Thoughts on the FTC investigation of Ann Taylor LOFT blogger event

by Susan Getgood on April 29, 2010 · 4 comments

in Blog with Integrity,Blogging,Ethics

So many things queued up to write about, including last week’s New Comm Forum, a slew of bad pitches that folks have forwarded over the past few months (Douches, Snakes and Brand Ambassadors) and a great visit to the Dana Farber Cancer Institute yesterday to learn more about the Jimmy Fund.

But the FTC went public this week with the results of its first investigation under the new endorsements and testimonials guidelines, and that news trumps the other (more evergreen) topics.

As reported in Ad Age, the FTC investigated an event held by Ann Taylor LOFT in January to launch its summer collection. The company invited bloggers to attend a special preview of the collection; those that posted about the event within 24 hours were entered into “mystery gift-card drawing” with a value between $50 and $500. (More about the event on Jezebel: February 3April 28)

Reported Ad Age:

The event and the unusual request for posts to be submitted for a prize received media scrutiny and caught the eye of the FTC. “We were concerned that bloggers who attended a preview on January 26, 2010 failed to disclose that they received gifts for posting blog content about that event,” Mary Engle, the FTC’s associate director-advertising practices, wrote in a letter dated April 20 to Ann Taylor’s legal representation.

According to the article, the FTC decided not to take further action because it was a single event, only a small number of bloggers participated (and some disclosed) and Ann Taylor subsequently adopted a written policy for blogger outreach.

This is exactly what the FTC said it planned to do all along. Its focus would be on advertisers, not individual bloggers, and the initial investigations would likely result in warnings, not indictments.

Taking the step of pursuing an action in the courts is a long expensive process. The harm to the public has to be pretty significant to merit the cost, especially if satisfaction can be obtained more efficiently, as it was here.  I suspect an uncooperative Ann Taylor might have resulted in a different outcome.

What can we learn from this?

The guidelines are intended to prevent deceptive advertising practices. The media may love the (erroneous) idea that the FTC is “cracking down on bloggers,” as Ad Age repeated again in this week’s article, but reality is, the larger burden is on the companies, not the individuals.  The FTC expects the company — the advertiser — to provide guidance to its WOM agents about the requirements. In the Ann Taylor case, there wasn’t much guidance.

While it isn’t covered in the Ad Age article, there was also an element of confusion in the event that probably concerned the FTC. This is entirely speculation on my part, but it’s a fairly informed one.

Basically, if you write about a company or product and subsequently get a gift, you aren’t required to disclose the gift. Unless of course you write about the company again. Further, if you win a sweepstakes or get a product in a swag bag, you don’t really have a material relationship with the advertiser. Your receipt of the product is random. Best practices may dictate disclosure but the endorsement guidelines do not.

Here we have a gift contigent upon a post. That’s compensation, albeit a little ugly. Not a gift. Disclosure required. But confusing.

This is compounded by the contest-like element of the mystery gift card drawing, which makes it look a bit like a sweepstakes. Except not really. Everyone who wrote a post got a gift card, and you had to get the initial invitiation to participate.  Relationship and compensation. Disclosure definitely required.

Bottom line, just a messy confusing campaign all around. Confusion for bloggers about whether they need to disclose, and little guidance from the company on the requirement. Confusion for consumers, because they don’t have the information they need to evaluate the blog posts.

The lesson for companies: Keep blogger outreach programs simple and easy to understand. Provide guidance and training to your word-of-mouth agents. And your employees, especially the ones charged with developing and executing social media programs.

The lesson for bloggers: Think twice about working with companies that don’t inform you that you need to disclose. Push back if you aren’t getting the information or support you need. Also, unrelated to this case specifically, but general advice: read agreements carefully. While I do not think companies can push their liability onto you, I wouldn’t be at all surprised if some tried. That’s just a mess you don’t want to get into.

What I highly advise you to NOT take away from the Ad Age article

A lawyer interviewed in the Ad Age article speculated:

“They’re [the FTC] probably throwing a little fire-starter into it, sending some messages out. The message this time is somewhere between $50 and $500 requires a disclosure.”

My head about to explode. I can just see this quote spawning a new urban legend that there is a minimum and maximum value that the FTC will look at, vis disclosure and enforcement. No no no no no. Compensation is compensation. $5 or $5000. Products or cash.

When in doubt, disclose. There’s never too much information when it comes to informing the consumer. You know. Us.

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1 MKRoberts18 (Mark Roberts) April 30, 2010 at 5:40 am

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Thoughts on the FTC investigation of Ann Taylor LOFT blogger event …: This is compounded by the contest-like ele… [link to post]

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2 Anne-Marie Nichols April 30, 2010 at 12:14 pm

Susan, what’s your take on Harvard Law Review’s report (http://www.harvardlawreview.org/media/pdf/april123_recent_regulation.pdf) that the FTC Guidelines are unconstitutional and that “the Guides unfairly hold bloggers to a higher
standard than legacy media”?

Now I wonder if the FTC dropped the Ann Taylor case because they’re concerned with lawsuits on free speech than reprimanding advertisers for flakey disclosure.
.-= Anne-Marie Nichols´s last blog ..I’m one of Babble’s 50 Best Mom Food Bloggers =-.

3 Susan Getgood April 30, 2010 at 12:46 pm

Standard disclaimer: Not a lawyer, don’t play one on the Internet. That said, I disagree with the Harvard Law Review author.

First, I don’t understand how an administrative document that informs how an agency intends to enforce existing law can be on its face unconstitutional. Laws are unconstitutional. The FTC guidelines do not have the force of law. In the very unlikely event that the FTC pursues legal action against a blogger who receives free product as compensation, we’ll see how the courts respond. That will then become part of the body of law and potentially grounds for a constitutional challenge. Until then, talking about constitutionality is sound and fury…

I noticed that the author of the article uses the term “unpaid blogger” a lot in the document, and expands unpaid to include bloggers who receive free products as well as those who are truly unpaid. If you are truly unpaid for your endorsement, your speech is not considered commercial and the guidelines don’t apply. To exempt free product however opens up a nasty slippery slope. Guaranteed there will be abuses. Ethics demand disclosure but not everyone is ethical.

IMO the guidelines actually provide MORE protection for bloggers than we would have without them, not less. Without them, I can absolutely see unethical companies pushing all liability down to the blogger.

As to the argument that the guidelines hold bloggers to a different standard. Not true. It is the same standard. In traditional media we expect a delineation between advertising and editorial. It’s why we have the concept of advertorial content and infomercials are labeled as such. We — consumers — need the same thing in social media when advertising looks like editorial. As I’ve written here before, the argument that journalists don’t have to disclose when they got a free meal or whatever is irrelevant, because the guides are about what the consumer understands, not what the writer did or didn’t do. The consumer knows that the restaurant reviewer from the NY Times is paid to do his job and that the paper pays for the meals, not the person. We usually don’t have that same information about a blogger.

That’s my opinion. Ultimately, the courts will decide. As to why the FTC didn’t pursue legal action against Ann Taylor, you’d have to ask it. I think it’s because the company made corrections and the harm was minimal. The FTC would rather NOT go to court. That’s expensive. It’s much better to resolve things with a warning.

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