FTC: Bloggers who shill must also tell

The new rules, effective December 1, are part of a general update to the FTC's "Guides Concerning the Use of Endorsements and Testimonials in Advertising," which address endorsements by consumers, experts, organizations, and celebrities, as well as the disclosure of important connections between advertisers and endorsers. The guides, last updated in 1980, are administrative interpretations of the law aimed at helping advertisers comply with the Federal Trade Commission Act, and they're not binding law themselves.

One problem with Internet reviews, as we reported here in June, is that a blog or online user review that seems to have been written by a sincere, unbiased mensch just like you, may be tainted by a behind-the-screen payment of freebie products or cold cash. Such payments are part of a new form of advertising, called word-of-mouth marketing, in which advertisers pay your favorite bloggers to review their products. Bloggers have been paid in the form of free product samples; gift certificates for JCPenney shopping sprees; cash payments; and the loan of a $30,000 Ford Flex for a year. We've reported examples of such payments–sometimes called blogola–in the electronics industry as well. 

The Internet advertising world didn't welcome the proposed setting of standards, and instead wailed about "a chilling effect on blogs" and "bloggers in handcuffs." Their recommended solution was "self-policing," which requires consumers to rely on the kindness of quietly paid bloggers to behave like disinterested judges. Hah! Or should I say, LOL!

Thankfully, the FTC cut through the bull and established some sensible guidelines, which boil down to this: If some promoter is giving something of value to inspire a blogger's or user reviewer's buzz and endorsement, then that online communicator should disclose the connection up-front. On the other hand, whenever you get your own idea to rave about something on the Internet, which you paid for out of your own pocket, no commercial "connection" exists, so you don't have any hidden payments to disclose.

In analyzing whether something is a commercial endorsement requiring disclosure, the FTC says "the fundamental question is whether, viewed objectively, the relationship between the advertiser and the speaker is such that the speaker's statement 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?"

The Internet advertising industry tried to play the FTC for fools by arguing that a blog or user review couldn't be considered an ad because advertisers typically don't dictate what the reviewer writes. As if bloggers who tap these payments as a source of income don't know who's buttering their bread or how to keep those payments coming. The FTC didn't buy it. "An advertiser's lack of control over the specific statement made via these new forms of consumer-generated media would not automatically disqualify that statement from being deemed an ‘endorsement' within the meaning of the Guides. Again, the issue is whether the consumer-generated statement can be considered ‘sponsored,'" the FTC says. To determine the obvious, the FTC says one should consider whether the blog involves payments by the advertiser or its agent, including payments in the form of a free product or service, and the value of the items or services received.

The blogger shill industry also tried scaremongering by fretting that ordinary folks who engage in non-commercial praise online or off, or who munch the free samples at Costco and tell to a friend, might inadvertently be subject to the regs. Nevermind that sincere, non-commercial speech over the backyard fence has no payments to disclose. The FTC says you need not fear the endorsement police. "A consumer who purchases a product with his or her own money and praises it on a personal blog or on an electronic message board will not be deemed to be providing an endorsement. In contrast, postings by a blogger who is paid to speak about an advertiser's product will be covered by the Guides, regardless of whether the blogger is paid directly by the marketer itself or by a third party on behalf of the marketer."

The revised Guides also address other issues:

• Ads that portray one consumer's fantastic results from using a product or service as typical—when that is not the case—will be required to clearly disclose the results that consumers can generally expect. "In contrast to the 1980 version of the Guides—which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as ‘results not typical'—the revised Guides no longer contain this safe harbor," says the FTC.

• Regarding celebrity endorsements, the revised Guides recognize Commission case law and now clearly state that both advertisers and endorsers may be liable for false or unsubstantiated claims made in an endorsement, or for not disclosing material connections between the advertiser and endorsers. The revised Guides also make it clear that celebrities have a duty to disclose their relationships with advertisers when making endorsements outside the context of traditional ads, such as on talk shows or in social media.–Jeff Blyskal