Vol. 82, No. 12, December 2009
On Dec. 1, 2009, the first revision since 1980 to the Federal Trade Commission (FTC) document, “Guides Concerning the Use of Endorsements and Testimonials in Advertising” (Guides), went into effect.1 The Guides provide businesses and marketing professionals with insight into the FTC’s interpretation of “unfair or deceptive acts or practices”2 in the context of advertising that includes “endorsements” or recommendations from individual people – celebrities, experts, and ordinary individuals.
The Guides now explicitly apply to communication from bloggers and other new-media speakers and have generated tremendous confusion within those communities. Advertisers and businesses that work with bloggers also face new requirements under the Guides. Additionally, the Guides alter the current requirements for testimonial advertisements in any medium, especially the so-called “results not typical” ad disclaimers.
This article briefly describes the kinds of new media addressed by the FTC, explains the disclosure requirements that now apply to new-media speakers and the controversy around those requirements, explains what businesses and advertisers are now responsible for, and discusses the new rules for testimonial advertising in all media.
What the FTC Means by ‘New Media’
Although the FTC does not define the term new media, it refers at various times to “new forms of consumer-generated media,”3 several times specifically to “blogs,” and once to “a social networking site that allows [the member’s] fans to read in real time what is happening in her life.”4 In public discussion of the new Guides, FTC spokespeople have indicated that this vagueness is intentional – they consider the Guides to apply to any apparently consumer-generated or social media and do not want to lock the agency into 2009 technology tools.5 For the sake of brevity, this article refers to all new-media speakers as “bloggers.”
Although the group of speakers included in the Guides might appear to be extremely broad, that is not entirely true, which highlights one of the key tensions within the Guides. They apply to ordinary people communicating through blogs, Facebook, Twitter, MySpace, or any other social networking site or new media tool. However, they do not apply to clear and conspicuous corporate communication in the same format nor to established traditional media voices, even if their communication is in a new format.
Traditional magazines, newspapers, and television broadcasters may provide the exact same review of a product or service that a blogger provides, but those providers are under no obligation to disclose that the product was provided to the medium for free – even if the review is published on the medium’s Web site.6
The FTC has indicated it believes that consumers know that traditional media companies receive review products for free, but that consumers are unaware that bloggers or other less-established individual contributors might also receive a review product for free.
New Rules for Bloggers and New Media
The revised Guides’ explanation of what is required of bloggers and how they will be judged is largely unclear. And, what has been made clear is likely to cause attorneys’ clients significant frustration.
On the one hand, the FTC indicates that it does “not believe that all uses of new consumer-generated media to discuss product attributes or consumer experiences should be deemed ‘endorsements’ within the meaning of the Guides.”7 The FTC indicates that the focus will be on the relationship between the advertiser and the speaker, and that sponsored communication must be disclosed.
If the speaker is entirely independent, there is no endorsement; if the speaker is part of an overall marketing campaign, the speech is an endorsement. The Guides describe several potential tests to determine independence8 but do not provide a bright-line rule.
A free product provided by a marketing or public relations professional and reviewed positively by a blogger might or might not be an endorsement, depending on such variables as the product’s value, the frequency with which the blogger receives products, and readership size and demographics.9
In spite of all these factors, the FTC somewhat surprisingly has commented that even if the speech is part of an overall marketing campaign, if it is made on a review blog, not on a blog that generally pertains to some other issue, the speech might not be an endorsement.10 Unfortunately, the test for this is whether or not even a “substantial minority” of consumers understand that there is a material relationship between the blogger and the company, and there is no empirical research examining this question.
Liza Barry-Kessler, U.W. 1997, is the managing partner of Privacy Counsel LLC, where she works with businesses and organizations to protect their reputations, their data, and their people. Her primary practice areas are issues related to social media and to data security and privacy.
The critical take-away for bloggers is that disclosure of any material connection – whether pennies of commission from participating in an Amazon Affiliate network, free products or services, or any kind of cash payment – must be very prominent within the blog. The FTC says the language should be “easy to find, easy to read, and easy to understand,”11 but the specific examples of insufficient disclosure take the disclosure language requirement much further than most bloggers expected.12
The FTC has indicated that blanket disclosures in a blog’s “About” or “Frequently Asked Questions” section are not sufficient. Even including a disclosure at the end of a post, rather than the beginning of the post, is inadequate.13 Requiring a click-through to reach a disclosure appears to trouble the FTC. Requiring a disclosure at the beginning of any post that includes an endorsement or an affiliate link will have a substantial impact on the many blogs that earn very small amounts of money through such modest endeavors as linking to an Amazon sales page for a book or product that the blogger has purchased independently. Currently, few bloggers disclose affiliate sales relationships, such as the type described above with Amazon.com, and those that do, generally do so on an “About” or “Frequently Asked Questions” page, not on every post with an affiliate link. Many bloggers will have to make substantial changes to the way they write to reflect these new requirements.
Although bloggers and other new-media speakers are explicitly obligated to make these disclosures, they are not the FTC’s target. The Guides indicate, “As with traditional media, the Commission’s law enforcement activities will continue to focus on advertisers.”14 Although FTC spokespeople have frequently explained this point to bloggers, bloggers remain concerned. This is understandable, because the Guide’s disclosure requirements overwhelmingly burden individual bloggers as compared to large businesses that have extensive compliance experience. Furthermore, as U.W. Law Professor Ann Althouse observed:
“The most absurd part of it is the way the FTC is trying to make it okay by assuring us that they will be selective in deciding which writers on the Internet to pursue. That is, they’ve deliberately made a grotesquely overbroad rule, enough to sweep so many of us into technical violations, but we’re supposed to feel soothed by the knowledge that government agents will decide who among us gets fined. No, no, no. Overbreadth itself is a problem. And so is selective enforcement.”15
Advertisers Working with Bloggers
Bloggers are not the only parties facing new requirements under the Guides. Advertisers and businesses that work with bloggers need to monitor what those bloggers are saying about them and ensure that the bloggers are appropriately disclosing the relationship. Both an advertiser and a blogger “are subject to liability for misleading or unsubstantiated representations made in the course of the blogger’s endorsement.”16
How monitoring is to be done is left to the discretion of individual businesses and advertisers. However, business clients would be well advised to revise their writers’ agreements to require their bloggers to provide prominent disclosure as required by the Guides. Depending on the business and the kinds of bloggers with whom the advertiser or business works, the writers’ agreement might require specific language in, and locations for, the disclosure. Business clients also could develop customized graphics that include appropriate disclosure to be placed within a post. Businesses working with bloggers who are highly trusted may instead require that the disclosure include specific elements and be placed “prominently.”
Additionally, businesses should implement a regular process for reviewing each affiliated blogger’s site, making sure that the site is fully compliant with the Guides, and correcting any factual errors or misrepresentations.
Lastly, companies and advertisers should develop policies and provide training to internal employees and bloggers to make sure that they understand the need to make disclosures, the substantive requirements of the disclosures, and, if applicable, exactly how and where to place disclosures on their blogs.
This policy development and training is important for bloggers and employees who participate in the use of social media, even if an employee’s participation is not part of his or her work responsibilities. The FTC provides an example in which an employee of a maker of electronic music-playing devices participates in an online message board related to new music-playing technology. The FTC notes that “this poster’s employment likely would affect the weight or credibility of her endorsement” and therefore should be “clearly and conspicuously” disclosed.17
Training for bloggers and employees may provide a protective benefit to business clients if an FTC complaint is filed against them. The Guides specifically explain that such policies and practices would be taken into account by the FTC in considering enforcement action:
“One commenter asserted that if the employer has instituted policies and practices concerning ‘social media participation’ by its employees, and the employee fails to comply with such policies and practices, the employer should not be subject to liability. The Commission agrees that the establishment of appropriate procedures would warrant consideration in its decision as to whether law enforcement action would be an appropriate use of agency resources given the facts set forth in Example 8.” 18
There are three substantial changes or clarifications as to how the FTC will consider testimonial advertising. First, the Guides now explicitly indicate that both endorsers and advertisers can be held liable for their statements – not just the advertisers who write the scripts or the manufacturer who provides the product. Although advertisers have always been responsible for the content of their advertisements and marketing materials, this additional layer of liability may be a concern for individuals who make expert testimonials or for celebrities who endorse products.
Second, celebrity endorsements are held to the same standards as other endorsers, except in cases where it is clear that the celebrity is acting, not actually or apparently voicing his or her own opinion.19 Celebrities must disclose when they receive payment or free products or services in exchange for endorsements.20
Third, the Guides eliminate the safe harbor that previously extended to testimonials accompanied by “results not typical” disclaimers. Advertisers now must “meet the same substantiation requirements that would apply if they made that performance claim directly, rather than through the means of a testimonial.”21 In other words, advertisements must substantiate that “the endorser’s experience is representative of what a consumer will generally achieve,” or else the advertiser will be required to “clearly and conspicuously disclose the generally expected performance in the depicted circumstances.”22
This change is a result of research into how consumers’ expectations are formed by “results not typical” advertisements. This research found that even when faced with highly visible disclosure that the endorser’s results were unusual, consumers anticipated that their results would be similar to those of the spokesperson.23 This research included advertisements related to diet products, cholesterol-lowering products, and financial services.24
Although the safe harbor is gone, the revised Guides do not completely prohibit the use of disclaimers of typicality: “Although the Commission is, admittedly, skeptical that most disclaimers of typicality will be effective in preventing deception, Section 255.2 does not rule out the possibility that a clear, conspicuous, and informative disclaimer could accomplish this goal.”25
The new FTC Guides require companies to take a higher level of responsibility for how their employees, and anyone with whom they have a material connection, discuss their products in any form of social media. Companies must make sure that those material connections are clearly and conspicuously disclosed. Furthermore, companies that have relied on “results not typical” disclosures within truthful, but exceptional, results testimonials can no longer do so – the safe harbor is gone.