The Key Elements of an Endorsement Agreement11 Jul, 2011 By: Cathy Polisoto, Jeffrey Richter
The Federal Trade Commission’s (FTC) “Guides Concerning the Use of Endorsements and Testimonials in Advertising“ set forth numerous rules for endorsements by experts and celebrities. The Guides do not have the force of law; rather, they offer interpretive guidance on the types of advertisements that the FTC views as deceptive under Section 5 of the FTC Act. Therefore, it is advisable to follow the Guides. All other Section references are to the Guides. A written endorsement agreement containing certain warranties provides probative evidence that the advertiser used reasonable efforts to comply with the Guides.
1. Endorsements must be honest. Section 255.1(a) provides that endorsements must reflect the honest opinions of the endorser. Include a warranty that the endorser owns and uses the endorsed product and shall notify the advertiser immediately of any change in circumstances.
2. Ensure that your expert endorser has the appropriate expertise. Section 255.3(a) provides: “Whenever an advertisement represents, directly or by implication, that the endorser is an expert with respect to the endorsement message, then the endorser’s qualifications must in fact give the endorser the expertise that he or she is represented as possessing with respect to the endorsement.” Include a warranty that the endorser possesses all scientific expertise necessary to support the representations in the advertisement being made about the product.
3. Clarify what your endorser can say about the product. Section 255.1(a) provides that endorsements may not convey any express or implied representation that would be deceptive if the advertiser made it directly. Also, Section 255.1(d) provides that advertisers are subject to liability for false or unsubstantiated statements made through endorsements. List all the express and implied claims for which you possess the requisite substantiation and advise the endorser that he or she may not exceed the scope of the claims.
4. Obtain the appropriate indemnification from your endorser. If you are relying on your endorser as a medical doctor or scientist, your endorsement agreement should provide that your expert indemnifies you for damages arising from his or her making of any false statements regarding the advertised product or statements that exceed the scope of the representations. Ideally, you should also seek indemnification for any breach by the expert of any representation or warranty in the endorsement agreement, any intentional malfeasance or grossly negligent performance (or non-performance) of his services, any unlawful or improper conduct, and any conduct that is an act of professional negligence.
5. The endorser should be permitted to change his mind over time. Section 255.1(b) provides: “ … An advertiser may use an endorsement of an expert or celebrity only so long as it has good reason to believe that the endorser continues to subscribe to the views presented. An advertiser may satisfy this obligation by securing the endorser’s views at reasonable intervals where reasonableness will be determined by such factors as new information on the performance or effectiveness of the product, a material alteration in the product, changes in the performance of competitors’ products, and the advertiser’s contract commitments.” Accordingly, if you change the product, provide your expert endorser with the new product so he or she can use it and determine whether he or she still wishes to endorse it. The endorser should be permitted to terminate the agreement when he or she no longer believes the representations he has been making.
Given that advertisers are subject to liability for false or unsubstantiated statements made through endorsements, it makes sense to carefully negotiate and draft endorsement agreements.