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FTC

Updated analysis of FTC guidelines, part one

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Monday,  the FTC published the final guidelines  for endorsements and testimonials. Nothing terribly surprising, although I was pleased to see some additions to the examples about blogging and word of mouth marketing that made things much clearer. [Full text of the changes to the guidelines (pdf) as submitted to the Federal Register.

I’m updating my May analysis of the proposed guidelines in two parts. First, in this post, some general comments about the final guidelines. Next — either Friday or Saturday– a detailed analysis of the sections relevant to blogging and social media.

General observations

The two keys to the FTC guidelines are the reasonable person standard and the degree of  the relationship between the company and the endorser.

“The Guides have always defined endorsements by focusing on the message consumers take from the speech at issue. Indeed this focus on consumer takeaway is completely consistent with the approach the Commission uses to determine whether a practice is deceptive,and thus in violation of the FTC Act.” (page 5)

“…in determining whether a representation, omission or practice is deceptive, ‘we examine the practice from the perspective of a consumer acting reasonably in the circumstances.'” (footnote, page 5)

“…the fundamental question is whether, viewed objectively,the relationship between the advertiser and the speaker is such that the speaker’s statements can be considered ‘sponsored’ by the advertiser and therefore an advertising message. In other words, in disseminating positive statements about a product or service, is the speaker: (1) acting solely independently, in which case there is no endorsement, or (2) acting on behalf of the advertiser or its agent, such that the speaker’s statement is an ‘endorsement’ that is part of an overall marketing campaign?” (page 8 )

Some critics of the FTC’s decision to apply the guidelines to blogs and new media focus on the fact that they will not be applied to similar content like product and entertainment reviews in mainstream media. Why do bloggers require regulation and journalists don’t, the argument goes.

There is some merit to this line of thinking, but I would argue that the issue isn’t that the guidelines shouldn’t apply to blogs. Instead, we need to separate the technological form used to publish a site — blogging software  — and focus on the type of site. Does it operate like a magazine — with editors, contributors, and editorial policies?

“In general, under usual circumstances, the Commission does not consider reviews published in traditional media (i.e. 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) to be sponsored advertising messages.” (page 47)

Under these circumstances, the FTC doesn’t believe knowing whether the reviewer paid for the item would affect the weight consumers give to the review, however, it does leave room for a different interpretation if the reviewer receives a benefit directly from the manufacturer. Mainstream media have editorial policies that govern their review practices to prevent potential abuses.

Applying the reasonable person standard, if the consumer would understand that the online site is acting as an independent review site, and like the traditional media, gets its review products for free from manufacturers, I doubt whether the FTC will vigorously apply the commercial endorsement guidelines. If the product value is low, it may not even matter if the reviewer keeps the product.  This is just my opinion based on the documents and the fact that the FTC investigates on a case by case basis. It just does not have the resources to pursue weak cases.

Does that mean such a review site shouldn’t practice strong disclosure? Absolutely not. It should have an editorial policy as airtight and as clear as the mainstream publications that provide a similar service. If you wanna be a duck, you gotta quack, and walk,  like one.

The FTC guidelines are NOT about compensation; compensation is simply one measure that determines how the consumer might interpret the blogger’s recommendation. The important test is whether the reasonable consumer would understand that a relationship exists (or doesn’t) between the reviewer and the company without disclosure. We know that the movie reviewer at the local paper or an entertainment website doesn’t pay for his ticket. We know that review sites like Cool Mom Picks get free products from manufacturers for review. We don’t however expect that people “like us”  — personal bloggers — get truckloads of free stuff from companies. So, that needs to be disclosed.

What about the argument that my readers know me? Why should I have to disclose?  Not all readers are regular readers who already understand your perspective and perhaps your business relationships. All blogs get some traffic from search engines, and those folks don’t know you from Adam (or Eve). You need to disclose your material relationships so all readers can properly evaluate your words.

Then there’s the assertion that journalists aren’t required to disclose. True, they don’t have to have a disclaimer on every post, but the publication they work for has an editorial policy that separates the editorial content from the commercial speech. The advertising. The very reason we assume that journalists are objective is because their employers have these policies. The reasonable consumer understands that the traditional media she reads makes a clear delineation between editorial and advertising.

Are the guidelines a violation of free speech? Jeff Jarvis and Dan Gillmor think perhaps. JD Lasica disagrees. So do I. You can write whatever you like. You just have to be clear about your interests and material relationships that might impact your opinion. The fact that you got paid or got a new living room set for free may not influence your opinion one little bit. The FTC just wants your reader to have the information so she can decide.

Take a minute and read through some of the comments the FTC received to the initial proposal, and some of the ways companies/advertisers try to shirk their responsibility and liability for commercial speech. Trust me, you will have a better appreciation for why it is so important for the FTC to take action.

Yes, we are bloggers, and these guidelines may impact how we do “our thing.” We are also consumers, and I for one am grateful that the FTC is watching out for deceptive advertising. These guidelines aren’t just about spelling out the blogger liability. They put the advertiser squarely on notice as well.

Lastly – this is not new law. Deceptive advertising is already against the law. The FTC guidelines merely inform as to how the agency intends to apply the law. Nor is there a prescribed fine associated with the guidelines. Penalties will be assessed in the enforcement – legal – process. The legal process is also where these guidelines will be tested. The FTC has to prove its case, and the courts have to agree – on both its interpretation of the law and whether the advertiser or endorser was deceptive.  The burden of proof is on the FTC. Admittedly, it can cost a lot to be the subject of a federal agency investigation, so it behooves us all to put our house in  order, just in case.

But the FTC hasn’t added additional resources to investigate commercial endorsement claims. It has said many times that it will continue to investigate complaints based on where it perceives the greatest potential harm to consumers, and specifically to the revised guidelines, Rich Cleland has commented in numerous media this week that the Commission plans to focus on advertisers, not bloggers:

“Our approach is going to be educational, particularly with bloggers. We’re focusing on the advertisers: What kind of education are you providing them, are you monitoring the bloggers and whether what they’re saying is true?” (Source: FastCompany)

My opinion – the first stop on the FTC enforcement train will be the large blog networks. The FTC will be checking that they are advising the bloggers working with them to properly disclose and  ensuring that blog posts are not deceptive as to facts about products.

What should bloggers do? I consider disclosure a best practice, and recommend that all bloggers publish a clear editorial policy on their blogs. At a minimum, even if you don’t engage with marketers and none of the FTC guidelines apply, you probably have a policy about comments. You may also want to disclose other general principles that guide your blogging and shape your point of view. Not because it is required. Simply because you want to help your reader — whether she visits once or a hundred times — understand what your blog is all about.

I do not however recommend using generic policies like the ones at disclosurepolicy.org. They are okay as a starting point, but they are often more about protecting the advertisers than the bloggers. Take the time to customize your policy. Be specific about your policies and practices. Ditch the legal mumbo-jumbo that’s generally designed to obfuscate, and speak to your reader in the same human voice you use on your blog.

Next post: Detailed analysis of the new examples relevant to blogging.

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Additional Reading:

New FTC guidelines call for greater blogger disclosure (CNN)

Yes, new FTC guidelines extend to Facebook fan pages (C|net)

FTC Responds to Blogger Fears: “That $11,000 Fine is Not True” (FastCompany)

Hey Bloggers! Let’s Hear It For Government Regulation! (MediaPost)

The new FTC guidelines and what they mean to you (BlogHer)

The WORST coverage of the new FTC guidelines? Hands down, ABC, which once again decided that this is all about mommy bloggers, even though the word “mom” does not appear even ONCE in the entire FTC document — Mommy Bloggers Could Be Held Liable for Product Reviews

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Disclaimer: I am not a lawyer and do not play one on the Internet. This post is my opinion based on published FTC documents and statements.

Disclosure, FTC and Ad Club

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Today the FTC published the final guidelines  for endorsements and testimonials. Nothing terribly surprising, although I was pleased to see some additions to the examples about blogging and word of mouth marketing that made things much clearer. [Full text of the changes to the guidelines (pdf) as submitted to the Federal Register.]

More from me on this later this week. We’ll also be updating and repeating the Blog with Integrity webinar on disclosure to reflect the final approved guidelines. Follow @BlogIntegrity on Twitter, fan on Facebook or subscribe to the email list for updates.

In the interest of full disclosure, I will be tweeting live from the Ad Club of Boston’s Hatch Awards tomorrow, courtesy of an invite from the folks at 360 Public Relations. Hashtag #AdClub.

More on FTC guidelines and impact on bloggers

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Recently Word of Mouth on NH public radio interviewed Rich Cleland, Assistant Director of the FTC’s Advertising Practices bureau about the revised guidelines on endorsements and testimonials that are expected to be approved this summer. Liz Gumbinner from Cool Mom Picks and Mom-101 provided the blogger’s perspective.

There really wasn’t anything new or unexpected. I’ve written about this topic as has Liz. What was nice was to actually hear it directly from the FTC rather than filtered through another source like AP or BusinessWeek.

Here’s my takeway from the interview:

  • The key issues are disclosure of relationships and truthful opinion. FTC believes truth in advertising/transparency should apply regardless of the media.
  • FTC isn’t regulating whether bloggers take compensation or not. The occasional review or free product is not the issue. FTC is concerned about blog networks, bloggers that consistently receive products/compensation, and disclosure of relationships.
  • FTC believes compliance will be high.
  • Enforcement will be subject to the same criteria as it is now — the extent of the injury will determine whether it justifies the expense of enforcement. I have long believed this would be the case. Nice to hear it from the source.
  • While bloggers would like the FTC to distinguish between free product and cash compensation, it does not seem inclined to do so. However, as noted above, the occasional free product or review isn’t the issue. The FTC is interested in consistent patterns of behavior, and in blog networks, not in whether an individual blogger got a free mascara or a bag of chips.

What they did NOT discuss on Word of Mouth was affiliate marketing, which the AP story said would be included:

“… the guidelines also would cover the broader and common practice of affiliate marketing, in which bloggers and other sites get a commission when someone clicks on a link that leads to a purchase at a retailer. In such cases, merchants also would be responsible for actions by their sales agents – including a network of bloggers.”

I’ve read the initial draft of the changes to the guidelines, and it does not include an example specific to online affiliate marketing such as Amazon. While I expect changes to draft in the final guidelines, I never made the connection between endorsements & testimonials, and affiliate ads like Amazon. Blog networks that offer free products or compensation to bloggers, absolutely. Campaigns that offer compensation to users for reviews on Amazon or iTunes. Again, clearly subject to the guidelines.

But simple affiliate marketing programs?

After much thought and conversation, I don’t think affiliate marketing should be lumped together with the guidelines on endorsements and testimonials. If the FTC wants to review online affiliate marketing practice, it should do so in a separate effort and allow sufficient time for public comment.

Affiliate marketing is a different type of advertising

A review of a product that is compensated in advance by either cash or free product should be considered a form of advertising. The FTC guidelines should apply.

The affiliate marketing relationship is different.

The blogger reviews or mentions a product on her blog and provides a link to a store that carries the item. For example, Amazon. It’s a referral. The blogger is only compensated if the buyer purchases the product from that link.

The explicit endorsement is of the product, although no one would deny that there is also an implicit endorsement of the store, especially if the blog also shows a search widget for the store in its sidebar.

However, once the buyer is at the store, the influence of the initial mention or review is diluted — by the advertising material on the store, by reviews from other consumers, by alternate product suggestions from the store. The blogger’s original opinion becomes one of many sources of information. If the buyer goes ahead and purchases something from the visit created by the affiliate link, the compensation is really nothing more than a “thank you for telling your friends about us.”

Now,  if the blogger received the product for free,  it should be disclosed under the guidelines. But it should be the free product that trips the endorsement guidelines, not the affiliate referral.

Affiliate marketing is understood by Internet users

Whether you see an ad like this:



or embedded links within a post like these Sleep Is for the Weak, The White Trash Mom Handbook, most Internet users  understand these to be affiliate marketing/advertising  links, with a compensation component. Many are probably Amazon affiliates themselves.

In the very long FTC guidelines document, a key condition of the additional disclosure requirement is if the consumer would not otherwise understand that an endorsement was compensated or that the speaker had a material interest. If the consumer would understand that the speech or action was compensated, the public interest does not require additional disclosure.

Examples — An athlete wearing name brand sports apparel is assumed to have a contract with the manufacturer. A celebrity on the red carpet is assumed to have borrowed her gown from a designer. A public figure endorsing a product in a TV commercial didn’t do it for free.

Affiliate advertising on blogs is similar. We don’t need additional information to know there’s compensation. It looks far too much like straightforward online advertising for there to be any real confusion.

What should bloggers do if they have affiliate marketing relationships?

The new FTC  guidelines are due later this summer. We’ll see then how affiliate marketing is covered (or not) in the document. It wasn’t in the initial draft, so we don’t have an example yet.

In the meantime, if you have affiliate marketing relationships, I suggest disclosing them clearly in your blog policy.

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The Amazon affiliate links used above for illustrative purposes are for books written by friends and use the Amazon affiliate account from my personal blog Snapshot Chronicles. So yes, if you buy a book, a friend gets a sale and I get a teeny weeny commission.

Do you WANT advertisers to lie to you?

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Today, an AP story about the FTC’s review of the guidelines for testimonials and endorsements and a John Dvorak PC Mag column about same stirred up the blogosphere a wee bit, although the scintillating *yawn* news of Jon & Kate plus 8 minus 1 seemed a potent distraction.

While the spate of coverage leads me to wonder if the FTC is getting closer to announcing the new guidelines — the AP prefers to lead, not lag, the news — nothing was announced today. Apart from the fact that it is officially summer, nothing has changed since the last round of posts and articles on the topic one month ago.

The FTC is reviewing its guidelines on endorsements and testimonials and expects to issue new ones this summer. These guidelines will affect social media and viral marketing. They may also impact affiliate marketing, such as Amazon.

If you are upset about this,  I have some questions for you.

  • Do you want advertisers to lie to you?
  • Do you want to wonder whether a commercial endorsement is honestly from the heart of the writer, or from the keys of a copywriter?

Right. I didn’t think so.

The enforcement guidelines on endorsements and testimonials  exist to make sure that consumers have the information they  need to judge a commercial endorsement. That is the FTC‘s job, to protect consumers .

The Federal Trade Commission is the nation’s consumer protection agency. The FTC’s Bureau of Consumer Protection works For The Consumer to prevent fraud, deception, and unfair business practices in the marketplace. The Bureau:

  • Enhances consumer confidence by enforcing federal laws that protect consumers
  • Empowers consumers with free information to help them exercise their rights and spot and avoid fraud and deception
  • Wants to hear from consumers who want to get information or file a complaint about fraud or identity theft

Consumers.

That’s us.

It’s NOT about the blogger, or your credibility. It’s about whether the reader — the consumer – would have a different impression of your opinion if it were compensated versus unsolicited. Your ethics could be impeccable, your opinion unchanged by the commercial transaction of free product or paid post. It doesn’t matter.

It’s not about you.

It’s all about whether the reader would have a different understanding, and you can’t decide that.

Hence the guidelines, so we can understand our responsibilities under the law, and the need for disclosure.

This doesn’t mean bloggers shouldn’t accept review product or free trips or whatever else companies might be offering for consideration. If you’ve got a property that companies consider valuable, why not profit from it. You just need to understand that under the FTC rules, if you are compensated, either directly or in product, the FTC guidelines for commercial endorsements may apply to you.

I recommend that bloggers publish their review and disclosure policy on their blogs, and if active on social networks like Facebook, Twitter and LinkedIn, a policy that covers your potential activities in these networks. I had updated my blog statements a month ago, but today I added links on Facebook and Twitter to clarify how I might mention products on these status-oriented sites.

Your readers decide if you are credible.

The FTC is just asking that you provide them with all the information they need to make that assessment. That’s everything from what and how you say it, to whether you may have been influenced by others.

You want that from the sites and blogs you visit.

Don’t begrudge it to your audience.

Impact of potential new FTC endorsement guidelines on companies

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Yesterday, I gave you my take on how the potential new FTC guidelines for endorsements and testimonials might impact bloggers. Today we are going to look at the potential impact on companies.

A couple of things to keep in mind:

  • The guidelines outline how the FTC intends to enforce the laws governing endorsements and testimonials in commercial speech. They are meant to be used as an aid to compliance. The new bit is that they are clearly extending the definition of commercial speech into certain social media activities.
  • The FTC is still working on these new guidelines, but has said they’ll be out this summer. The new guidelines  could change a little or a lot from what it outlined in the call for comments I reviewed, based on the comments received, lobbying and so on. I’m betting a little, but I could be wrong. Been known to happen.

How might companies change/have to change their blogger relations programs and practices to comply with the guidelines?

First, let’s review the three examples related to blogs. The citations are the direct quotes from the document; headlines and emphasis mine. Please note,  I’ve changed the emphasis from yesterday’s post. It now reflects the impact on the company. Also, be aware that there is a fourth example specifically related to in-person word-of-mouth marketing, “street teams,” such as the work done by firms like BzzAgent. That’s not my area of expertise, so I’ll leave that one to WOMMA.

Number one: Liability for false statements in a sponsored post.

“Example 5: 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 false or unsubstantiated statements made through the blogger’s endorsement. The blogger also is subject to liability for 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. [See § 255.5.]

In order to limit its potential liability, the advertiser should ensure that the advertising service provides guidance and training to its bloggers concerning the need to ensure that statements they make are truthful and substantiated. The advertiser should also monitor bloggers who are being paid to promote its products and take steps necessary to halt the continued publication of deceptive representations when they are discovered.”

Number two: Disclosure of receipt of free product

“Example 7: 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. The readers of his blog are unlikely to expect 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 would likely 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.”

Number three: Anti-astroturfing. Requires disclosure of material interest when making an endorsement.

“Example 8: 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.”

Sponsored Posts/Blogs

There are a few flavors of sponsorship. The company might pay the the blogger directly for a post or as an advertising sponsor of the blog, it might pay a blog network like BlogHer for access to its members or it might work with a sponsored post company like Izea.

In the first case, when the company works directly with a blogger, for example by sponsoring a specific post or even the blog as an advertising sponsor, the relationship should be governed by an advertising contract that outlines the responsibilities of the parties, and the nature of the relationship clearly disclosed on the blog. This is just smart business for both sides.

If, however, the company is not working directly with the blogger and instead is working through an intermediary, described in the FTC doc as a blog advertising service, the company needs to perform an additional level of due diligence. It needs to be sure that the advertising service is providing guidance and training to its bloggers, and if free product or services are provided, requiring disclosure of the commercial relationship.

Note that there is no requirement that the blogger be receiving a payment. Or even free product. If a company uses a blog network to reach out, is paying the blog network for the access to its members, that seems to be sufficient for liability for false statements.

What kind of policy should you look for in a blog advertising network or sponsored post firm? A good example is BlogHer. It  has done a nice job navigating this minefield. The blog network you use may not have exactly the same policies, which is fine, but you want it to have at least paid as much attention to its own policy. To understand and be sensitive to the impact on both the blogging community and the advertiser.

Is there an issue if you are working with a consultant or agency to reach out to bloggers on your behalf, but who has not promoted a blog network as a product? In this case, the vendor would be building an outreach list based on your criteria and probably its relationships, but it isn’t advertising a blog network service.  I do not think the same liability exists, but usual disclaimer. Not a lawyer, don’t play one on the WWW.

{added 5/21 7:50 am}

After sleeping on it, I realized the above paragraph wasn’t clear. I don’t want to read too much into the examples, so be aware that this next thought is my interpretation, not a direct example from the FTC document.

It is the payment to the blog network combined with the explicit agreement that the bloggers will write that creates commercial speech, ie advertising. When blogger outreach is handled more like public relations, as it would be by a PR agency or an independent consultant like me, there is no agreement that the bloggers will write. Our job is to present a relevant story to a group of bloggers that we expect will be interested. If they write, it is editorial.

If free product is provided to them, the same disclosure provisions would apply. In both cases, whether there is agreement to write or not, best practice is to provide as much information as the blogger needs/requests, but no direction as to post tone, content or timing.

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Free product considerations

Many blogger relations programs include something for free. A product. A trip. Products to giveaway on the blog. While the FTC example doesn’t require you, the company, to do anything, I recommend that you act as though it does, and advise bloggers of the need to disclose.

Should you stop offering review product or developing blogger events? Absolutely not. Even with these new guidelines, honest customer experiences of your products and services are a great way to reach other customers. We all just need to understand that it is a new form of advertising and act accordingly.

A word about contracts. The temptation will be strong, particularly in your legal department, to pass as much liability onto the blogger as you can. My advice is to be reasonable. If the value of the goods received, either for loan or free, is high, you probably need a contract that spells out the responsibilities of the parties. But, if you try to pass on all the responsibility to the bloggers, be prepared for them to walk away. And if you’re just sending the blogger a few DVDs or product samples to try and perhaps give away on her blog, be realistic. A contract?

A form of astroturfing specifically prohibited

The astroturfing example warmed  my cold cynical heart. Far too many companies and agencies have engaged in the  practice of leaving positive comments on blog posts and forums without disclosing their interest in the product or service being discussed. This is an abhorrent, unethical practice. If the example above makes it into the final guidelines, this will be considered deceptive advertising subject to FTC enforcement. AMEN.

Better practice by far is to participate but disclose your interest. In most cases, you’ll be better off communicating with the site or forum owner first, privately, before jumping into a forum, community or ongoing blog discussion, but some will already have threads for vendor discussion. Once you’ve established a relationship with the community, you may even become a resource for it. Isn’t that what we really want? Robust relationships with our customers and influencers.

What’s the bottom line?

The potential new FTC guidelines change the playing field for social media outreach, but only slightly, and really, well within what we should be doing as  ethical practice anyway.

The FTC’s job is to protect consumers from deceptive advertising. One of the ways it does this is to make sure that commercial speech — paid advertising in all its forms — is clearly marked as such. While it may make our jobs as marketers and bloggers a bit more complex, as consumers, we should be glad that we have this watchdog on our side.