• New FTC Rule Could Trigger Big Fines for Bloggers

New guidelines regarding the use endorsements and testimonials were released by the Federal Trade Commission’s (FTC) last month, and they have far-reaching implications for bloggers and advertisers. Under the new rules both face substantial fines if they fail to disclose value-for-testimonial relationships.

A Workshifting.com post by David Baeza, head of the global media team for Citrix Online, a few days ago alerted me to the FTC’s new endorsement rules which are set to take effect on December 1, 2009. As I dug a bit deeper, I felt compelled to write more about how this might affect your blogging or advertising strategy. You can read the full ruling on the FTC web site, but here’s what I consider to be the meat of it as it relates to bloggers and website owners.

The critical paragraph of the ruling states that:

“. . . the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service. Likewise, if a company refers in an advertisement to the findings of a research organization that conducted research sponsored by the company, the advertisement must disclose the connection between the advertiser and the research organization.” (http://www.ftc.gov/opa/2009/10/endortest.shtm)

The ruling also closes the loophole that allows companies to post wild success claims followed by the line “results not typical.” Ouch, that’s gonna hurt the diet industry!

It’s also clearly indicates that celebrity endorsements are on the FTC’s radar. If Football Joe is paid to endorse Huge Henry’s Hotdogs and he stands to gain from the endorsement—even if that gain is the result of consuming free hotdogs, he’ll be in hot water if he doesn’t make that clear to his listeners, readers, viewers.

What Does It Mean to Bloggers?

Most reputable bloggers are careful to let their readers know when their posts recommend something they have an interest in, but as you read the examples in the full guidelines (some follow below), you’re likely to want to rethink your affiliate programs, endorsements, testimonials, and even how you post media mentions about your company. This video from the FTC’s web site will give you an idea of how far-reaching the new ruling may be:

Examples of What Does and Doesn’t Constitute a Violation of the FTC’s New Guidelines for the Use of Endorsements and Testimonials in Advertising

The full guidelines with additional examples is available here — click on Text of the Revised Endorsement & Testimonial Guide

Clipping Reviews or Quote Mining is a No-No: A film critic’s review of a movie is excerpted in an advertisement. When so used, the review meets the definition of an endorsement because it is viewed by readers as a statement of the critic’s own opinions and not those of the film producer, distributor, or exhibitor. Any alteration in or quotation from the text of the review that does not fairly reflect its substance would be a violation of the standards set by this part because it would distort the endorser’s opinion.

Celebrities Can Be In Violation Without Actually Stating an Endorsement: A television advertisement for a particular brand of golf balls shows a prominent and well-recognized professional golfer practicing numerous drives off the tee. This would be an endorsement by the golfer even though she makes no verbal statement in the advertisement.

Fictional Characters Are Exempt: A TV commercial depicts two women in a supermarket buying a laundry detergent. The women are not identified outside the context of the advertisement. One comments to the other how clean her brand makes her family’s clothes, and the other then comments that she will try it because she has not been fully satisfied with her own brand. This obvious fictional dramatization of a real life situation would not be an endorsement.

Bloggers Cross the Line When They Accept Freebies—So Do the Freebie-Givers: A college student who has earned a reputation as a video game expert maintains a personal weblog or “blog” where he posts entries about his gaming experiences. Readers of his blog frequently seek his opinions about video game hardware and software. As it has done in the past, the manufacturer of a newly released video game system sends the student a free copy of the system and asks him to write about it on his blog. He tests the new gaming system and writes a favorable review. Because his review is disseminated via a form of consumer-generated media in which his relationship to the advertiser is not inherently obvious, readers are unlikely to know that he has received the video game system free of charge in exchange for his review of the product, and given the value of the video game system, this fact likely would materially affect the credibility they attach to his endorsement. Accordingly, the blogger should clearly and conspicuously disclose that he received the gaming system free of charge. The manufacturer should advise him at the time it provides the gaming system that this connection should be disclosed, and it should have procedures in place to try to monitor his postings for compliance.

Affiliate “Endorsements” Are Risky for Endorser and Endorsee: A skin care products advertiser participates in a blog advertising service. The service matches up advertisers with bloggers who will promote the advertiser’s products on their personal blogs. The advertiser requests that a blogger try a new body lotion and write a review of the product on her blog. Although the advertiser does not make any specific claims about the lotion’s ability to cure skin conditions and the blogger does not ask the advertiser whether there is substantiation for the claim, in her review the blogger writes that the lotion cures eczema and recommends the product to her blog readers who suffer from this condition. The advertiser is subject to liability for misleading or unsubstantiated representations made through the blogger’s endorsement. The blogger also is subject to liability for misleading or unsubstantiated representations made in the course of her endorsement. The blogger is also liable if she fails to disclose clearly and conspicuously that she is being paid for her services.

Research Sponsors Must Fess Up: A drug company commissions research on its product by an outside organization. The drug company determines the overall subject of the research (e.g., to test the efficacy of a newly developed product) and pays a substantial share of the expenses of the research project, but the research organization determines the protocol for the study and is responsible for conducting it. A subsequent advertisement by the drug company mentions the research results as the “findings” of that research organization. Although the design and conduct of the research project are controlled by the outside research organization, the weight consumers place on the reported results could be materially affected by knowing that the advertiser had funded the project. Therefore, the advertiser’s payment of expenses to the research organization should be disclosed in this advertisement.

Message Board and Forum Participants Must Disclose: An online message board designated for discussions of new music download technology is frequented by MP3 player enthusiasts. They exchange information about new products, utilities, and the functionality of numerous playback devices. Unbeknownst to the message board community, an employee of a leading playback device manufacturer has been posting messages on the discussion board promoting the manufacturer’s product. Knowledge of this poster’s employment likely would affect the weight or credibility of her endorsement. Therefore, the poster should clearly and conspicuously disclose her relationship to the manufacturer to members and readers of the message board.

Viral Marketing Campaigns Can’t Compensate Participants: A young man signs up to be part of a “street team” program in which points are awarded each time a team member talks to his or her friends about a particular advertiser’s products. Team members can then exchange their points for prizes, such as concert tickets or electronics. These incentives would materially affect the weight or credibility of the team member’s endorsements. They should be clearly and conspicuously disclosed, and the advertiser should take steps to ensure that these disclosures are being provided.

Weightloss, Business Opportunity, and Other Chronic Exaggerators Beware: An advertisement for a weight-loss product features a formerly obese woman. She says in the ad, “Every day, I drank 2 WeightAway shakes, ate only raw vegetables, and exercised vigorously for six hours at the gym. By the end of six months, I had gone from 250 pounds to 140 pounds.” The advertisement accurately describes the woman’s experience, and such a result is within the range that would be generally experienced by an extremely overweight individual who consumed WeightAway shakes, only ate raw vegetables, and exercised as the endorser did. Because the endorser clearly describes the limited and truly exceptional circumstances under which she achieved her results, the ad is not likely to convey that consumers who weigh substantially less or use WeightAway under less extreme circumstances will lose 110 pounds in six months. (If the advertisement simply says that the endorser lost 110 pounds in six months using WeightAway together with diet and exercise, however, this description would not adequately alert consumers to the truly remarkable circumstances leading to her weight loss.) The advertiser must have substantiation, however, for any performance claims conveyed by the endorsement (e.g., that WeightAway is an effective weight loss product).

If, in the alternative, the advertisement simply features “before” and “after” pictures of a woman who says “I lost 50 pounds in 6 months with WeightAway,” the ad is likely to convey that her experience is representative of what consumers will generally achieve. Therefore, if consumers cannot generally expect to achieve such results, the ad should clearly and conspicuously disclose what they can expect to lose in the depicted circumstances (e.g., “most women who use WeightAway for six months lose at least 15 pounds”).

A Not-So Brave New World?

If the FTC actually enforces the new guidelines, come December we’ll be living in a not-so brave new world; one where every testimonial is legitimate; where home-based business opportunities are what they say they are; where even the deepest pockets won’t be able to buy celebrity endorsements! More likely, there will always be offenders, but these new guidelines will give the government new powers to reign in the worst among them. Let’s be careful out there.

After December 1, advertiser and endorser transgressions can be reported through the FTC’s online Complaint Assistant or by calling 1-877-FTC-HELP (1-877-382-4357).

Full Disclosure: I’m not a lawyer. I do not work for, have not ever worked for, and receive no remuneration whatsoever from the FTC or its parent organization, the U.S. Government of the United States.

Full Disclosure: I also write for Workshifting.com but they don’t pay me squat.

If you have any thoughts on how this is all going to play out, drop us a line or post your comment here.