October 15 – October 22, 2009 Edition

Bloggers Beware of New FTC Rules

WASHINGTON, DC/AUTHORLINK NEWS/10/15/09–The Federal Trade Commission (FTC) is implementing new rules for bloggers who endorse products or services, effective December 1. Bloggers will be required to disclose any compensation-including payments or gifts-they receive, or face possible fines up to $11,000.

Social networks such as Twitter and Facebook will need to disclose any connections or compensations that could influence their opinions. The regulation extends to book reviewers as well.

In an attempt to better understand the FTC’s position, blogger Edward Champion interviewed Richard Cleland of the Bureau of Consumer Protection by telephone. Champion’s interview provides useful insights into the rules, especially as they relate to the publishing industry. Read the full interview.

Cleland informed Champion that the FTC’s main criteria is the degree of relationship between the advertiser and the blogger.

“The primary situation is where there’s a link to the sponsoring seller and the blogger,” said Cleland. And if a blogger repeatedly reviewed similar products (say, books or smartphones), then the FTC would raise an eyebrow if the blogger either held onto the product or there was any link to an advertisement.

Champion asked what was the best way to dispense with products (including books) given to those who might endorse them?

“You can return it,” said Cleland. “You review it and return it. I’m not sure that type of situation would be compensation.”

If, however, you held onto the unit, then Cleland insisted that it could serve as “compensation.” More details can be seen in Champion’s article.

Also this week, The Specialized Information Publishers Association (SIPA) website cited this example: if an employee of Microsoft gives a Windows 7 endorsement on Facebook, that person would have to divulge any paid allegiances, though what that person has said about the product may be true.

“The big question with the new rules will be how much regulation can be done; in other words, how careful should a blogger be?” asked the SIPA. The organization quoted several attorneys:

“Chad Bowman, an attorney at SIPA counsel Levine, Sullivan, Koch & Schulz in Washington, D.C., says very careful. ‘SIPA members are well-advised to heed the FTC regulations. In addition to an FTC enforcement priority for online behavior, the standards set by the agency often evolve into the legal standard for private civil lawsuits that allege deceptive or unfair trade practices.’

“Andrew Mirsky, an attorney for Mirsky & Kong, also in Washington, DC, advises bloggers to comply as well, but wonders how regulation will play out with so many thousands of blogs. ‘My take, in a general sense, is that much of the compliance is necessarily going to have to be voluntary, because we can’t expect the government-which has limited resources-to be able to police everything. It’s sort of like the canned spam laws, intended to shut down spammers, but it probably shut down legitimate businesses and just sent other folks overseas. But ultimately, like most new government or industry rules, we’ll really have to see how it plays out. These are strong and meaningful measures, and it’s good to know that they are in place,’ he says.”

Here are some other key points from the new FTC guidelines, quoted by the SIPA:

. Gone is a “safe harbor” for testimonials, where atypical results could be promoted so long as the advertiser included a disclaimer such as “results not typical.” The FTC will now look at testimonials as a whole to determine whether they are deceptive and can be proven, or “substantiated.” Says Bowman: “This may be an important change for financial publishers or others who use testimonials in their promotional materials.”

. The FTC wants businesses that run ads to disclose payment of expenses to an outside entity that conducts a study subsequently touted in those ads: According to the report.”Although the design and conduct of the research project are controlled by the outside research organization, the weight consumers place on the reported results could be materially affected by knowing that the advertiser had funded the project. Therefore, the advertiser’s payment of expenses to the research organization should be disclosed in this advertisement.”

. It is important to note that a blogger who regularly receives free samples and then writes reviews could be characterized as an “endorser.” The FTC has taken the position that both the advertiser and the reviewer/endorser have an obligation to disclose any compensation-or else the endorsement might be deceptive. “As a result,” says Bowman, “the safest practice for a blogger or online publisher is, when writing about a commercial product or service, to disclose any compensation.”

. It is also important to be clear in your message. According to the report….”[W]here an ad conveys more than one meaning, only one of which is misleading, a seller is liable for the misleading interpretation even if non-misleading interpretations are possible.”

. Be careful in places like Facebook or Twitter when you make endorsements of services or products that you’ve used. If you’ve received anything for free, you will need to note this.

Mirsky admits that there will still be some grey areas. “Material relationships will still need to be figured out,” he says. “It’s easy if you’re accepting payments for something; but what if you’re invited to Bermuda to be on a panel? Maybe you paid for your flights but not the hotel. It’s probably just best to disclose any interest.”

Maybe what Dave Coursey wrote online for PC World is the best advice: “In summary: Tell your readers the truth and let them make the decision about your credibility.”

(Authorlink Note: We are concerned about how some of these rules will play out in the real world, and whether freedom of speech will be curtailed as a result).