Bloggers have been buzzing since the Federal Trade Commission (FTC) updated its Guides Concerning Use of Endorsements and Testimonials in Advertising (“Guides”) to cover “consumer generated media” such as blogs and other Internet media forms. (16 C.F.R. Part 255) (.PDF) The changes are the first update since 1980 for the Guides, which are intended to offer guidance to compliance under 15 USC § 45 (“Unfair methods of competition unlawful; prevention by Commission”). While the FTC describes the Guides as providing “the basis for voluntary compliance with the law by advertisers and endorsers”, the Guides could form the basis for an enforcement action by the FTC, and noncompliance may result in a civil penalty of up to $10,000 per violation.
In the interest of providing consumers with full disclosure, the updated Guides require bloggers to disclose any “material connection[s]” they have with producers of any products that they “endorse” on their blogs. A “material connection” includes not only monetary compensation, but also any free good received by the blogger—even if that good was provided unsolicited, with no conditions attached, for the purpose of allowing the blogger to review the product. Under the Guides, “endorsers” and companies must fully disclose any connection between “the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement.” In an effort to further explain the intent behind the Guides, the FTC has provided 35 example fact patterns in the Guides, and even an instructional video.
Much of the recent media attention to the updated Guides has addressed the required disclosure by bloggers who write about products after receiving free samples of the product or other financial benefits from the product manufacturers. Companies, however, should also be aware of the recommendations and examples set forth in the Guides, and how the Guides might apply in at least two modern contexts: (1) with respect to a company’s interactions with bloggers, and (2) with respect to a company’s own social media or other customer-interactive online presence.
(1) Interactions with Bloggers
Example fact patterns in the Guides make it clear that companies providing free products to bloggers, in addition to the bloggers themselves, will be subject to the Guides. The very first reported FTC investigation after issuing the new Guides resulted from the Ann Taylor retail clothing company inviting bloggers to a collection previewing event where it distributed gifts to attendees. A closing letter (.PDF) from the FTC to Ann Taylor’s attorneys states that the FTC’s inquiry “focused particularly on [Ann Taylor’s] provision of gifts to bloggers who attended . . .” and that the FTC was “concerned that bloggers who attended . . . failed to disclose that they received gifts for posting blog content about the event.”
Though the FTC is not currently recommending enforcement action against Ann Taylor, the fact that the inquiry took place should be of concern to retailers or service providers who communicate directly with bloggers, and certainly to any companies who make a practice of sending free merchandise or gifts to bloggers. Also of importance is the FTC’s noting of three factors that it took into consideration in not recommending enforcement action, namely: (1) the preview event was the first and only one of its kind for the company, (2) “only a small number of bloggers” posted content about the preview, and (3) Ann Taylor subsequently adopted a written policy stating that it “will not issue any gift to any blogger without first telling the blogger that the blogger must disclose the gift in his or her blog.”
(2) Social Media Presence, Consumer Generated Media Interactions
When participating on a company Facebook page, on-line chat, wall, discussion, or message board, if a company employee is making statement or representations promoting the company or a company product or service, the company should ensure that the employee should clearly disclose his or her relationship to the company.
“Endorsement” in the context of the Guides is not limited to celebrity or expert endorsements. Instead, an “endorsement means any advertising message . . . that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser. The party whose opinions, beliefs, findings, or experience the message appears to reflect will be called the endorser and may be an individual, group, or institution.”
In the absence of the disclosure of such a “material connection,” an employer could find itself liable for damages suffered by a consumer who relied upon an inaccurate, inappropriate statement by one of its employees.
If a blogger posts a statement about his or her employer’s product or service, the FTC has taken the position that a person “should clearly disclose her relationship to the manufacturer to members and readers of the message board,” on the theory that a consumer’s understanding of the “poster’s employment likely would affect the credibility of her endorsement. Company employees posting on a company’s own Facebook page, for example, should be aware that general users visiting the page might expect that what appear to be causal wall postings and commentary are not being posted by company employees with a financial and professional interest in promoting the products. Accordingly, any praise for company products or services, or any other type of communication which could be construed as an endorsement, should include a clear disclosure that the person making the post is an employee. Further, companies and employees making such posts must take care to avoid making any representations or claims about products which the company has not substantiated or which company would not make in a more traditional marketing context.
While it remains to be seen how the FTC intends to construe the new Guides in choosing to investigate or recommend enforcement actions, companies should familiarize themselves with the Guides to avoid unnecessary risks when interacting with blogs, social media sites, other "consumer generated media", and the people who publish therein.