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Field Reports

23 Nov, 2009 By: Thomas Haire, Jacqueline Renfrow Response

FTC Sets New Guidelines for Endorsements, Testimonials

WASHINGTON — The Federal Trade Commission (FTC) announced the approval of final revisions to the Guides Concerning the Use of Endorsements and Testimonials in Advertising, which address endorsements by consumers, experts, organizations and celebrities, as well as the disclosure of important connections between advertisers and endorsers.

The guidelines, last updated in 1980, now state that advertisements featuring a consumer and conveying an experience with a product or service as “typical” when that is not the case, will be required to clearly disclose what consumers should generally expect. The earlier version of this guideline allowed advertisers to describe the consumer’s experience as long as they included a “results not typical” disclaimer. The new version goes into effect on Dec. 1.

“This could have far-reaching effects on advertisers. No longer will direct marketers and advertisers be able to highlight their ‘best’ testimonial — feeling that they will have zero liability by placing the obligatory ‘results not typical’ disclaimer language on the ad,” says Shannon L. Van Dorn, Esq. “This means that in order to avoid potential regulatory hot water, they will have tout the ‘average’ testimonial — and not the exceptional one.”

Other new guidelines address endorsements by bloggers or word-of-mouth marketers, stating anyone who receives cash or in-kind payment to review a product is considered an endorsement. This is the first-ever guide addressing bloggers and others in non-traditional media.

Finally, the Guides address celebrity endorsers, for the first time making them liable for false or unsubstantiated claims.

In reaction to the announcement, the Electronic Retailing Association (ERA), which had fought to keep the regulations from becoming too restrictive, issued a statement and offered guidance on how to keep endorsement and testimonial ads in line with the Act.

“Like the FTC, ERA fully supports enforcement against businesses and individuals that cut corners, and jeopardize the healthy and vibrant $300 billion electronic retailing sector,” says Julie Coons, president and CEO of ERA. “As leaders in self-regulation, we look forward to partnering with the FTC to ensure the relevant communities are educated and fully able to comply before they become involved in costly legal challenges.”

Questex Reaches Agreement With Lenders on Restructuring

NEWTON, Mass. — Questex Media Group Holdings Inc., parent company of Response and 22 other print magazines, is restructuring in an agreement with its lenders to reduce debt. The company’s management remains in place, and it will continue to conduct business as usual. The restructuring will have no effect on the day-to-day operations of Response Magazine, Response Expo or the Direct Response Marketing Alliance (DRMA).

The Newton, Mass.-based company — which also sponsors 28 conferences and has more than 150 trade Web sites — filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on Oct. 5 in order to restructure its debt for continued operations.

However, based on the strength of the company’s business plan, senior lenders have already committed financing as part of the filing, including both debtor-in-possession (DIP) financing and exit financing.

“We are pleased with the strong support we have received from our lenders and business partners for a restructuring that will allow us to reduce our debt and achieve a strong, sustainable capital structure,” says Questex CEO Kerry Gumas. “Questex has attractive assets, marketing-leading brands, a great talent base of professionals and a track record of performance that has allowed us to continue to generate strong cash flows. This restructuring will better position the business for future growth for the benefit of all the company’s stakeholders.”

A group of the company’s senior lenders have entered into an agreement to serve as the stalking horse for a purchase of substantially all of the assets of the company pursuant to a 363 sale. The company expects the process to be completed within 60 days.

The first priority for the Response brand and the entire Questex family of properties will remain its valued customers and providing them with the same quality products and services that they have come to expect.


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About the Author: Thomas Haire

Thomas Haire

About the Author: Jacqueline Renfrow

Thomas Haire

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