The U.S. Federal Trade Commission has revised the FTC Act governing deceptive practices in commerce to include product testimonials and endorsements by individuals. In a press release distributed by the FTC, the organization outlined changes in the FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising that affect blogs, celebrity endorsements and other types of online product testimonials. The changes require that anyone participating in what the FTC explicitly labeled word of mouth marketing disclose material relationships with the companies and products they endorse. The changes also removed a previous safe harbor where the disclaimer results not typical was considered disclosure.
The news has its fair share of coverage, with plenty of questions about breadth of the rules and how they’re going to be enforced. It seems any hazy areas would have to be addressed quickly as FTC has moved fast. While it announced that it would be looking at changes to the act in June of this year, the changes were made public yesterday and take effect December 1, 2009. That doesn’t give a whole lot time for product endorsers to consider where they fall and what they need to do. It also takes away any chance of one last Holiday cheer for those used to getting sacks of free bounty this time of year. The fine for violating the rules is $11,000, according to Washington Post. A penalty that size could ruin anyone’s Christmas.
The FTC changes are the first of its kind in nearly 30 years, dating back to when word of mouth was something that only fell on ears and Tupperware parties were the height of buzz marketing. As reported throughout the media, the organization considered the changes after several high profile cases highlighting irregularities came to light, including cases where video game review blogs received free video game consoles. One example the FTC is providing to reflect rule changes in-fact refers to game reviews, citing how a college student running a game review blog and receiving free copies would now have to disclose that in reviews.
Not surprisingly the blogosphere is buzzing. One blogger, Ron Hogan of Media Bistro’s book blog Galley Cat, took the time to draw up a letter to the FTC outlining gray areas. His focus is on his own realm, seeking to understand how the changes might affect bloggers associated with a media organization. The FTC states that the changes affect individuals more than journalists working at media organizations. Hogan wonders whether in these cases the FTC would hold the individual or his media organization liable, and even how easily a blogger could establish themselves as a media corporation to get around the rules. Another blogger, Jeff Jarvis at Buzz Machine, makes poignant observations about the changes as well. His stance is one that most bloggers who talked to the media seem to share, that some good will come out of this in ridding the web of some of the more insidious blogging practices. Jarvis thinks the rule changes are perhaps aiming at curtailing services such as Pay Per Post that pair writers with advertisers. Yet even there he says the FTC missed the mark, treating product-infused blogs as if the reviews mattered to the advertisers. Brands seed blogs to spam search engines, not consumers, and that requires more regulation for Google than bloggers.
The grayest of the gray areas might be in what the FTC considers full disclosure. In removing the results not typical safe harbor, they now require that product testimonials fully state what are considered typical results. This may work for a diet ad, where the endorser lost 50 pounds but the average person can expect to lose five. How that applies to subjective product evaluation think a game review is a mystery. Celebrity endorsements is another shady area, where one blogger asks how the FTC might crack down on those who promote fashion lines by wearing the free clothing and accessories they re provided in public venues such as a red carpet event.
In one of the more interesting late reports on the news, CNET posted a story quoting an FTC official specifying how the rule changes will extend to social media sites such as Facebook and Twitter. Speaking to CNET’s Caroline McCarthy, associate director of FTC’s advertising division, Richard Cleland, says the organization will consider product placements and testimonials on these sites as endorsements that would fall under the new guidelines. As an example, he centers on product plugs on celebrities social networking pages. That prompts McCarthy to quote Brandchannel’s Peter Feld, who predicts a celebrity fined by the FTC to become the first scandal under the new rules.
For its part, the FTC is making statements to soothe some of the panic. Even with the rule changes looming in less than two months, the organization is saying that its initial focus is going to be on education about the new guidelines, essentially helping the myriad bloggers and product endorsers on the web understand what they need to do to comply. They acknowledge the difficulty in policing hundreds of thousands of blogs. They also take some pressure off anyone who might be sweating out the $11,000 fine when they sit down to write a product review on December 2. The FTC is positioning the new rules as necessary additions to advertising guidelines that historically have been self-policed while giving the government agency leverage to pursue major violators.
You can access previous coverage and various blogs commenting on the news through McCarthy s piece at CNET.
The FTC press release and the full text of the Federal Register Notice, all 81 pages of it, are available at FTC.gov.