U.S. federal guidelines concerning the disclosure of endorsements or incentives will set a new standard for online advertisers. The revised guidelines are intended to address hidden endorsements and incentives in a variety of new media, including blogs and word of mouth media. The rules are broad enough to affect activity on forums, Twitter and social networks.
(The various statements of fact made in this article concerning the guidelines come from the text of the FTC Guidelines: see, “Guides Concerning the Use of Endorsements and Testimonials in Advertising,” 16 C.F.R. Part 255. A hyperlink to a download of the full text of the rules can be found at the end of this article.)
The guidelines, promulgated by the United States’ Federal Trade Commission, go into effect on December 1, 2009 and and are intended to regulate endorsements by consumers, experts, organizations, and celebrities, as well as requiring the disclosure of “material connections” between advertisers and endorsers.
The term “endorsement” is defined as:
…any advertising message … that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser.
The definition is clearly broad enough to cover social media, blogging and posts made on review sites or forums.
The standard applied to social media is stated in this passage:
The Commission does not believe that all uses of new consumer-generated media to discuss product attributes or consumer experiences should be deemed “endorsements” within the meaning of the Guides. Rather, in analyzing statements made via these new media, 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 facts and circumstances that will determine the answer to this question are extremely varied and cannot be fully enumerated here, but would include: whether the speaker is compensated by the advertiser or its agent; whether the product or service in question was provided for free by the advertiser; the terms of any agreement; the length of the relationship; the previous receipt of products or services from the same or similar advertisers, or the likelihood of future receipt of such products or services; and the value of the items or services received.
TERMS OF ENGAGEMENT
Under the new guidelines, advertisers and publishers must disclose in clear and unequivocal language the existence of any sponsorship of an advertising message. In the context of social media, here are some of the situations where we believe the guidelines would be applied:
(1) A posting to the Facebook forum recommending a particular hotel. If the speaker was compensated in some fashion for posting the recommendation, the guidelines require disclosure.
(2) A tweet on Twitter recommending a product. If the speaker was compensated in some fashion for posting the recommendation, the guidelines require disclosure.
(3) A blogger reviews a product. If the blogger received compensation or complimentary products or services, the guidelines require disclosure.
(4) An employee of a company recommends one of the company’s products on a forum. The existence of an employee/employer relationship would need to be disclosed.
Note that the guidelines themselves contain within the body an entire series of examples. We strongly encourage you to read these carefully as there are some subtle nuances at play that you need to recognize.
In past versions of the rules, there was no specific provision stating that endorsers as well as advertisers could be liable for statements made in an endorsement. The revised guidelines clearly state that both advertisers and endorsers may be liable for false or unsubstantiated claims made in an endorsement – or for the failure to disclose material connections between the advertiser and endorsers. The revised guidelines 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.
The rules also close an old loophole that was frequently exploited. It is no longer sufficient to simply add small print at the end of an ad indicating that “results may vary.”
In terms of enforcement, it appears the FTC will continue to rely on public complaints, the Better Business Bureau, and even issues reported by competitors. The rules are at this time merely guidelines and do not carry penalties or fines, though clearly they are intended to provide a grounds for enforcement actions via Section 5 of the FTC Act (15 U.S.C. Sec. 45). The FTC is charged with protecting consumers in the United States. Therefore, if your message is published in the U.S. and a complaint is raised, it is conceivable the FTC would get involved where enforcement action is merited.
CONTROVERSY SURROUNDING THE RULES
The newly revised guidelines have already proven to be a magnet for controversy. While the U.S. Government can clearly regulate commercial speech, the present guidelines seem to muddy the waters. Under the new guidelines it is unclear when a speaker has ceased to be voicing an opinion protected by the First Amendment and when their statement rise to the level where there is a legitimate governmental or public policy interest that requires protection.
The Internet Advertising Bureau has even called for a rollback of the provisions. Read their argument in the open letter drafted by the IAB’s CEO:http://www.iab.net/insights_research/public_policy/openletter-ftc
HOW TO DEAL WITH THE NEW RULES
Only time will tell whether these new rules withstand test in the courts, but until then we encourage all to comply and to formulate clear rules of engagement for your brand.
We recommend that you create an internal best practices document that defines for your staff the permissible limits of both their interactions with bloggers and their own statements in forums or on their personal blogs. You should also raise this issue clearly with your PR department or agency, emphasizing the need for compliance.
If you are a blogger, the best path is “disclose and dispose” — that is, disclose if you have been given a freebie and dispose of it once you’ve reviewed it. Moreover, given that the rules require a clear and conspicuous disclosure, place your notice of disclosure above the fold in the article where it is not likely to be missed.
The Word of Mouth Marketing Association (WOMMA) is formulating best practice statements for advertisers and publishers. You would do well to follow the discussions on their site. See,http://womma.org/ftc/
TO LEARN MORE…
- Read the FTC announcement:http://www.ftc.gov/opa/2009/10/endortest.shtm
- Download a PDF of the new rules (“Guides Concerning the Use of Endorsements and Testimonials in Advertising”):http://www.ftc.gov/os/2009/10/091005revisedendorsementguides.pdf
- WOMMA slideshow on the new Guidelines:http://www.slideshare.net/WOMMAssociation/short-version-understanding-the-ftc-guidelines
- View the WOMMA Ethics Code: http://womma.org/ethics/