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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

Should a blogger disclose “material connections” with a sponsor or advertiser? Of course. It’s one of those lessons we learned in kindergarten. Or should have.

For the most part, professional organizations line up behind practice that helps create trust and transparency. In the long run, it’s good business. But some have quibbles – or outright dismay – at the FTC’s rules.

While professional organizations generally support Federal Trade Commission rules, it’s important to note that most bloggers are not affiliated with these organizations. In the wild-west environment of today’s web, many will happily write a post in order to get free products, services or cash. The blogosphere is supported by a plurality of business models, including pay-per-play, and the barriers to entry are very low.

Here’s a look at how some major professional organizations have responded to the FTC disclosure rules:

Public Relations Society of America

PRSA’s Code of Ethics has a provision entitled “Disclosure of Information,” based upon the principle is that “open communication fosters informed decision making in a democratic society.” The intent is “to build trust with the public by revealing all information needed for responsible decision making.”

The code states that a member shall:

• Be honest and accurate in all communications.
• Act promptly to correct erroneous communications for which the member is responsible.
• Investigate the truthfulness and accuracy of information released on behalf of those represented.
• Reveal the sponsors for causes and interests represented.
• Disclose financial interest (such as stock ownership) in a client’s organization.
• Avoid deceptive practices.

Separately, PRSA has advocated for increased disclosure when there is an exchange between a PR practitioner and a journalist. Said Robert Frause, chair of the PRSA’s Board of Ethics and Professional Standards:

Readers, listeners, and viewers have the right to expect advance disclosure about anything that might compromise the integrity of the information they are getting. Journalists should be notified that any gift or in-kind service in exchange for placement should be clearly disclosed so the audience can make up its own mind about the information’s value, bias, accuracy and usefulness.

PRSA reiterated its stand on “Pay per Play” in Professional Standards Advisory PS-9, dated October 2008. While it precedes the FTC ruling, the document supports disclosure.

PRSA convened a panel on disclosure in social media at its 2009 International Conference, held just a month after the FTC’s ruling. Its online newsletter, PRSAY, offered a detailed summary of the FTC ruling on Oct. 9, 2009, placing it squarely inside the existing code of ethics, summarizing, “Essentially, the FTC applied longstanding principles to new media realities.”

International Association of Business Communicators

The IABC comprises membership largely working in public relations and corporate communications. Its code of ethics covers much of the same ground as that of PRSA. Specific to the FTC ruling is Article 10:

Professional communicators do not accept undisclosed gifts or payments for professional services from anyone other than a client or employer.

IABC’s magazine, Communication World, ran an article on the ruling in its Jan., 2010 issue (member-only paywall). Additionally, IABC hosts a blog by Laura P. Thomas, who has written several posts on the ruling as it applies to so-called “mommy blogs.”

Word of Mouth Marketing Association

The Word of Mouth Marketing Association, or WOMMA, has emerged as a leader of ethical behavior in the social space. The organization offers a detailed resource list on the FTC disclosure ruling as well as a code of ethics that includes specifics on disclosure.

The first four of eight standards of conduct reference some aspect of disclosure:

Standard 1 – Disclosure of identity:  A WOMMA member shall require their  representatives¹ to make meaningful disclosures of  their relationships or identities with consumers in relation to the marketing initiatives that could influence a consumer’s purchasing decisions.

Standard 2 – Disclosure of consideration or compensation received:  A WOMMA member shall require their representatives to disclose meaningfully and prominently all forms of consideration or compensation they received from the member, marketer or sponsor of the product or service.  In other words, WOMMA members shall not engage in marketing practices where the marketer/sponsor or its representative provides goods, services, or compensation to the consumer (or communicator) as consideration for recommendations, reviews, or endorsements, unless full, meaningful, and prominent disclosure is provided.

Standard 3 – Disclosure of relationship: A WOMMA member shall require their  representatives involved in a word of mouth initiative to disclose the material aspects of their commercial relationship with a marketer, including the specific type of any remuneration or consideration received.

Standard 4 – Compliance with FTC Guides: A WOMMA member shall comply with the Guides Concerning Use of Endorsements and Testimonials in Advertising promulgated by the Federal Trade Commission.  See 16 C.F.R. §§ 255.0–255.5.

WOMMA offers a comprehensive document (.pdf) with examples and best practices on how to disclose on blogs and in social media. It clearly describes good practice for disclosure in social media.

Interactive Advertising Bureau

One group that has taken issue with the FTC Disclosure Rules is the Interactive Advertising Bureau.

In an open letter to the FTC, President and CEO Randall Rothenberg acknowledges the FTC’s role in regulating communication:

All of us would agree that false and deceptive advertising should be stopped, and penalized when it slips through and is caught. We agree that paid testimonials and endorsements should be labeled. But in taking business ethics and attempting to give it the force of law, the Commission is stretching the definition of remuneration to ludicrous lengths.

But in a quote in an IAB press release he bristles at the notion that online media should be subject to these regulations while traditional media are not.

What concerns us the most in these revisions is that the Internet, the cheapest, most widely accessible communications medium ever invented, would have less freedom than other media. These revisions are punitive to the online world and unfairly distinguish between the same speech, based on the medium in which it is delivered. The practices have long been afforded strong First Amendment protections in traditional media outlets, but the Commission is saying that the same speech deserves fewer Constitutional protections online.

While the FTC denies that online publishers are second-class citizens in this regard, Rothenberg offers passages from the 81-page ruling that show otherwise. The FTC’s interpretive guide contains softer language than the full document. For example, in the guide, the FTC states that its main interest is the advertiser’s behavior, not the endorser’s.

From a practitioner perspective, it’s easy to support basic disclosure requirements. Rothenberg is taking a legal perspective to support long-term freedom for online publishers. To paraphrase Supreme Court Justice William O. Douglas, the FTC represents the nose of the camel inside the tent. Are the government’s ends benevolent or sordid?

Here’s an excellent piece by ReadWriteWeb COO Bernard Lunn on the future of the book publishing business. Think about the forces at work in this swirling vortex: traditional publishers, distributors and bookstores; mega-distributors like Amazon.com; eBooks like Kindle; Google, with its aggressive digitization programs; and self-publishing. 

Yes, I’m writing this article on Posterous using my traditional blogging tool, Movable Type. The irony is not lost on me. And no complaints about MT – it’s easy to use, stable, and very well behaved.

“And though all the winds of doctrine were let loose to play on the earth, so Truth be in the field, we do injuriously by licensing and prohibiting misdoubt her strength. Let her and Falsehood grapple; who ever knew Truth put to the worse in a free and open encounter?”

• Web browser FireFox is gaining ground with power users due to its powerful extensions. Here are 15 tools to streamline the workflow of blogging, from CNet.

Our culture is generating more messages than ever, as we email, blog, Tweet and text our way through each day. Everyone can communicate using multiple channels, and that’s a good thing. 

But there’s a cost: all of these pipes are filling up with junk. Junk people writing junk messages, junking up the channels of communication. Junk, junk, junk. So good luck finding an original thought:

“What’s another word for Thesaurus,” by the way, is attributed to comedian Steven Wright. The Tweeters above seem unconcerned about stealing his words. All they care about is to look smart, to be in the game. This, of course, is why so many people hate Twitter, which The Ad Contrarian says is how the narcissistic keep in touch with the feckless.

Good manners – and that includes academic and journalistic training – suggest that when we use other peoples’ words, we attribute them. Our copyright laws reinforce this. But as a culture, we are increasingly ignoring these norms.

So fight that urge to retweet someone else’s wisdom without attributing it. Think of that other person for a minute. Think about the rules of discourse that you learned in school. Think about copyright, so important to the production of knowledge that it’s part of our Constitution.

Are you really adding to the conversation? If in doubt, maybe you should stay out. Try thinking more and speaking less. More signal, less noise. So when you do speak, people might actually listen.

It’s an exciting time in the halls of the academy these days; graduation is near. And it’s also a scary time, because graduating students are entering a marketplace in shambles. Old structures are crumbling; new ones have yet to figure out how to monetize. Ack! What to do? Get to work, that’s what. Do something, for someone; build your networks; gain some experience; and do some good in the world. And listen to these guys, who feel your pain.