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- FTC v. Ashton Kutcher?: Special edition -


Serious reports were made earlier this week that there might have been a United States Federal Trade Commission (FTC) action against Ashton Kutcher.  Now, it is being reported that there will not be an FTC investigation of Mr. Kutcher.

But, why is there an FTC issue at all?  Why is Ashton Kutcher -- of all people -- even on the United States of America FTC radar?  Seems odd, doesn't it?

Here's why:

Let's say you go onto a website to learn about a product or service, such as you might commonly Bing or Google these days.  On that website, there are reviews of the product you are considering.  You review the website content. Product A sounds great!  You buy Product A.  Product A is terrible.  You find out later that the website was owned and controlled by the manufacturer of Product A and not disclosed to you.  You wasted your money.  You feel tricked.  It is that simple.

As a result of the new forms of social media that are now pervasive, the FTC has revised its guidelines for endorsements and proper disclosures.

But, back to Ashton Kutcher. 

In short, it was reported that the FTC investigation might occur for Mr. Kutcher's failure to disclose investments he made in technology companies.  According to the reporting sources, Mr. Kutcher, a social media entrepreneur of sorts, served as guest editor for an online publication and failed to reveal his investments relative to the magazine content.

The revised FTC Guidelines reflect three basic truth-in-advertising principles:

  • Endorsements must be truthful and not misleading;

  • If the advertiser doesn’t have proof that the endorser’s experience represents what consumers will achieve by using the product, the ad must clearly and conspicuously disclose the generally expected results in the depicted circumstances; and

  • If there’s a connection between the endorser and the marketer of the product that would affect how people evaluate the endorsement, it should be disclosed.

Here is an interesting celebrity example by the FTC, paraphrased from the Guidelines:

A well-known pro tennis player appears on a television talk show.  The host comments that the pro is doing better than ever.  She responds by saying the improvement is resulting from her eye surgery. She touts the procedure.  But, she does not disclose that she has a contractual relationship with the service provider, who pays her for speaking publicly about her surgery when she can do so.

Okay, those are the basic facts.  Here is the FTC explanation:

Consumers might not realize that a celebrity discussing a medical procedure in a television interview has been paid for doing so, and knowledge of such payments would likely affect the weight or credibility consumers give to the celebrity’s endorsement. Without a clear and conspicuous disclosure that the athlete has been engaged as a spokesperson for the clinic, this endorsement is likely to be deceptive.

Furthermore, if consumers are likely to take away from her story that her experience was typical of those who undergo the same procedure at the clinic, the advertiser must have substantiation for that claim.

Assume that instead of speaking about the clinic in a television interview, the tennis player touts the results of her surgery – mentioning the clinic by name – on a social networking site that allows her fans to read in real time what is happening in her life. Given the nature of the medium in which her endorsement is disseminated, consumers might not realize that she is a paid endorser. Because that information might affect the weight consumers give to her endorsement, her relationship with the clinic should be disclosed.

Assume that during that same television interview, the tennis player is wearing clothes bearing the insignia of an athletic wear company with whom she also has an endorsement contract. Although this contract requires that she wear the company’s clothes not only on the court but also in public appearances, when possible, she does not mention them or the company during her appearance on the show. No disclosure is required because no representation is being made about the clothes in this context.

This illustrates why someone like Aston Kutcher, and other music and sports celebrities, are or might be on the FTC radar.  The new power of a celebrity to affect consumer purchasing decisions is important.  It is important to consumers in making purchase decisions, and it is important to celebrities and business in managing legal compliance.

                                                                                         -- Gregg Zegarelli

As lead counsel in securing the only known judgment against Google as an intentional trespasser from its Street View program, with an overturn against Google in the Third Circuit Court of Appeals, Gregg Zegarelli, of the law firm of Technology & Entrepreneurial Ventures Law Group, PC, is committed to assisting people and businesses protect and manage their rights in this new technology and media-driven commercial environment.

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