In October 2009, the Federal Trade Commission issued "Guides Concerning the Use of Endorsements and Testimonials in Advertising" (the "Guidelines") that may impose a disclosure requirement on bloggers and social media users who review or otherwise write about products and services. The Guidelines, which officially went into effect on December 1, 2009, call for online publishers to disclose "material connections" they have with a company whose products or services they "endorse." Without the legal jargon, this means that bloggers and social media users must disclose their relationship with a company when they are being paid or otherwise compensated by the company to comment favorably on its products or services. The Guidelines also say that bloggers may be held liable for making misleading or unsubstantiated claims about a product or service.
The Guidelines have provoked quite a bit of anxiety and consternation, but there's little that can't be handled with some common sense and transparency. The Guidelines impact a relatively narrow category of online publishing activities that can be construed as "endorsements," like writing reviews or otherwise commenting favorably on products or services. And, putting aside a few gray areas, the Guidelines require disclosure of only relatively established relationships with companies—like getting paid, participating in a network marketing program, or receiving a steady stream of freebies. On top of that, the Guidelines are easy to comply with, and they require nothing more than upholding good journalistic standards and prinicples, namely independence and transparency. Finally, the FTC staff have made numerous public statements indicating that they are more interested in educating than suing bloggers.
BackgroundThe Federal Trade Commission (“FTC”) is a federal government agency concerned with consumer protection and competitive business practices. The FTC enforces the FTC Act, which prohibits deceptive business practices, including deceptive advertising.
The Guidelines are the FTC's interpretations of the FTC Act—they tell the public what the FTC thinks deceptive advertising is in the area of testimonials and endorsements. The Guidelines do not have independent force of law; they are not "rules"; and there is no automatic fine for violating them.
If the FTC staff think that someone has violated the Guidelines, the agency may commence an enforcement action against the alleged wrongdoer for violating the FTC Act. In that enforcement action, the FTC would have the burden of proving that the challenged conduct violates the FTC Act, and the outcome would be reviewable in federal court. The primary remedy in an FTC enforcement action is a cease-and-desist order commanding the defendant to stop violating the FTC Act. Fines are only available in particularly egregious cases or when the defendant violates the cease-and-desist order.
Bloggers and users of social media only need to disclose their relationship with a company when they "endorse" a product of service. Accordingly, for the vast majority of online publishers, the Guidelines probably won't come into play much. But if you publish reviews or otherwise regularly discuss products and services, the Guidelines could impact your work, and you should have a sense of what constitutes an "endorsement."
The Guidelines define an "endorsement" as "any advertising message . . . that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identicial to those of the sponsoring advertiser." Guides, § 255.0(b).
Not all online discussion of product attributes or consumer experiences will qualify as an "endorsement." The FTC explains in its commentary on the Guidelines: "the fundamental question is whether, viewed objectively, the relationship between the advertiser and the speaker is such that the speaker's statement can be considered 'sponsored' by the advertiser and therefore an 'advertising message.'" Federal Register Notice, at 8.
The FTC will look at the following factors to determine whether a message conveying positive statements about a product or service is an "endorsement":
- whether the speaker is compensated by the advertiser or its agent;
- whether the product or service in question was provided by free by the advertiser;
- the terms of any agreement;
- the length of the relationship;
- 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
- the value of the items or services received.
Federal Register Notice, at 9. That's a lot of factors, but most of the FTC's examples in the Guidelines and its public statements suggest that it is primarily concerned with those getting paid in cash, those participating in network marketing programs, and those receiving a steady stream of products from a company or group of companies.
For instance, in an FTC instructional video (embedded below), Mary Engle, Associate Director of the FTC Bureau of Consumer Protection, answers the question "what do the Enforcement Guides mean for bloggers." In doing so, she focuses on these categories of relationship:
If you are one of those bloggers whose in a marketing program with an advertiser and you're being paid to blog about a product, or you're receiving a steady stream of products from a company, then you need to disclose that relationship you have with the company.
Rebecca Tushnet's notes from a December 1 panel discussion, which included Stacey Ferguson of the FTC's Division of Advertising Practices, provide a little more detail, but basically the same gist:
Disclosure of connection: when does a consumer become an endorser? When the consumer is sponsored by the advertiser, looked at objectively. Are they acting independently, or are they part of the advertiser’s marketing campaign? Definitely: Explicit understanding; cash payments; additional perks; network marketing programs; network advertising agencies; commissions. It depends: Continuous free merchandise; value of the product or service; links to where the product can be purchased.
Note: The FTC is also cracking down on astroturfing by company employees, which makes sense because there is certainly a "material connection" between employer and employee that readers would like to know about in evaluating the credibility of the message.
The pages below dig into some of the most important issues surrounding the Guidelines and their application to online publishing activities:
- Complying With the FTC's Disclosure Requirements
- Avoiding Misleading and Unsubstantiated Claims
- Is the FTC Really Going to Sue Bloggers?
- Some Gray Areas Surrounding the FTC's Disclosure Requirements
For additional information, be sure to check out the resources on FTC's website.