Endorsement Deals and FTC Compliance

A famous athlete has thousands of followers on Twitter and is well-known as a spokesperson for a particular product. Does he have to disclose that he’s being paid every time he tweets about the product?

Actors, athletes, models, musicians are usually thrilled when an endorsement deal is finalized. They might receive free products, cash upfront or even cash for every tweet that mentions a product. It's rumored Kim Kardashian receives $10,000 a tweet for certain brands she endorses.

In drafting and implementing talent and/or brand endorsement deals, it's important both the brand and talent comply with Federal Trade Commission (FTC) Revised Endorsement Guidelines. 

The revised Endorsement 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.

Talent, to protect their integrity, should always use their best efforts to disclose their endorsers. That disclosure becomes tricky in 140 characters on Twitter. If followers understand the talent is being paid to endorse a product, then no disclosure is necessary. What if a significant number of followers don’t know? In that case, a disclosure would be needed. Determining whether followers are aware of a relationship could be tricky in many cases, so a disclosure is recommended.

Also, talent should investigate any product claims before they endorse a product. In 2014 the FTC cracked down on Sensa, L'Occtaine and HCG Diet Direct for deceptive advertising claims. Talent would regret associating with a product or service that runs afoul of the FTC.

Remember, you don't have to be rock-star or pro-athlete to be subject to the Endorsement Guidelines -   bloggers and affiliate marketers must also comply.

Texas media and entertainment lawyer Tamera Bennett can answer questions on endorsement deals and FTC compliance.

Duck Dynasty - What Contract Clause Did Phil Violate? The Morals Clause?

This post is not about agreeing, disagreeing, supporting, or not supporting the comments made by Duck Dynasty Patriarch Phil Robertson.  As an entertainment lawyer, this post is to raise conversations with lawyers and industry professionals on what contractually grounds give A&E the ability to terminate Phil from the Duck Dynasty show. Phil made public statements regarding his personal beliefs that did not sit well with A&E.  While I do not have a connection to A&E or Duck Dynasty, I do have sample contractual language that may be similar to Phil's agreement.  Interestingly enough, the language I suspect A&E used to terminate Phil is found in what we entertainment lawyers call a "Morals Clause."  This is the clause that was used by GILLETTE and other endorsers of Tiger Woods to terminate his endorsement deals when facts about his personal life came to light.

A Morals Clause allows the studio/production company/endorser to terminate a contract when the actor or athlete commits conduct that "casts disrepute on the studio or industry."

If the Network or Producer becomes aware that Artist has previously committed any such acts or has engaged in behavior that the Network or Producer reasonably determines brings or may bring Artist, Producer, the Network or the Network's sponsors into widespread public disrepute, scandal or ridicule or which reflects or may reflect unfavorably upon Artist, Producer, the Network or a sponsor, then Producer shall be entitled to terminate this Agreement forthwith by giving Artist notice of termination in writing at any time after the Network or Producer acquires knowledge of such act or conduct.

Termination under the Morals Clause usually occurs when there has been an allegation of criminal or civil charges against the artist or athlete.  Or, in the case of Tiger Woods, many allegations of marital infidelity.

Does A&E have an implied covenant of good faith and fair dealing not to act arbitrarily, irrationally or unreasonably in exercising discretion to execute its termination rights under the morals clause of the contract?  At least one court held recently that invoking a Morals Clause because of a Tweet made by an athlete the brand endorsed was not enough to trigger termination.

Lawyers and industry professionals, please leave your thoughts and comments.  I may delete comments that do not add to the legal conversation.

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