Pending Court Case Could Affect Advertising & Entertainment Industries
Electronic Retailing Association Convenes Panel to Discuss Celebrity Product EndorsersÂ’ Roles, Responsibilities and Potential Personal Liability Pending Court Case Could Affect Advertising & Entertainment Industries The Electronic Retailing Association (ERA), an international trade association of companies that use the power of electronic retailing to sell direct to consumers, recently hosted an industry roundtable to explore the changing roles and responsibilities of celebrity product endorsers. In its mission to create a climate in which electronic retailers can operate with consumer confidence, the ERA asked meeting participants to comment on the future of celebrity endorsements in both infomercials and general advertising.
(PRWEB) May 16, 2002
(May 13, 2002 – Washington, DC) The Electronic Retailing Association (ERA), an international trade association of companies that use the power of electronic retailing to sell direct to consumers, recently hosted an industry roundtable to explore the changing roles and responsibilities of celebrity product endorsers. In its mission to create a climate in which electronic retailers can operate with consumer confidence, the ERA asked meeting participants to comment on the future of celebrity endorsements in both infomercials and general advertising.
The meeting was prompted, in part, by pending Federal Trade Commission (FTC) litigation against Steve Garvey, co-host of an Enforma infomercial, and GarveyÂ’s management company. (The FTCÂ’s case against Enforma Natural Products and others, over dietary supplements Fat Trapper and Exercise in a Bottle was previously resolved with a stipulated final order and a payment of $10 million for consumer redress.) This case is only the fourth time the FTC has filed suit against a celebrity in the past 24 years, and it punctuates the FTCÂ’s commitment to broadening the relief it seeks against advertisers and those who assist them. Recently, FTC Commissioner Sheila F. Anthony called on the dietary supplement industry to institute more and better self-regulation and called on media companies to take responsibility not to run ads containing unsubstantiated and fraudulent claims.
On Aug. 31, 2000, the FTC sued baseball star Steve Garvey, his management company and others involved in the Enforma infomercial. The FTC charged that Garvey and his management company were liable for the commercialÂ’s misleading claims because he personally made deceptive claims when he knew or should have known the claims were false or misleading, and because he endorsed the product. Garvey also accepted payment based on sales of the advertised products. Garvey denied the FTC claims and the case went to trial in March. A decision is expected in a few months.
The outcome of the Garvey case is being closely watched in the entertainment, advertising, media and retail sectors. If Garvey loses, some believe that the FTC will have a precedent that may impact the future of celebrity endorsement advertising.
ERA president and CEO, Elissa Matulis Myers noted, “Out of enlightened self-interest, we take an active role in helping the industry regulate itself. Good companies want happy customers as much as the federal government does.” As spokesperson for the electronic retailing and DRTV industries, the ERA strongly advocates industry self-regulation and wants to find common ground between the FTC, industry players and consumers. Additionally, the ERA plans to conduct consumer research to determine what influence celebrity endorsers have on purchases and how consumers react when they see claims made by celebrities in an advertising context.
The roundtable was convened and hosted by Stephen Breimer, Beverly Hills entertainment attorney and ERA Board Member. Ed Glynn, trade regulation attorney and counsel to Steve Garvey and Garvey Management, and Elaine Kolish, associate director-division of enforcement for the FTCÂ’s Bureau of Consumer Protection, presented a history of the issue and their respective positions on the Garvey case. Other meeting attendees included media companies, entertainment lawyers, and representatives from the Screen Actors Guild and several large talent agents.
"The Federal Trade Commission, as well as state and local law enforcement officials, appear to be widening their net in seeking to hold, not just primary marketers, but others involved in the marketing effort, accountable for misrepresentations or other problems that may arise in commercial marketing messages," said Breimer, Chair of the ERA Task Force on Shared Liability.
“Talent rarely has any control over the total script or commercial,” stated Glynn. In the Steve Garvey case Glynn pointed out that many of the claims in dispute were made as a “voice over” to the commercial, added when Garvey wasn't present. Additionally, in response-driven or interactive advertising, it is common for all involved to be paid based on product sales. An upfront or flat fee is almost always too small to enable the endorser to hire subject-matter experts and extract verification of the claims made in advertising about the products. “The fact that an actor is paid on a ‘royalty’ basis in the form of an ongoing fee based on the success of the show is not evidence that the actor has any ownership or control over the project.”
Kolish noted that the FTC wants to prevent endorsers from misleading consumers and impress upon them their “duty to make reasonable inquiries” about whether appropriate substantiation exists for the claims they make.
The FTC took action in the Garvey case because it claimed he had requisite knowledge of the products’ alleged unsubstantiated claims. According to the FTC, Garvey “personally participated” in the deception by making deceptive claims about the product. Although Garvey said he tried the product and lost weight, Kolish said, “for health and safety claims, it’s not sufficient to base claims of efficacy on the celebrity’s personal use.” She expressed the FTC’s stated crackdown on dietary supplement advertising. “A growing concern we have is that advertisers are using endorsements to make claims they don’t have substantiation for.”
Kolish added, when endorsers are paid based on product sales, “they become far more like a principal or co-venturer. Giving celebrities a total pass would be inappropriate. They would benefit from their involvement in ads but would take no responsibility.”
KolishÂ’s participation in the roundtable was tempered with a presentation of her suggestions of minimum requirements for celebrity endorsements.
Always make sure there is substantiation appropriate to the claim. If the claim states “tests prove,” ask to see the tests. If the claim involves consumer health or safety, tests should be scientific.
Make sure substantiation is not obviously defective. Endorsers have no general duty to do independent testing or statistical analyses, but they cannot ignore contrary evidence or obvious inconsistencies. If the celebrity is asked to endorse a dietary aid with a recommended dosage of 10 milligrams and clinicians distributed 100 milligrams to test patients, “you don’t need to be an expert to know that may be a problem,” Kolish said.
An endorserÂ’s experience, education and background also will be a factor in determining whether he or she has the ability to detect study inadequacies. Both celebrities and manufacturers should be sensitive to this.
About the Electronic Retailing Association:
Founded in 1990, the Electronic Retailing Association (ERA) is a trade association representing the $125 billion electronic retailing industry. It is comprised of more than 450 member companies and subsidiaries worldwide that use the power of electronic retailing to sell direct to consumers via television, radio, Internet, and wireless media. The ERA also hosts several major conferences and exhibitions, the largest of which is held in Las Vegas each October. More information is available at www. retailing. org.
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