The New FTC Guidelines on Endorsements by Bloggers

The Federal Trade Commission has issued new guidelines that go into effect December 1, 2009 regarding the use of endorsements and testimonials in advertising that for the first time specifically include blogs.  While there’s a ton of rumors swirling around about what this means, here’s my two cents worth, read from my viewpoint as an attorney, albeit one who does not currently practice in this field professionally.

Brief History

Back in 2007, the Federal Trade Commission (FTC) published a notice in the Federal Register seeking comments from the public on the existing Guidelines Concerning The Use of Endorsements and Testimonials in Advertising, looking for information about the usefulness and the economic impact of the Guides, as well as seeking information about the increased use of consumer endorsements.  The FTC then published a notice in the Federal Register again in November of 2008 discussing the comments received and posted proposed revisions to its Guide, requesting comment on the proposed revisions. (This is all required under the rules of Agency Law, and has been done precisely as required.)
Seventeen comments from various advertising concerns were received, including, most relevant to online content producers, BzzAgent, Word of Mouth Marketing Association, Public relations Society of America (PRSA), the Direct Marketing Association, the Interactive Advertising Bureau among others.

The final version of the new Guidelines published October 5, 2009 will become effective as of December 1, 2009, and are no longer subject to revision or public comment.  For the reference librarians among you, you can find the new Guidelines at 16 C.F.R. part 255, or view them online by clicking here.

What are the Guidelines and Why are They Necessary?

The whole point of having FTC guidelines regarding endorsements and testimonials is to try to ensure truth in advertising, so that if the typical consumer sees an ad on TV, in a magazine, or online, they are aware it is an ad, and that the information contained within it is reasonably truthful and reliable.  The FTC is in charge of enforcing the rules requiring advertisers avoid outright lies and fraud, and advertisers and endorsers are subject to fines for doing so.

The advent of consumer generated content on a mass scale has radically changed who can provide information, opinions, endorsements and testimonials.  So where do bloggers, podcasters, and other user generated content producers fit into this mix?

The “New” Rules of Disclosure

The rules themselves are not particularly new, but they do extend to cover new media sources, consumer generated content, and attach the same standard used for businesses, celebrities and the like to the “Mom & Pop” blogging world.  Blogging as a medium is now going to need to take itself more seriously, and bloggers are going to have a new level of professionalism expected of them as it concerns endorsements or reviews that have some sort of exchange or quid pro quo attached.

Yes, I can still complain that the service stinks at my local grocery store.  But if the local grocery or one of its competitors gave me anything or paid me to write a review of their service online, I need to disclose that in my review, so people can discern any potential bias.

So How do I know if I am doing an Endorsement?  Am I equivalent to an expert or celebrity?

The Guidelines expressly define what constitutes an endorsement or testimonial and treats both identically.  Endorsements “must reflect honest opinions, findings, beliefs or experience of the endorser.”  They “cannot convey any express or implied representations that would be deceptive if made directly by the advertiser.”  This means the endorser is covered by the same rules that would apply to any ad agency- there is no longer any safe harbor for consumer generated content that is exempt from the Guidelines.  Likewise, advertisers have to disclose the connections between themselves and endorsers, and are liable for any false claims made by their endorsers.

The rules further state that as used in the rules, a product includes any product, service, company or industry, and an expert is defined as “an individual, group or institution possessing as a result of experience, study or training, knowledge of a particular subject which is superior to what ordinary individuals generally acquire.”

In plain english, this means:

- Almost anyone can qualify as an expert for the purposes of the rules, by just being able to review a product or service.

-If you receive money or any sort of exchange, including a free product, even if unsolicited, you must disclose this in the endorsement somewhere.  You can’t disclose it after the fact- it needs to live with the endorsement.  Writing about it, positively or negatively, does not matter- you are effectively an endorser and need to disclose this “quid pro quo”. (Section 255.2 regarding Consumer Endorsements).

-  If you are endorsing something, you must be a bona fide user of the product at the time the endorsement is given.  So writing a positive review about a book you didn’t read is deceptive;  writing a review about a product you intend to try but haven’t yet is deceptive as well, IF you have received any sort of exchange.  I can write about how I like my R16 mixer and say anything I want about it, positively or negatively, because I paid for it myself, even if I haven’t put it through all its paces.  I don’t have any disclosures to make because there’s no quid pro quo in any way, shape or form.

-The advertiser is liable for any false claims you make.  If I was paid or got a free service in exchange for trying it out and writing about it or podcasting about it, and I decide to say that “X brand soda is not only tasty, but cured my cancer” (or something equally unprovable and clearly a false claim) the advertiser as well as myself are liable and can be fined for that statement, No Matter How Large My Blog Audience Is or Is Not.

There are great examples in the actual guidelines I recommend you read if you have any questions.  It should clarify most situations if you have any questions.

But I think there are inevitably some gray areas- here are some personal examples:

-Chris Brogan is a close friend who has written a book.  I bought the book, but then I was also sent a review copy as well.  If I write a review, what are my disclosure requirements?
Well, I have received the product for free, but I also paid for it.  I am also friends with the author, and may have some bias because of it.  The BEST practice is to disclose both the copy received and the friendship along with the purchase- that way, everyone is clear when reading the article about potential bias.  I could review the book without disclosure because I purchased the item and probably get away with it.  However, full disclosure of the circumstances surrounding the review or discussion of the book is clearly the best policy, as it always has been.

-Another close friend, Andy Quayle,  has an internet hosting service I use for my blog as a paying customer.  If I talk about Tubu to friends or blog about it, what do I have to disclose if anything? I don’t have to disclose that I know the owner because regarding this “exchange”, I am just like any other commercial consumer- there is not reduced price or free service given with an expectation of advertising by word of mouth or otherwise in return.  But even when talking to my friends, I tend to do disclose  that I know Andy anyway, because it actually tends to add rather than subtract credibility on the whole.  If you tell someone “I use this service and it’s great- I know the guy and he really cares about his customers”- this benefits you, the business and your friend who know all the facts and have a good basis to judge your credibility and bias on the issue.  Lack of disclosure doesn’t substantially change the message, but it may lose some of its value as well.

A product available on Amazon.com starts to receive a bunch of reviews that are part of an elaborate joke or hoax, equivalent to being “Rick Rolled”.  As someone writing a review, are you liable?  No.  This is still fine, unless you were paid or received a free product or service.  You can still refer to a product sarcastically or rant or anything you like on Amazon or elsewhere, as long as you weren’t paid to do so and don’t disclose it.  Review to your heart’s content.  And if you were paid or received a free product, disclose it, and you’re fine.

How Does This Effect Celebrity Bloggers?  How will they have to adapt their content, if at all?

Let’s take a quick look at a couple of celebrity bloggers and their businesses, from the outside, and how these new regulations may affect them.

Take Gary Vaynurchuk.  Gary produces Wine Library TV, and this started as a way to build community around wine and sell more wine out of Gary’s family shop.  If Gary is paid by a sponsor to endorse a certain wine, discuss it on his show, or otherwise blog or rant about it, good or bad, he needs to disclose that he recieved payment for that.  If he is sent free bottles of wine even just one, and then discusses it in any way on any of his channels, personal or Wine Library TV, even if it was through a distributor and not from the Company directly, solicited or unsolicited, he needs to tell his viewers that he did not pay for the wine, and where he got it from.

Likewise, if Gary recommends that you attend a conference where Gary gets a hefty speaking fee, he has a commercial interest as does the host, in your attending the conference.  Asking Gary to “pimp” this out to his network is, in essence, asking for advertising over the web, and Gary will need to disclose his financial interest to avoid potential complications.

Likewise,Mommycast.Com is one of the longest running parenting podcasts, and the people behind Mommycast have received some great sponsorships and endorsements.  Some of them, like Dixie and their Aveeno Baby campaign (of which my show, the LD Podcast was a part of last year) are explicitly acknowledged in the audio portions of their show.  Other potential sponsorships or promotional exchange deals, such as when Mommycast went on the Disney Cruise, have not been totally transparent as to what was paid for or sponsored content.  In the future, any such program where there is an exchange of money, endorsements, items, whether solicited or not, will have to be part of the the written, audio and video shows they produce.  They can continue to produce the great content they always have, but they need to disclose what has been given in exchange, if anything, for their endorsement, review, opinion or other representations, regardless if the material is scripted by the sponsor or not.

This also means music shows will need to disclose if they receive free CD’s or downloads from the artists trying to promote their music, book review shows will have to disclose if they did not purchase the books themselves, and review sites looking at commercial products of any type will have to detail anything they received in hopes of review.

While some bloggers like Laura Fitton, a.k.a. @Pistachio have handled this to date by providing a page on their blog with bulk disclosures of all clients and potential interests, the rules are fairly clear and best practices require that the disclosure live along with the content.  Without indicating that there is a relationship in individual blog posts that promote a partner, there is a substantial chance consumers will not scour the website for all existing relationships, so best practice would require disclosure within each audio, video or blog post where an endorsement is made.

Implications for Twitter

Chris Penn and I discussed this a bit today.  “Buzzing” or promoting things for money in 140 characters or less is going to be challenging.  Safety says that you should probably link to a blog post where all detailed disclosures, if any, can be made rather than not disclose.  Twitter is microblogging, after all.  Likewise, we may see hashtags like #PE for paid endorsement take off, to meet disclosure requirements in as few characters as possible.  Tweets from companies directly are not consumer endorsements and are fine.  If you ReTweet someone’s else’s paid endorsement, you have not personally benefited from the transaction, so you are just passing along the message.  Because you haven’t been the recipient of any quid pro quo, you are unlikely to risk any liability.  What’s going to be interesting is to see how the FTC handles mass contests like “Win a Mac Book Air” and how this interacts with the endorsement/paid advertising regulations.  I would expect these sorts of issues will be some of the murkier ones to sort out once the Guidelines go into full effect.

The Good News

This is probably the first time independent bloggers, podcasters and video producers have some up against any sort of formal regulation or rules.  However, it’s already the rules and conditions that most people follow and have self-imposed anyway, as failing to follow these rules harms both your credibility as well as that of whatever you decide to endorse.  This is just another case where good common sense prevails on a day to day basis.

Bloggers, Podcasts and video producers- any producer of consumer-generated content online- are now being treated as real business people and grown-ups.  This will probably result in all of us “producers” being taken more seriously.  Blogging has grown up, and warrants actual rules and regulations- we should be pretty proud.  Likewise, it means we should expect that advertisers and companies treat our opinions and views with more respect as well- the relationships they seek with us will be even more valuable when done correctly, because there will be a clear benefit and avoiding an expensive potential fine of up to $11,000 per post, for violations.  This means advertisers and companies may spend more time talking to and training their blogging staff, street teams and the like, which again, will benefit both the disseminators of the information as well as consumers.

Implications for Advertisers

The implications for advertising through blogger outreach programs has a new level of seriousness, however.  Since ad agencies are liable for any false claims a blogger might make, there may be more review required of potential posts, or requests to remove posts with false claims after the fact, to avoid liability on the side of the advertiser and blogger.  This will start to change the endorsement space, hopefully for the better as each side treats the endorsement and recommendation or review process more seriously than ever before.

At the end of the day, the FTC has put together a reasonable set of guidelines that asks everyone to be reasonably responsible for themselves and what they ask other people to say about them.  While I am eagerly awaiting to see what kind of enforcement actually occurs and how the cases are determined, good common sense and basic disclosure practices adopted by most credible and long-standing bloggers already will keep everyone out of harm’s way.

Just remember, even if it’s free, even if it’s unsolicited, let everyone know.