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Bloggers and Paid Reviews: New FTC Guide to Endorsements

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By Admin on October 06, 2009 12:50 PM

How can you tell when a blogger or online reviewer has been paid to review a product so glowingly endorsed? Well, right now you really can't. That's part of why, for the first time since 1980, the Federal Trade Commission (FTC) has revised its guidelines governing endorsements and testimonials. The new guidelines include provisions requiring bloggers and online reviewers to disclose if they've been compensated to write the review.

Previously, we've discussed growing concerns over attempts to create false word-of-mouth buzz through blogs and online product reviews that are more akin to paid advertisements than objective reviews (sometimes called astroturfing).

The old FTC endorsement guidelines were geared toward traditional paid advertising. They allowed advertisers to pay for less than objective endorsements as long as they included the caveat "results not typical."

That safe harbor is gone under the new guidelines. Simply stated, under the new guidelines, those endorsing products or services must disclose any "material relationships" they have with the maker of the product or service. "Material relationship" means whether the endorser has received payment or "payment in kind" (i.e., free stuff). This could come straight from the maker of the product, or perhaps from a PR or advertising agency between the product and the online reviewer.

Here is the full text of the new FTC guidelines on endorsements (beginning at page 55). It contains example of common practices and how they would be interpreted by the FTC.

What's the punishment for not complying? The FTC could issue a warning letter, or pursue corrective action including a fine of up to $11,000 per violation. Both advertisers (such as a product maker) and endorsers (such as bloggers) may be held liable under the guidelines.

Some have complained that a freebie for a review is common practice, and has been the practice for reviews in traditional review outlets such as newspapers, print magazines, TV and radio, which are not subject to the same disclosure requirements.

The new guidelines, however, are not strict law. In fact, they are not law at all. They are guidelines for advertisers and endorsers meant to give them warning about how the FTC interprets existing federal law against deceptive advertising. Any action against advertisers or endorsers will be decided on a case by case basis, with the FTC still having the burden of proving a violation of federal law against deceptive ads (not simply a guideline violation).

With the rash of large scale fakery through corporate sponsored (but undisclosed) social media campaigns, it seems the FTC will be more concerned with organized attempts to mislead consumers than one-off bloggers who receive a free device to review.

And though it might be tough to fit into a tweet, online reviewers who have received freebies can simply disclose that fact to avoid running afoul of the guidelines.