SEMA News - February 2010

By Joe Dysart

Protecting Your Business From the FTC Crackdown on Social Media


The FTC is cracking down on clandestine blogger endorsements.

The Federal Trade Commission (FTC) has a stern warning for businesses secretly using bloggers and others in social media to endorse products and services: We’re coming after you. In a move that has generated a backlash as big as the blogosphere itself, the agency has put the word on the street that, as of December 1, it will be looking to haul into court the most flagrant users of cloaked endorsers.

“Social media is here to stay, and we have enough respect for advertising on the Internet and the important role of the blogosphere as a marketplace for public opinion to hold it to the same standard we apply to advertising in any other medium,” said Mary K. Engle, director of the FTC’s Division of Advertising Practices.

Not surprisingly, violent pushback to the new FTC guidelines was nearly immediate in the blogosphere, as cries of “Big Brother,” “Nineteen Eighty-Four,” and “government muzzling of free speech” sprang up like many dandelions. Jeff Jarvis, one of the medium’s most prominent spokespeople, posted on his blog, “For the FTC to go after bloggers and social media—as they explicitly do—is the same as sending a government goon into Denny’s to listen to the conversations in the corner booth and demand that you disclose that your Uncle Vinnie owns the pizzeria whose product you endorsed.” And Randall Rothenberg, CEO of the Interactive Advertising Bureau (IAB), responded with unbridled indignation, dismissing the new FTC guidelines as “constitutionally dubious,” and castigating the agency as being draconian.

“We offered to bring in bloggers, social media executives and others from among our membership and work with you to develop practical guidelines and self-regulatory mechanisms that would protect consumers from real harm, while assuring that independent opinion in digital media isn’t stifled,” Rothenberg wrote in an open letter to the FTC. “But commission staff did not follow up with us on our offer, held no public hearings on the proposed guides and ultimately dismissed our concerns.”

According to the FTC, the impetus for the new guidelines has been an ever-increasing prevalence of company endorsers—paid either in cash or in free products and services or both—who masquerade as unbiased, “everyday” consumer reviewers in all sorts of social media forums. Specifically, Engle pointed to a Proctor & Gamble social media blitz campaign in which, she said, 400,000 moms were given free products in exchange for their cheery reviews of the same in blogs and on Twitter.

Other flagrant cases, according to Engle, included a blog reviewer who received free use of an automobile—along with free gas for a year—in exchange for an endorsement, as well as bloggers who received luxurious vacations in exchange for their supposedly unbiased endorsements of a consumer electronics product.

“Our concern is with the advertisers who pay consumers to talk up their products and make it look like independent consumer opinion,” Engle said.

While IAB agrees that brazen misrepresentation in web reviewing needs to be reigned in, what really sticks in the organization’s craw is that the FTC drew a stark distinction in its new guidelines between traditional journalists and new-media bloggers. Essentially, the agency ruled that while any blogger who receives a free product or service must explicitly reveal that fact—even if the subsequent review is negative—traditional journalists will not be held to the same standard. The FTC’s reasoning? The public has long known that journalists often receive free books, theater and movie tickets and the like from companies in hopes that those products or services will be reviewed.

“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,” Rothenberg said. “These revisions are punitive to the online world.”

Given the firestorm the FTC has ignited, the tussle over what’s fair and what’s not seems destined to continue for some time. In the interim, here’s how to protect your business based on the facts on the ground right now:

Get Your Attorney to Go Over the Guidelines: The FTC has posted a complete copy of its updated “Guides Concerning the Use of Endorsements and Testimonials in Advertising” online. If you’ve ever used a blogger to endorse your company—or you plan to—this is the first stop for you and your counsel.

Assuage the Fears of Your Bloggers: While there was undoubtedly white-knuckle fear among thousands of bloggers and other social media posters when the FTC guidelines first dropped, the agency has since assured the blogosphere that its primary mission is to go after the companies who hire them. According to Richard Cleland, the FTC’s assistant director of the Division of Advertising Practices, the agency also sees as remote the prospect of seeking up to $11,000 fines through the courts for social media reviewers who fail to reveal company ties. Instead, the FTC will first write a series of warning letters to the offenders.

Cease and Desist: If your company does secretly have bloggers singing your praises or twittering away on your behalf, now would be a good time to stop. Despite the backlash, the FTC has all intentions of moving ahead with its mission to clean up the web. There’s no reason to make your company become a poster child for the FTC’s crusade.

Be Sure to Identify All Paid Research: For years, companies have been commissioning research that casts themselves or their industry in a positive light, ostensibly offering businesses and consumers an unbiased, third-party perspective. Some companies freely admit to financing such studies. Others do not. Under the new FTC guidelines, all companies must explicitly state that they have paid for such research, especially if it’s used for marketing and promotion purposes.

Disclose the Nature of All Celebrity Endorsements: The FTC is tired of celebrities who make service or product endorsements for a company without disclosing their commercial relationship with the firm. Essentially, the agency wants that relationship made explicit. When safeguarding against this provision, ask your attorney to clarify the FTC’s definition of celebrity. Not everyone has the bankroll for Paris Hilton, but they still may be using a local former football great as a hawker.


Joe Dysart is an Internet speaker and business consultant based in Manhattan, New York.
Voice: 646/233-4089





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