The first revision to its endorsement rules in almost 30 years, the FTC now regulates emerging digital advertising channels, including the blogosphere. I reviewed the 81 page FTC notice of adoption of revised Guides Concerning the Use of Endorsements and Testimonials in Advertising (the “Guides”). Without making your eyes glaze over or oversimplifying the Guides, I distill them into digestible form in this post. I also include a brief summary of statements made by the FTC on the issue of enforcement.
The revisions specifically regulate certain blogger endorsements. The relationship between the blogger and the advertiser must be conspicuously and fully disclosed if it falls within the Guides’ definition of “endorsement.” Furthermore, the advertiser and the blogger are subject to liability for misrepresentations made by the blogger.
What is an “endorsement”?
Postings by a blogger who is paid to speak about an advertiser’s produce will be covered by the Guides, whether the blogger is paid directly or by a third party (like a PR firm) on behalf of the marketer. The donation of a free product to a blogger may bring the blogger’s statements within the FTC’s definition of “endorsement.” A blogger who purchases a product with his or her own money and praises it on a blog or message board will not be considered an endorsement covered by the Guides.
According to the FTC, the “fundamental question is whether, viewed objectively, the relationship between the advertiser and the [blogger] is such that the [blogger’s] statement can be considered ‘sponsored’ by the advertiser and therefore an ‘advertising message.’” This is an analysis that must be made on according to the facts and circumstances of the situation and include: (a.) whether the blogger is compensated by the advertiser or its agent; (b.) whether the product or service was provided for free by the advertiser; (c) the terms of any agreement; (d) the length of the relationship; (e) 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 (f) the value of the items or services received. The relationship between the blogger and advertiser could be compromised, according to the Guides, by the receipt of a single high-priced item.
If a blogger frequently receives products from manufacturers because he or she is known to have wide readership within a particular demographic group that is the manufacturer’s target market, the blogger’s statements are likely to be deemed “endorsements.”
What’s the Penalty? Will the FTC enforce the revised Guides?
Media was abuzz about the $11,000 per occurrence penalty. Kudos to Jennifer Vilaga at FastCompany.Com for inquiring with the FTC about the intended enforcement of the revised Guides. According to Richard Cleland, Asssistant Director, Division of Advertising Practices at the FTC, “the $11,000 penalty is not true.” Instead, he reported to Vilaga, “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. To the extent that I have seen and heard, people are not objecting to the disclosure requirements but to the fear of penalty if they inadvertently make a mistake. That’s the thing I don’t think people need to be concerned about. There’s no monetary penalty, in terms of the first violation, even in the worst case. Our approach is going to be educational, particularly with bloggers. We’re focusing on the advertisers: What kind of education are you providing them, are you monitoring the bloggers and whether what they’re saying is true?” Assistant Director Cleland also remarked: “we’re going to rely more on voluntary compliance than prosecution.”
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