March 11th, 2014
FTC Sounds the Alarm on ADT Paid Endorsements
As part of its ongoing focus on endorsements in advertising, the Federal Trade Commission ("FTC") recently settled a case against home security company, ADT LLC, for use of paid endorsers presented to look like impartial experts. In its complaint, the FTC alleged that ADT paid a total of $300,000 (and gave $4,000 worth of security products) to spokespeople hired by the company to review, demonstrate and promote ADT's "Pulse Home Monitoring System" without disclosing that they were paid to do so.
Under the Endorsement Guides, any material connection between an advertiser and an endorser must be clearly and conspicuously disclosed. According to the Endorsement Guides, a "material connection" is one "that might materially affect the weight or credibility of the endorsement."
According to the FTC's complaint, the ADT "experts" were featured on numerous high-profile TV and radio shows, and across the internet in articles and blog posts, at ADT's behest. Although ADT allegedly booked the experts' appearances through its public relations firms and booking agents - and even provided the media with B-roll footage and questions for the interviews - few segments mentioned the experts' connection with ADT, a financial relationship, or that these spokespeople were anything other than "impartial, expert review[ers] of the products." For example, one "expert" appeared on the Today Show, and was billed as "a national family and safety expert known as The Safety Mom." Although it appeared to the average viewer that she was merely presenting on a topic related to her expertise, her time on the show was almost exclusively spent discussing the virtues and affordability of ADT's Pulse System.
As Jessica Rich, Director of the Federal Trade Commission's Bureau of Consumer Protection, said: "It's hard for consumers to make good buying decisions when they think they're getting independent expert advice as part of an impartial news segment and have no way of knowing they are actually watching a sales pitch....When a paid endorser appears in a news or talk show segment with the host of that program, the relationship with the advertiser must be clearly disclosed."
As part of the settlement, ADT has agreed to:
- no longer misrepresent that any discussion or demonstration of a security or monitoring product or service is an independent review provided by an impartial expert;
- clearly and prominently disclose, in connection with the advertising of a home security or monitoring product or service, a material connection, if one exists, between an endorser and the company; and
- promptly remove reviews and endorsements that have been misrepresented as independently provided by an impartial expert or that fail to disclose a material connection between ADT and an endorser.
Advertisers and agencies should take note of regulators' continuing interest in ensuring that consumers know if an endorser has been paid or given something of value to promote a product. Advertisers must ensure that any such connection is made clear to consumers in their advertising. And what of the media? Since ADT's public relations firm and booking agents placed the experts on the Today Show and the other shows, the shows presumably knew that the "Safety Experts" were ADT spokespersons. While broadcasters may not yet be in the FTC's crosshairs, it seems to us likely they will be expected to play a role in ensuring transparency for their viewers in the future.
If you have any questions about the ADT case, the Endorsement Guides, or any other advertising law issues, please contact Terri Seligman at (212) 826 5580 or firstname.lastname@example.org, Hannah Taylor at (212) 705 4849 or email@example.com, or any other member of the Frankfurt Kurnit Advertising, Marketing and Public Relations Group.
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