The FTC Disclosure rules: one year later

One year ago, the Federal Trade Commission updated its Guides Concerning the Use of Endorsements and Testimonials in Advertising, to go into effect on Dec. 1, 2009. The 81-page document identified three main updates to the Commission’s rules:

• Restrictions on describing “typical” results in advertising
• Guidelines for celebrity product endorsers
• Guidelines for disclosing material connections between advertisers and endorsers

Of these three, the “material connections” guidelines are the subject of this article and two other related posts (see bottom of page). The release of these guidelines created a stir in the blogosphere and social media space, a largely unregulated melee of ideas, commerce and hucksterism. There was talk of $11,000 fines for bloggers who ran afoul of these regulations (not true).

What really happened?

The announcement of the new Guides generated lots of discussion amongst bloggers, in large part depending on their position in it. Established bloggers, for example, said the ruling would cut down on the “cloggers,” wanna-be influencers who were blogging just to get free products and services. Some said it was an important step forward that would improve the credibility of the blogosphere.

There was also plenty of criticism.

“Jumbo are the shrimp and deep are the highballs at most media events,” wrote Eric Felten in the Wall St. Journal. His point was that the mainstream media get all sorts of free product – from books to review to the best seats at sporting events. Why should bloggers be held to a higher standard?

Dan Gillmor found the effect of the ruling to be “unworkable,” noting the high volume of bloggers and predicting “full employment” for First Amendment lawyers. And many wrote of the First Amendment implications of the ruling. For example, Randall Rothenberg of the Interactive Advertising Bureau called it “Constitutionally dubious,” for its sharp distinction between online and offline media.

FTC actions

While the new Guides may eventually open the spectre of Big Government limiting free expression, so far the Commission’s actions are modest.

In January, 2010, Ann Taylor Loft invited 31 bloggers to see the new summer clothing line. The bloggers were encouraged to write about the new clothing, then submit their content to a public relations person in order to win a gift card. The value of the gift card was not revealed until after the submission. According to Jezebel.com, the note said:

Come take a sneak peak at LOFT’s summer 2010 collection before anyone else! … Bloggers who attend will receive a special gift, and those who post coverage from the event will be entered in a mystery gift card drawing where you can win up to $500 at LOFT!

Coverage from the bloggers was very positive, and only two of the 31 attendees disclosed the gift from Ann Taylor Loft.

The FTC’s response?

Upon careful review of this matter, we have determined to not recommend enforcement at this time.

The FTC slapped Ann Taylor Loft on the wrist, noting that this was a first-time occurrence, that the company had agreed to go over disclosure rules with bloggers in the future, and that the effect of the promotion was small. The takeaway: the advertiser has a responsibility to encourage the blogger to disclose.

The second FTC action resulted in a settlement with Reverb Communications, a PR firm. Reverb had several clients who published games in Apple’s App Store. Reverb employees were found to have written positive  reviews by the FTC. The FTC’s position was that they were “shill” reviews; Reverb contended that the employees bought the games with their own money and wrote the reviews as individuals. Here are some of the reviews, as reported by the FTC:

• “Amazing new game”
• “ONE of the BEST”
• “[Developer of gaming application being reviewed] hits another home run with [gaming application being reviewed]”
• “Really Cool Game”
• “GREAT, family-friendly board game app”
• “One of the best apps just got better”
• [Developer of gaming application being reviewed] does it again!”

The complaint was settled by removal of the reviews from the App Store. Reverb owner Tracie Snitker said:

The FTC has continuously made statements that the reviews are ‘fake reviews,’ something we question … If a person plays the game and posts one review based on their own opinion about the game should that be constituted as ‘fake?’ The FTC should evaluate if personal posts [from] these employees justifies this type of time, money, and investigation. It’s become apparent to Reverb that this disagreement with the FTC is being used to communicate their new posting policy.

FTC attorney Stacey Ferguson told CNET:

We’re most concerned about the disclosure of the connection … so whether or not the employee actually did love the game or not, that wasn’t really of consequence to us. We want them to disclose that they did have an affiliation with Reverb and the client when they’re making those endorsements.

Read more about the FTC disclosure guides:

• How to disclose material connections on your blog or social media site
• What professional organizations say about the FTC’s disclosure rules