The U.S. Federal Trade Commission has updated its rules concerning endorsements and testimonials in advertising. Beginning December 1st, the FTC will require bloggers and other reviewers to disclose any payments or free products they receive from advertisers. Julie O’Neill, with the Washington, D.C. office of the law firm Morrison & Foerster, tells us ways in which ecommerce merchants can adapt to the new regulations.
PeC: Can you explain what the new FTC endorsement guides are and, secondly, explain the changes that apply to bloggers and reviewers?
Julie O’Neill: Absolutely. It is a guide. It’s not a law. But folks shouldn’t be misled into thinking that the FTC isn’t serious about them. Basically, the FTC issues guides in various areas to let companies [and here, bloggers] know how it intends to enforce the Federal Trade Commission Act. The FTC Act prohibits deception and unfairness. So, in effect, the guides show or give examples of what the FTC thinks could be an unfair or deceptive practice. The big change with respect to bloggers is that the FTC has really made it clear that not only are advertisers on the hook for deception surrounding endorsements that they procure, but bloggers could also be on the hook in certain circumstances.
PeC: Is that a widespread problem?
O’Neill: There are services where bloggers are paid. They participate in sort of networks where companies can retain them to review their products and they are paid for their endorsements. The free product side is also pretty widespread.
PeC: The concern we’re hearing in reaction to this decision comes from ecommerce merchants who think, “I sent a product to a blogger for him or her to review and now I’m hearing about the potential for an $11,000 penalty.” What is the likelihood that a small ecommerce merchant would receive such a fine?
O’Neill: I think the likelihood is not great. That’s not to say companies shouldn’t comply regardless of their size or what they do. They should absolutely speak with counsel and take these guides into consideration. The most likely result is that the matter would end in a consent decree, which is a settlement, and the settlement would in my opinion be highly unlikely to include any sort of financial penalty if we’re just talking about a violation of the guides. The most likely scenario is that the order would require the company to comply with the law and the financial piece of it would kick in if the company then subsequently violated the order.
PeC: Are there some general guidelines ecommerce merchants should be using when they’re working with bloggers or reviewers that maybe they didn’t have to use before?
O’Neill: Sure. If the company is giving the blogger anything of value in exchange for the endorsement or the potential endorsement, get something in writing requiring the blogger to disclose the connection. Also, have the blogger agree that if the company found that the blogger said something that the company cannot back up or if the blogger failed to disclose the relationship, the company would have some recourse such as, ideally, requiring the blogger to remove the statement or add the disclosure.
Know where the blogger is publishing. The advertiser should follow up and check out what the blogger has written and make sure that he or she has done what the company asked for.
PeC: I guess the key piece of information here is that both the blogger and the advertiser are on the hook. So, it’s in both parties’ best interest.
O’Neill: That’s a great way to spin it. Instead of it being that the company’s imposing some sort of owner’s requirements on the blogger that turns the blogger off, it can be presented as, you know, “Here’s a way to help limit liability for both of us.”
PeC: Anything else our readers should keep in mind?
O’Neill: If a blogger says something purely subjective such as, “I like the color, the style,” then we’re in safe territory. The potential for trouble comes in if the blogger is making really broad performance claims that somebody could misunderstand as applying generally.