Celebrity Advertising Endorsements and Promotion Can Be Expensive — For the Celebrity

It’s the rare celebrity, whether sports or Hollywood, who has not acted as an advertiser’s spokesperson, or even as an endorser. The deals run from Jimmy Walker hawking Medicare insurance on late night TV to William Shatner, who made $13 million to promote Priceline. That’s not bad money for a few hours on the sound stage every year. Rapper Travis Scott is said to have made $20 million promoting McDonald’s on social media.

Not all of these deals pass legal muster, however, and when a celebrity endorses a product in his field of interest, such as a celebrity racecar driver pushing tires, the public has a right to believe the celebrity means what he says and actually uses the product.  Where it is obvious the actor, or celebrity, is merely being paid to act as a spokesperson, product use is not needed. And, when the celebrity is given something of value to add an endorsement, disclosure is required. If these rules are not followed, the result may be a claim by a state attorney general, the FTC, or group of consumers that the celebrity endorser engaged in deceptive trade practices.

Recently, Tom Brady, Gwyneth Paltrow, and David Ortiz were sued because they promoted, or endorsed, the FTX crypto platform, although it is hard to imagine why anything they could say about a sophisticated financial platform would induce an investor to spend money. However, the basis of the suit was the failure of the celebrity endorsers to disclose their own dealings with the advertiser they promoted. It was pled that these celebs had taken undisclosed equity and that they were advancing their own self-interests without full disclosure to the $11 billion detriment of investors, who may not have invested had they known all. And there is the question whether they were promoting unregistered securities.

No surprise the celebrities are being sued; they are rich, and with FTX in ruin, investors are looking for ways to become reunited with their capital. Justin Bieber, Serena Williams, and Jimmy Fallon also found themselves in a lawsuit because they acted as spokespersons for the nonfungible token, in this case digital art, Bored Ape Yacht Club.  They were also accused of deceptive trade practices, because they induced investors to part with their money without telling them they had a stake in the seller’s financial wellbeing. Once again, investors may or may not have thought twice before investing if they had all the facts.

Bottom line is that there are guidelines available to, er, guide celebrity endorsers and the advertisers for whom they work. Getting in front of the camera and reading from a prepared script may make for lots of very easy money, but if the endorser steps outside of the guidelines, the result may become very expensive to wallet and reputation. See, Guides Concerning the Use of Endorsements and Testimonials in Advertising, a proposed rule by the Federal Trade Commission, published July 26, 2022 in the Federal Register.