability to use Section 13 of the FTC Act to obtain restitution and disgorgement from entities that engage in unfair or deceptive advertising practices. Going forward, the agency will likely continue to rely on less frequently used enforcement tools to accomplish its enforcement goals.

Notably, the FTC similarly relied on the FTC Act’s penalties to target false claims by for-profit colleges. In a press release announcing that the agency had sent a Notice of Penalty Offense to 70 colleges, FTC Chair Lina M. Khan stated that the FTC was “resurrecting a dormant authority to deter wrongdoing and hold accountable bad actors who abuse students and taxpayers.”

Key Takeaway

Recipients of the Notice are now on notice that any future online advertising practices alleged to be “deceptive” could result in penalties of up to $43,792.00 per violation. For all businesses that use online endorsements, the Notice provides an important opportunity to review your advertising practices to ensure that any endorsements comply with the FTC Act. We have previously discussed the use of online endorsements here and remain ready to help businesses ensure that their advertising campaigns do not result in unintended liability. Additional resources are also available on the FTC Business Center’s Endorsements, Influencers, and Reviews portal.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Ajoe Abraham, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
What Founders Can Learn From Start-up Suits post image

What Founders Can Learn From Start-up Suits

High-profile founder litigation is more than just a media spectacle. For startup founders, these cases underscore the legal and structural risks that can arise when rapid growth outpaces formal oversight. While launching a new company can be both an exciting and deeply rewarding endeavor, founders must be mindful that it also comes with significant risks. […]

Author: Dan Brecher

Link to post with title - "What Founders Can Learn From Start-up Suits"
Corporate Governance Reviews: A Practical Guide for New Jersey Companies post image

Corporate Governance Reviews: A Practical Guide for New Jersey Companies

Every New Jersey company should periodically evaluate its governance framework. Strong corporate governance protects directors and officers, builds investor confidence, reduces litigation exposure, and positions a company for sustainable growth. The first quarter of the year is a great time to evaluate your corporate governance practices and perform any routine maintenance needed to keep that […]

Author: Ken Hollenbeck

Link to post with title - "Corporate Governance Reviews: A Practical Guide for New Jersey Companies"
What to Do After Being Served with a Lawsuit: Steps to Protect Your Legal Rights post image

What to Do After Being Served with a Lawsuit: Steps to Protect Your Legal Rights

Being served with a lawsuit is one of the most stressful legal events a business or individual can face. Whether the claim involves a contract dispute, an employment matter, an intellectual property issue, or another legal challenge, the actions you take in the first few days can significantly shape the outcome of your case. Acting […]

Author: Robert E. Levy

Link to post with title - "What to Do After Being Served with a Lawsuit: Steps to Protect Your Legal Rights"
Will 2026 Be a Banner Year for SPACs? Understanding the Risks and Opportunities post image

Will 2026 Be a Banner Year for SPACs? Understanding the Risks and Opportunities

Special Purpose Acquisition Companies (SPACs) continue to gain momentum as we move through 2026. After enduring a significant contraction following the 2021 boom and the regulatory scrutiny that followed, SPAC activity rebounded sharply in 2025 and now carries forward into 2026 with real momentum. The SPAC resurgence reflects broader improvements in both market conditions and the […]

Author: Dan Brecher

Link to post with title - "Will 2026 Be a Banner Year for SPACs? Understanding the Risks and Opportunities"
Why Compliance Monitoring Matters for NY and NJ Businesses post image

Why Compliance Monitoring Matters for NY and NJ Businesses

Compliance programs are no longer judged by how they look on paper, but by how they function in the real world. Compliance monitoring is the ongoing process of reviewing, testing, and evaluating whether policies, procedures, and controls are being followed—and whether they are actually working. What Is Compliance Monitoring? In today’s heightened regulatory environment, compliance […]

Author: Dan Brecher

Link to post with title - "Why Compliance Monitoring Matters for NY and NJ Businesses"
When Are New Jersey Business Owners Personally Liable for Corporate Debt? post image

When Are New Jersey Business Owners Personally Liable for Corporate Debt?

New Jersey personal guaranty liability is a critical issue for business owners who regularly sign contracts on behalf of their companies. A recent New Jersey Supreme Court decision provides valuable guidance on when a business owner can be held personally responsible for a company’s debt. Under the Court’s decision in Extech Building Materials, Inc. v. […]

Author: Charles H. Friedrich

Link to post with title - "When Are New Jersey Business Owners Personally Liable for Corporate Debt?"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form. By providing a telephone number and submitting this form you are consenting to be contacted by SMS text message. Message & data rates may apply. Message frequency may vary. You can reply STOP to opt-out of further messaging.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!