New Federal Trade Commission guidelines became effective on December 1 that require online product reviewers to disclose any compensation or payment received in exchange for publishing the review.
The revisions represent the first changes to the FTC's policy on endorsements since 1980, before the Internet became a tool to appeal to consumers. The FTC says the revisions now apply the same kinds of guidelines to bloggers and commentators on social media Web sites that have long governed other media forms, such as television or print.
"Given that social media has become such a significant player in the advertising area, we thought it was necessary to address social media as well," said Richard Cleland, assistant director of the division of advertising practices at the FTC, in an October 6 report in The Washington Post. The Post reported violators could be subjected to up to $11,000 in FTC penalties or civil liability in a lawsuit.
The guidelines represent the FTC's interpretation of the Federal Trade Commission Act, 15 U.S.C. sectionsection 41-51, as applied to new technology. The FTC began to investigate revising its Guides Concerning the Use of Endorsements and Testimonials in Advertising, 16 C.F.R. section 255.0 et seq., (2009), in January 2007. The agency then issued proposed revisions in November 2008. The final guidelines can be found online at http://ftc.gov/os/2009/10/091005endorsementguidesfnnotice.pdf.
The guidelines raise questions about what constitutes an advertisement, the extent to which a reviewer must disclose relationships with companies, and how far the FTC will go to police online reviews and advertisements. "The revised Guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement," the FTC said in an October 5 release. "Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service."
The FTC's overview of the regulations published in the Federal Register assures bloggers that not all product reviews violate the guidelines. The crucial question is whether the statement can be considered "sponsored." A consumer who buys a product with his or her own money and writes a glowing review on a personal blog has not violated the guidelines. However, posts by a blogger paid to speak about the product constitute a violation, according to the FTC.
In an October 5 interview with Edward Champion, publisher of the Reluctant Habits blog, Cleland said that the FTC was still in the process of finalizing how to apply the guidelines. Cleland revealed that the FTC will not make a priority of targeting individual bloggers who fail to disclose one minor free gift.
"I think that as we get more specific examples, ultimately we hope to put out some business guidance on specific examples," Cleland said. "From an enforcement standpoint, there are hundreds of thousands of bloggers. ... Looking at individual bloggers is not going to be an effective enforcement model."
The FTC acknowledged that bloggers will probably be subjected to different standards than reviews published in traditional media. The commission described traditional media reviews as instances "where a newspaper, magazine, or television or radio station with independent editorial responsibility assigns an employee to review various products or services as part of his or her official duties, and then publishes those reviews." The commission reasoned that in such a context, revealing whether the media entity paid for the product "would not affect the weight consumers give to the reviewer's statements."
This rationale for distinguishing bloggers from journalists raised the ire of Jack Shafer, who likened the new guidelines to licensing journalists and policing speech in an October 7 story on Slate.com. "[I]f the guidelines don't apply to established media like the New York Review of Books, which also happens to publish reviews on the Web, why should they apply to Joe Blow's blog? ... Nobody likes deceptive advertising or fishy bloggers. But I'd rather wade through steaming piles of unethical crap on the Web than give the FTC Javertian powers to pursue shady advertorial. This is one of those cases in which the government's solution is 10 times worse than the problem."
Many bloggers and traditional journalists said they favor transparency, but reject the notion that online dialogue should be regulated. "There should be more disclosure, but the Web is different from earlier media in ways that make government regulation less relevant and practical," L. Gordon Crovitz, the former publisher of The Wall Street Journal, wrote in an October 18 Journal op-ed. "The Web has its own self-regulatory mechanisms. Failing to disclose interests sullies one's reputation online, and reputation harm travels faster and lasts longer than it did before the Web."
On his BuzzMachine blog, Jeff Jarvis questioned the need for the regulations because he said most online commentators do not consider what they do to be remotely connected to journalism. "So for the FTC to go after bloggers and social media - as [the regulations] explicitly do - is the same as sending a government goon into Denny's [restaurant] to listen to the conversations in the corner booth and demand that you disclose that your Uncle Vinnie owns the pizzeria whose product you just endorsed," Jarvis wrote in a October 5 post.
To ease the fear of bloggers, Cleland noted that the FTC is more likely to use its enforcement policies against an advertiser for disclosure or testimonial violations than a blogger. An exception, Cleland said in an October 5 Associated Press (AP) story, is a blogger who runs a substantial operation that violates the guidelines and has already been warned about the practice. To further clarify the rules, Cleland noted that a blogger who receives a free product without the advertiser's knowledge would not violate the rules. As an example, he said that someone who receives a free bag of dog food as part of a pet store promotion would be able to write about the food without violating the guidelines.
Jack Gillis, a spokesman for the Consumer Federation of America, said the FTC guidelines were necessary to put added pressure on bloggers to properly disclose their ties to advertisers. "Consumers are increasingly dependent on the Internet for purchase information," Gillis said in an AP report. "There's tremendous opportunity to steer consumers to the wrong direction."
In an October 7 post on Legal Blog Watch, Robert Ambrogi defended the guidelines as an easy way to foster the disclosure that bloggers should practice anyway. "These guidelines are not a heavy-handed government crackdown on innocent bloggers who say nice things about a product," Ambrogi wrote. "It is meant to expose marketing practices that exploit viral media by paying for favorable reviews - whether the payment is in cash or goods. One other point to keep in mind about the guidelines is that the disclosure they require is not onerous. All a blogger needs to do is to add a line to the particular post saying what was received, whether it was a payment, a free sample or something else of value."
Since the guidelines were released, some bloggers started disclosing their connections in a manner that criticized the new regulations. An October 6 post on DeepGlamour, a blog that comments on a variety of subjects, such as fashion and real estate, began by revealing that the blog's editor receives a percentage of the purchase price on items readers buy via the blog's link to Amazon.com. The post concluded by saying, "The Federal Trade Commission demands that we tell you this - they think you're idiots and are violating the First Amendment with their regulation of what bloggers publish - but it's also a friendly reminder to Support DeepGlamour by starting all your Amazon shopping here."
In another change incorporated into the new guidelines, advertisements that feature consumer testimonials about a product or service must clearly disclose the results that consumers can generally expect rather than use a standard "results not typical" disclaimer.
Anthony DiResta, general counsel for the Word of Mouth Marketing Association, a trade group that promotes advertising via social media, said that while he favors disclosing connections between advertisers and endorsers, he was less enthusiastic about abolishing the "results not typical" disclaimer. "Whenever there is going to be a claim of typicality, then there's going to have to be substantiation," which costs time and money, DiResta said, according to an October 6 report in The National Law Journal.
The new guidelines do not reveal what the FTC considers "typical" results and the term needs to be more accurately defined, said Daniel Fabricant, interim executive director and CEO of the Natural Products Association, a trade group for nutritional supplements and natural products manufacturers and retailers. "I don't think [the FTC has] done that," Fabricant said in the October 5 AP report. "The results you see in clinics are going to be in some degree different from what you see in the consumer."
The new regulations also require that celebrities disclose their relationships with advertisers when they make endorsements outside the context of traditional ads, such as on talk shows or in social media. In addition, if a company pays or sponsors a research company to study a product, an ad that cites the study must disclose the financial tie between the advertiser and the research organization, according to the guidelines.
- Cary Snyder
Silha Research Assistant