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New FTC Guidelines

Update 10/2009: Note that this is a blog… an opinion. I post on topics of interest, but don’t pretend to be a news reporter. That said, this post was on-target. It was a response to the crazy blogging going on after the FTC announced new guidelines for sponsored word of mouth advertising. Righteous-sounding bloggers proclaimed fines and laws barring word of mouth promotions that did not openly “disclose” material relationships (like free products). I said that was nonsense (see below). Subsequent updates (see the end, down below) confirmed that.

But for those who like to go further with the facts, check out this report of the IAB’s response to the FTC action. The report states:

Richard Cleland, assistant director, division of advertising practices at the FTC, said the ‘$11,000 fine is not true. Worst-case scenario, someone receives a warning, refuses to comply, followed by a serious product defect; we would institute a proceeding with a cease-and-desist order and mandate compliance with the law. … There’s no monetary penalty, in terms of the first violation, even in the worst case.’ Instead, he said the FTC’s guidelines are intended to serve as education.

See? It’s not really even a fine… it’s a guideline. For education. Carry on.
—end of update

A report of the final draft of the new FTC guidelines is out. You can read it here, or read about it here. I don’t like the Mashable coverage; I don’t think it is objective enough, and it clearly sensationalizes the fines aspect, with additional commentary suggesting a strong bias against paid endorsements.

Looking at the actual FTC news release instead, I’ll highlight what I consider the most important parts of the report (which is NOT the guideline…that is to be posted to the Federal Register):

The Guides are administrative interpretations of the law intended to help advertisers comply with the Federal Trade Commission Act; they are not binding law themselves

Got that? The FTC won’t be taking you off to jail, and your lawyer is free to argue your case on the points. It’s not a fine for non-disclosure.

advertisements that feature a consumer and convey his or her experience with 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.

Know those promotions that have fine print “results not typical”? Now they have to actual say what typical is. That’s the change.

the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement

Okay so now that’s settled. It was always true, but the FTC wanted to state publicly that its lawyers were convinced it was true (as a means of influencing the court system)  Now your lawyer should be certain that it is true, too. This can save you money.

bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service

This is the guideline (not the law). This can be argued… on several points. Was the post an actual advertisement? Was it an actual endorsement? Did the material benefits come directly from the seller, or through a third party? Expect evangelical paid-posts-are-evil websites to proclaim the end of sponsored posts, and the make-money-online web sites to come up with crafty new ways to make a personal blog post NOT technically an endorsement (somehow). That’s how business works, and that’s how evangelical social media websites get attention.

if a company refers in an advertisement to the findings of a research organization that conducted research sponsored by the company, the advertisement must disclose the connection between the advertiser and the research organization

This is a good change, but the political action groups have addressed this (successfully) already. They make new non-profit organizations and think tanks that sound like one thing, but are actually another. A certain “coal is the future of America’s independence from foreign oil” group, which proclaims that CO2 is good for us, and is named green something, comes to mind. There are more of these; they play to our collective lack of patience for looking past the labels and tag lines. (To the Social Media blogger who took money to publish this… I have to say cool story bro).

Finally, the guidelines really boldly clarify this one:

a paid endorsement – like any other advertisement – is deceptive if it makes false or misleading claims

I guess that needed to be clarified, since we’ve just about forgotten about the concept of right and wrong in this country lately.

Updated 10/15/2009: Jon Henshaw provided an update/clarification  that pretty much confirms what I said above.. check it out.

One Comment

  1. Great break down and hopefully calms down some of the hysteria, most notably at WickedFire. I found myself falling asleep skimming the Federal Register so I’m glad someone was able to cut out the legal jargon and make some sense of it.

    Tuesday, October 6, 2009 at 12:28 pm | Permalink