Bloggers and Advertisers Beware: New FTC Rules Impact You

Whoa! Before you ask Janet in Accounting to blog about the firm’s terrific service or you give a sample of your miracle product to cousin Ernie in the hopes that he will post an oh-wow comment on Facebook, pay heed to the new Federal Trade Commission (FTC) guidelines.

Don’t let the regulations catch you by surprise or the FTC could slap a $10,000 per day fine if it finds you making and not immediately yanking unlawful claims. What the FTC considers “advertising” may be a surprise.

For the first time in almost 30 years the FTC recently modified its guidelines on the use of endorsements and testimonials in advertising, said attorney Frank S. Hiscox, a partner with Lewis and Roca LLP who is based in the San Francisco Bay Area’s Silicon Valley. The regulations went into effect in November.

“The FTC makes clear that a blog posting can be an endorsement,” he said.

Clarity and transparency and giving consumers full and accurate information are the premise of the guidelines. The guidelines target the creating the false impression of product popularity using “viral marketing” and require clear disclosure for Internet marketing and advertising, including blogs and social networking.

Supposedly independent bloggers and those who tout products and services and promote them social networking sites such as Facebook and Twitter, must disclose any connection or relationship between the poster and the company or product.

• If the boss asks you to go on to a review site and boast about your firm, you must reveal your relationship or “material connection.”

• If a book author posts a positive review about his latest novel, he must disclose that he wrote the book.

• If a cosmetic company gives you a free face cream and asks you to go online and make a comment about its effectiveness, you must disclose that you received it for free. Double diligence is required here: If a blogger makes a false claim or misrepresentation, the blogger and the cosmetic company could be liable.

Compensation doesn’t need to be monetary, nor must there be a formal agreement for a positive post.

Also new, a blogger or poster who is either compensated or encouraged to make a positive comment, is now considered to be endorsing the product. He or she and the company could be liable if the blogger or poster makes a misleading statement or inaccurate claim about the product or fails to disclose the relationship.

Businesses that actively encourage touting their products on the Internet may be creating testimonials for which they are liable. These mentions should be monitored to make sure they are substantiated and relationships revealed, Hiscox recommends.

But wait, there’s more.

The guidelines also require new disclosures for funded studies, testing and consumer testimonials, especially those featuring miraculous weight loss testimonials accompanied by “results not typical” disclaimers, Hiscox said.

Among the guidelines:

• Endorsements must reflect honest opinions, findings, beliefs or experience of the endorsers. The endorser must be a bona fide user of the product or service at the time.

Celebrities included. A significant percentage of consumers are likely to believe the celebrities’ statements represent their own views, even though the celebrities might be reading from scripts.

• Advertisements that imply endorsements are from customers should use actual customers or, if actors are employed, disclose that conspicuously.

• Expert endorsements should clearly state the endorser’s qualifications. For example, if an engineer endorses a car there is an assumption he has professional expertise in the design and performance of automobiles. If the endorser were a chemical engineer, the ad would be deceptive.

The FTC guidelines — 16 CFR Part 255 — are packed with legalese, but the explaining examples are easily understood. Find the guidelines on the FTC Web site.

(Thanks to afagen for the photo.)


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