Newsletter
FTC ISSUES GUIDANCE ON TESTIMONIAL ADVERTISING
On 23 September 2005 the Fair Trade Commis-sion (FTC) promulgated its Guidelines on the Regulation of Testimonial Advertising, which took effect on the same day.
The FTC stated that recently there has been a trend toward increasing use of testimonial ad-vertising. To promote the sale of their goods or services, or raise consumer awareness, compa-nies often employ well-known public figures, specialists or organizations, or consumers to share their experience of consumer products. If such advertising is false or misleading, consum-ers' interests will be damaged. Thus there is a need to regulate the content of testimonial ad-vertising. The main points of the Guidelines are as follows:
Definitions of "testimonial advertising" and "endorser"
1.Testimonial advertising: any advertisement in which a person other the advertiser re-flects, through language or other means, his/her opinion of, trust in, insights into, or personal experience of the advertised goods or services.
2.Endorser: a person who reflects in an ad-vertisement his or her opinion of, trust in, insights into, or personal experience of the advertised goods or services. An endorser may be a well-known public figure, a spe-cialists or organization, an ordinary con-sumer, or even a foreign national.
Advertisers must observe the principle of "authenticity" with regard to information about the endorser and the endorsement.
1.Endorsements by well-known public fig-ures or by specialists or organizations: if there is any change in the content or quality of the goods or services featured in a tes-timonial advertisement, the advertiser must have reasonable grounds for believing that during the period over which the adver-tisement is published or broadcast, the en-dorser has not changed his/her opinion of the endorsed goods or services expressed in the advertisement.
2.Endorsements by specialists or organiza-tions: the endorser must indeed possess relevant specialist knowledge or skills, and the opinion expressed in the endorsement must be consistent with the experience of other persons of the same profession or possessing the same skills.
3.Endorsements based on consumers' per-sonal experience: at the time of making the endorsement, the consumer must be a genuine user of the endorsed goods or ser-vices; or if the endorser is not a genuine user, this must be expressly indicated in the advertisement. The advertisement must also clearly indicate the results that con-sumers may obtain from the goods or ser-vices under the circumstances assumed in the advertisement, or indicate under what conditions consumers may achieve the re-sults claimed in the advertisement.
To assist businesses, endorsers, and consum-ers in complying with and monitoring com-pliance with the Guidelines, the Guidelines also include examples of specific forms of ac-tion that may contravene the Fair Trade Act (FTA), based on relevant cases handled by the FTC over the years.
For example: false or misleading statements or representations (the product does not have the qualities or effects claimed in the advertise-ment; the effects claimed in the advertisement are not supported by scientific theory or evi-dence, or are not consistent with medical the-ory or the results of clinical tests; the desired effects cannot be achieved in the time period claimed in the advertisement; the claims made in the advertisement have been determined by the regulatory authority for the industry con-cerned to be exaggerated or false; etc.); com-parative advertising (the claims made about the advertiser's own goods or services are not false or misleading, but false or misleading representations are made about the goods or services of others); or other deceptive or ob-viously unfair action sufficient to adversely affect the orderly conduct of trade.
Penalties and legal liability for noncompliance
1.Advertisers, advertising agents, and adver-tising media: under Article 41 of the FTA, the FTC may set a deadline for a noncom-pliant party to cease or correct its actions or undertake necessary corrective measures, and may impose an administrative fine of NT$50,000 to NT$25 million. If the party fails to comply with the order by the dead-line, the FTC may set further deadlines for such noncompliant party to cease or correct its actions or undertake necessary correc-tive measures and impose further fines of NT$100,000 to NT$50 million for each occurrence, until the party complies.
2.Endorsers: if an endorser is an enterprise as defined in Article 2 Subparagraph 4 of the FTA, improper endorsements may lead to penalties under Article 24 of the FTA.
Overlapping legislation
Where both the FTA and other legislation regulate false or misleading advertising, then in accordance with the principle that laws of specific application take precedence over laws of general application, such cases should be investigated and dealt with by the agency re-sponsible for administering the other legisla-tion. The FTC will handle cases not covered by such other legislation, and which fall within the purview of the FTA.