Perhaps the single biggest headache for many Internet marketers and advertisers has been figuring out how to comply with the FTC disclosure requirements regarding average results in their customer testimonials. Most Internet businesses use some type of customer review or feedback to promote their products, including direct customer testimonials. The prior guidelines allowed advertisers to use a “results not typical” or “results may vary” generic type of disclosure. This is no longer allowed under the 2009 revised FTC Guidelines.
Advertisers are now required to disclose what results consumers should generally expect from your product in the circumstances depicted in the endorsement if the results claimed are not typical. The applies to specific performance type claims. These types of claims cause concern as they suggest or imply the results in the endorsement are typical results and make specific claims which are not in fact typical. For example, the claim “I made $55,444 in just 4 weeks from my e-book sales by just following 5 simple steps.”This is a specific performance type claim that suggests that by following the steps, the average consumer can typically expect these results too. These ‘typicality claims’ must be qualified with the generally expected results or simply not used. (Keep in mind, results and performance of a product can be reasonably implied from a customer’s testimonial as well as directly stated).
Endorsements that don’t make a ‘typical results’ claim don’t have to be disclosed. For example, a casino customer providing an endorsement that “I just walked in and hit the big jackpot… walked out a winner!” The reasonable consumer would understand that they cannot expect to hit the jackpot just by walking into a casino. Here are some more examples of claims that would need to be qualified by average results disclosures:
EXAMPLE: As a reseller of window and siding products, you place a customer testimonial on your website whereby the customer boast that he or she saved $100 per month on his/her utility bills. If most customers only save 1/3rd of that amount, then the ad must contain a clear disclosure that the average homeowner under the circumstances depicted in the ad can generally expect to save at or near $33 per month.
EXAMPLE: You illustrate e-book cover art and you publish customer testimonials on your website where one customer proclaims that his sales “exploded” after using one of your designs on to revise an existing e-book cover. The average customer will probably not experience an “explosion” in sales, so you need to disclose what the generally expected results would be. If most customers do not achieve any increase in sales, you need to disclose this.
EXAMPLE: Your business has developed and sells software allowing carpet and flooring retailers to implement a virtual dealer type website where customers can view your product samples in a virtual room. One of your customer’s endorses your product by stating “my sales jumped over 50% in the first month I began using this application. It was so easy!” If sales do not jump over 50% generally speaking for all users of the software, you must disclose the generally expected results your customers can expect.
EXAMPLE: You operate a website that sells a step by step program aimed at helping affiliates increase traffic to their websites. One of your customers provides an endorsement proclaiming “Traffic quadrupled almost literally overnight after we followed your steps to success.” The reasonable customer would probably imply that his or her affiliate website might see a significant increase in traffic right away by using your program. You would need to disclose generally expected results in this example if your customers do not see a significant increase immediately after implementing your program.
You Must Have Support for any Disclosure of Generally Expected Results!
The information you put in your disclosure (and claimed in any of your endorsements) must be backed by some credible, reliable measure, such as scientific studies, real time documented performance of your past customers, a reliable and objective survey, etc. The bottom line is the generally expected results disclosure cannot be fabricated or exaggerated.
Most importantly, you need to understand that you should not use the endorsement if you do not know or cannot back up the generally expected results. If you don’t know the generally expected performance, you need to avoid using endorsements that may imply or suggest the endorsement results are typical. You can only use endorsements that express the endorser’s opinion without being able to substantiate general results.
This does not mean your business has to actually conduct a scientific style study or conduct a survey of every customer. It does not mean your business has to submit anything to the FTC. But, you cannot simply estimate or guess what the “generally expected” results are. They must be substantiated, meaning the data has to come from somewhere credible and reliable. This means your business just might have to collect some data or take some steps to determine this.
The FTC understands figuring out the generally expected results will entail costs associated with data collection and analysis. However, they make it clear that these costs are the same the advertiser would incur if they were making the ad directly. The FTC has directly stated that there is “no reason why a new company that might not yet have data showing how well its product performs should be allowed to convey a performance claim through testimonials that it would not be able to substantiate if it made that claim directly.” The bottom line is that the FTC expects that businesses and advertisers know the generally expected results.
5 Common Questions About Making An Average Results FTC Disclosure
The FTC has provided comments in its revised guidelines that clarify the requirements on average results disclosures and provide some real time guidance. This breakdown comes from direct staff comments as well. You should understand the FTC’s viewpoint since it will help answer many questions you may have after reading this section. Most importantly, you will gain a much greater understanding of how to draft proper general results disclosures.
1. Do I have to create an actual survey or some study and create some actual mathematical average result?
FTC Viewpoint: No. The FTC uses the term “generally expected results” rather than “average” in order to convey that this disclosure would not have to be based on an exact mathematical average of all users of the product. However, you have to know what the actual generally expected results are by some reliable measure.
2. Do the “generally expected results” I have to disclose apply to every customer who purchases my products?
FTC Viewpoint: Not necessarily. According to the FTC’s comments, you are not required to identify a “typical consumer” of your product and then determine what result that consumer achieved. You are only required to disclose “the generally expected performance in the depicted circumstances.” The FTC points out, as an example, that you could use results “from valid clinical studies of patients matching the profile of the persons depicted in some ad, even though consumers’ real world results are not likely to match exactly the results in the clinical study.”
You can conduct a survey of a subgroup, provided the subgroup is representative of the entire customer pool. In other words, it cannot be limited to customers with the best results. For example, emailing past customers to gauge performance may only illicit a response from satisfied customers. There has to be a more representative and broad model than that method.
3. Can I limit my disclosures?
FTC Viewpoint: Yes. You can use the specific circumstances of the ad to limit the scope of the average results you have to disclose. According to an example provided in the FTC’s comments, “if all of the testimonials used in an advertisement are clearly identified as persons who have been members of a weight loss clinic for at least one year, the disclosure can be based on performance data from that group… ” This is fact specific, of course.
If your business sells a program that may not be followed, the average or general results might be negative or very low since most of my customers don’t follow through or complete the program.
FTC Viewpoint: The FTC has stated that “The Commission recognizes that differences in physiology and commitment will affect the results that individual consumers will get from a particular weight loss or fitness product or program. With meaningful disclosures, consumers not only would have a realistic sense of what they can expect from a product or service, but could also take away the message that if they dedicate themselves as much as the endorser did, they might achieve even more.”
Translation: This leaves the door open for you to qualify your disclaimers to indicate that effort or completion of the program or a series of steps, instructions, etc. is necessary to achieve the desired results claimed in the endorsement. By doing so, you could potentially help your conversions since customers won’t automatically be led to believe achieving the results claimed in the endorsement are not extraordinary or out of the question. In fact, this is a recommended practice as long as you are cautions and clear.
EXAMPLE: “We successfully established our company’s business credit and obtained our first credit line in the amount of $10,000 within 2 months by just following the program step by step!”
Disclosure example: “Customers can generally expect to establish and receive business credit within 8.5 months from the time they begin the program. The results obtained in this endorsement do not reflect generally expected results since these results are due to factors controlled by the customer, such as follow through of each program step and the pace at which each step is completed and each customer’s individual effort and level of desire.”
4. What happens if my business does not possess the necessary information to be able to disclose generally expected performance? Does this mean I cannot use any testimonials or endorsements whatsoever?
FTC Viewpoint: Yes. Many businesses/advertisers may not have the information available to them to be able to disclose the generally expected performance of their product or service to consumers. You may only use testimonials that offer a general opinion without having to disclose any generally expected performance. If any of your product testimonials or endorsement makes a claim about any specific result of your product, you must disclose the generally expected results.
EXAMPLE: “This program was the best program I have ever purchased.”
This does not require you to use a disclosure since the endorsement represents a general opinion and does not make a specific claim.
EXAMPLE: “My business obtained a much higher business credit rating after just two weeks of following the program steps.”
Again, this endorsement makes a specific claim about some specific result. The customer may expect that obtaining higher credit for their business is possible after only 2 weeks. A disclosure must be made.
EXAMPLE: “This system is hands down the most complete system we have reviewed yet!”
This expresses another opinion by the endorser of the system regarding some aspect and does not convey a claim of results or generally expected performance.
5. Where do I stick my ‘Generally Expected Results’ disclosures?
Considering the nature of an endorsement, the disclosure should be placed next to or below the endorsement. As you have probably gathered by now, there is no uniform disclosure since it is specific to the endorsement. The best disclosures are clear and straightforward. “Most customers can generally expect to achieve approximately 1/3 of the per month earnings claimed above.” Use the same size font as the endorsement text and don’t try to hide it. Use the principles you learned above.
Given the difficulty most Internet businesses are going to have in gathering generally expected results, it is much safer to simply not to use endorsements that contain specific claims that aren’t typical. You will be taking a big chance the endorsement may suggest a typical claim. This is especially true with endorsements that make specific results or earnings claims.
This article was written by Philip A. Nicolosi, J.D. Mr. Nicolosi provides legal services through his law firm, Phil Nicolosi Law, P.C., focusing on startup and small business law, Internet & technology law and commercial transactions.
Mr. Nicolosi serves as a trusted advisor to numerous startups and small to medium sized businesses. This includes representation for a wide range of business law matters including business organization, corporate/LLC governance, regulatory law, contracts and transactions and most other matters outside of litigation. Mr. Nicolosi provides guidance with e-commerce, Internet marketing and technology-related legal matters. He also assists startup technology companies with seed financing, venture capital and exit transactions.