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Avoiding FTC Fines for Endorsements

 

CliffsNotes For Bloggers To Avoid The FTC's $11,000 Fine For Endorsements


If you've already read - and clearly understand - the 81-page Guides for the use of Endorsements and Testimonials in Advertising issued by the FTC on October 5, 2009, then read no further.

However, if you're a blogger or other producer of consumer-generated online content, and you're not quite sure about how to decipher the legaleze or how to comply with the Guides, then this article may be for you... particularly if you're more than a little concerned about avoiding the $11,000 fine for non-compliance.

What's This All About, Anyway?
I've read bloggers' comments to the effect of "why is the Federal Trade Commission sticking its dad-gum nose into the blogosphere -- how far will this go?" That's one way to look at it - as an unnecessary intrusion by the government.

Another way to look at is that the Guides represent an "official" recognition that blogging has passed its adolescent stage. Blogging has grown up, and the FTC is the so-called new sheriff in town.

Now, any producer of consumer-generated online content - bloggers, podcasters and video producers - is being treated to the same truth in advertising rules that other businesses in the brick and mortar world have been living with for a long time.

When Do Bloggers Become Endorsers?
This is the key threshold question. If a blogger is not an endorser, then the Guides do not apply. However, if the blogger is an endorser, then the Guides apply and with them, potential liability.

If you want to actually read the Guides to find the answer, go to new Example 8 (pp. 50-51). Example 8 provides 3 scenarios where a consumer reviews a product or service on a blog:

no endorsement - a consumer purchases a product with his/her own money, and posts a review or opinion on a blog (result: Guides do not apply do not apply because there is no relationship at all with the advertiser; no worries);
no endorsement - same scenario, except that a coupon for a free trial of the product is generated by the store's computer, based on his/her purchases (result: Guides do not apply because there is no relationship with the advertiser indicating "sponsorship"; no worries); and
endorsement - the consumer is part of a network marketing program where he/she periodically reviews products and receives a free product for which he/she writes reviews (result: Guides apply because there is a relationship with the advertiser based on the stream of free products indicating "sponsorship"; there are legitimate worries about how to comply with the Guides).
Suggestions For Bloggers Who Act as Endorsers
If you're a blogger who acts as an endorser, then you should take care to understand and comply with the Guides to avoid a $11,000 fine by the FTC.

In simple terms, the basic rules are these:

disclose "material connections" you receive for promoting someone else's product or service, and
disclose typical results that should reasonably be expected from a product or service ("results not typical" disclaimers won't work anymore).
The real trick is understanding how to comply with these basic rules. The following is a list of examples and suggestions to assist you:

if you purchase a product and pay for it with your own money, then blog about it, you're not regulated by the Guides - no worries;
if you are paid for product review, you should disclose who paid you that you were paid for the review (you're clearly regulated by the Guides);
if you regularly get free products and blog about them (e.g. a book reviewer), you should disclose who sent you the product and that it was free (you're clearly regulated by the Guides);
however, if you don't routinely blog about products, or you don't routinely receive free products, but you receive a free product that's not very valuable and you blog about it, you're probably not regulated by the Guides;
even if you write a negative review of a product or service you're not off the hook -- if you're required by the Guides to make disclosures, the disclosure rules still apply, even to negative reviews;
if you're an endorser, you should be a bona fide user of the product or service at the time the endorsement is given - fake endorsements are deceptive, and won't comply with the Guides;
disclosures should not be after-the-fact; they should be made at the time of the endorsement and live with it;
disclosures should be clear and conspicuous - it's not required that the disclosure be in ALL CAPS, but all caps disclosures would go a long way toward satisfying the clear and conspicuous requirement;
example disclosure: FTC GUIDES NOTICE: I RECEIVED THIS PRODUCT FROM XYZ, INC. FREE OF CHARGE, or FTC GUIDES NOTICE: THIS PRODUCT WAS PROVIDED FREE OF CHARGE BY XYZ COMPANY; and
if you regularly get free products and blog about them (e.g. a book reviewer), you might consider adding a clause to your website's Terms of Use regarding this business practice.
Conclusion
Prior to the issuance of the Guides by the FTC - which go into effect on December 1, 2009 - the blogosphere was sort of like the wild, wild west. Few if any rules, anything goes... and that sadly included fake endorsements and material relationships that weren't disclosed.

The Guides were intended to address some of these abuses. Despite the good intentions motivating the Guides, there are legitimate concerns that the Guides may have gone too far. Critics argue that they are overbroad, and that they may create as many problems as they solve. Legal scholars debate whether they are contrary to established legal precedent.

Despite the misgivings of some and debate among legal scholars, the new FTC Guides are here to stay. They represent not only a win for consumers, but also a wake-up call to bloggers. The blogosphere has now come of age, and this requires a much greater sense of responsibility in a highly regulated environment.

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