FTC Cracks Down on Blogger Payola, Celebrity Tweets

Rules on Endorsements and Testimonials Extended to Social Media

by Michael Learmonth
Published: October 05, 2009

NEW YORK (AdAge.com) -- The Federal Trade Commission is cracking down on blogger payola.

The agency, which protects consumers from fraud or deceptive business practices, voted 4 to 0 to update its rules governing endorsements, and the new guidelines require bloggers to clearly disclose any "material connection" to an advertiser, including payments for an endorsement or free product.

It's the first time since 1980 that the FTC has updated its rules on the use of endorsements and testimonials in advertising. In addition to covering bloggers, the new FTC rules state that celebrity endorsers can be held liable for false statements about a product, and all endorsements must include results consumers can "generally expect." Previously, an advertiser could cover their claims by the disclaimer "results not typical."

But the new rules on bloggers are the most far-reaching attempt to stamp some guidelines of conduct on the blogosphere, which generally operates according to informal codes and the notion that "inauthentic" bloggers -- including those not disclosing commercial relationships -- will suffer in the web's court of public opinion.

The new rules go into effect Dec. 1, and penalties include $11,000 in fines per violation. The FTC wasn't specific about how disclosures must be communicated but said its decisions would be made on a "case-by-case" basis.

Rules for everyone
Specifically covered in the new rules is the use of social media, such as Twitter, by celebrities to endorse a product. That's now a no-no unless the commercial relationship is disclosed. So, too, are celebrity mentions of products in other media, such as talk shows.

But the new rules on blogging will have the farthest-reaching influence. They are, in effect, the first rules imposed on a general public that no longer needs access to TV, print or radio to publish opinions or create a personal media channel.

"In 1980 most of all advertising was disseminated by the advertisers themselves; today a good part of that advertising is being disseminated by users," said Richard Cleland, assistant director- division of advertising practices at the FTC.

The government agency has been reviewing its nearly 40-year-old rules on testimonials and endorsements for the better part of a year, and marketers have been anticipating a change.

The new guidelines for social media are "relatively consistent with preexisting principles that have applied to traditional forms of advertising," said C. Lee Peeler, president and CEO of the National Advertising Review Council. Some think the rules could spur brand involvement in the social media space by better defining what's OK and what's not.

Clearing the air
"The legal departments of big brands don't like ambiguity, and that has been a challenge for us," said Joe Chernov, VP-communications for word-of-mouth marketing firm BzzAgent.

Now that the dust has settled, the rules are more or less clear, he said. "If a consumer's speech has been materially influenced by a marketer, it must be disclosed. That speech, the consumer's speech, also must be restricted to their own personal experience," he said.

Within the text of the new rules, the FTC gives many hypothetical scenarios, including that of a college student who maintains a "blog where he posts entries about his gaming experiences." If that student receives a console from a gaming company and posts a review, "the blogger should clearly and conspicuously disclose that he received the gaming system free of charge."

Mr. Cleland said the guidelines include posts on review sites such as Yelp or online stores such as Amazon, where the writer is being compensated in some way. That would include an employee of a restaurant giving it a stellar review, or the author of a book.

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Contributing: Abbey Klaassen