Legal News

FTC Enforces Online Endorsement Guides
In the Matter of Reverb Communications, Inc.
by Cyrus Wadia

Monday, September 13, 2010

The Federal Trade Commission (FTC) enforced its "truth-in-advertising principles" in the recent settlement of a case alleging an advertising agency had posted misleading endorsements of gaming applications ("apps") on Apple's iTunes Store.  In the Matter of Reverb Communications, Inc. (FTC, August 26, 2010).
 
From 2008 to 2009, the owner and employees of Reverb Communications, Inc. ("Reverb") submitted positive reviews of apps developed by their clients for sale on iTunes Store.  Reverb reviewed these apps using high star ratings and favorable comments such as "[o]ne of the best apps just got better" through anonymous accounts. 

The FTC applied  its revised guidelines on endorsements released earlier this year, and discussed in a previous alert.  The FTC's Complaint took issue with Reverb's failure to disclose :  (1) that Reverb was anonymously endorsing the same apps it was hired to promote, and (2) that the agency was often paid a sales percentage fee on the apps.  According to the FTC, the failure to disclose these "material connections," connections that would otherwise affect a consumer's purchasing decision, violated Section 5 of the FTC Act (15 U.S.C. § 45) against deceptive commercial practices. 

Pending final approval, the FTC accepted a consent order agreement in which Reverb agrees not to misrepresent itself as an independent endorser in connection with advertising for specific products and to remove public endorsements not in compliance with this order. 

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