Earlier this year there was an uproar surrounding the news that the FTC was proposing regulations on Social Media Marketing. Last week the FTC published the final guides, which govern endorsements and testimonials and specifically addresses online advertisers and bloggers. You'll find the official notice here:
The question everyone is asking is just how far this will trickle down – and how this will ultimately affect bloggers, online advertisers, affiliates, and even the unsolicited & unendorsed opinions and comments that are posted across discussion forums and social media sites every single day… source
What the FTC Guidelines Actually Say - And What It Means (To YOU)
In Plain English...
The first issue in the official notice (3rd paragraph) addresses Personal Experience & Results. Up to this point you were allowed to use atypical or exceptional results in testimonials and endorsements, as long as you included a simple disclaimer such as "results not typical" or "results may vary".
With the new guidelines you must also clearly disclose typical results, or what consumers can generally expect.
Basically if you write or use a testimonial or endorsement, you need to tell people that the result is not average - and you also need to tell them what the average results are.
The second issue (4th paragraph) addresses any material connection between advertisers and endorsers, meaning payment and/or free products. You must disclose any compensation you receive when endorsing or promoting a product/service.
These material connections are defined as "connections that consumers would not expect" and insinuate that your opinion of that product may be biased due to your compensation. Also that your opinion may carry less weight in the eyes of your readers due to that connection.
In addition to the official notice, there is a PDF File of the Guides Concerning the Use of Endorsements and Testimonials in Advertising. It defines endorsements and testimonials on the first page:
(b) For purposes of this part, an endorsement means any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) 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.
(c) The Commission intends to treat endorsements and testimonials identically in the context of its enforcement of the Federal Trade Commission Act and for purposes of this part. The term endorsements is therefore generally used hereinafter to cover both terms and situations.
There are 8 individual examples on pages 2 and 3 of the PDF File that define exactly what is and what is not considered an endorsement.
In these examples it seems clear that the definition relies on whether consumers may believe your opinion to be unbiased, versus seeing you as just being a spokesperson for that merchant. If they may believe your opinion or endorsement is true and based on your personal experience, you are required to disclose any relationship or compensation with the merchant.
Example 8 is particularly interesting (and potentially confusing):
Example 8: A consumer who regularly purchases a particular brand of dog food decides one day to purchase a new, more expensive brand made by the same manufacturer. She writes in her personal blog that the change in diet has made her dog’s fur noticeably softer and shinier, and that in her opinion, the new food definitely is worth the extra money. This posting would not be deemed an endorsement under the Guides.
Assume that rather than purchase the dog food with her own money, the consumer gets it for free because the store routinely tracks her purchases and its computer has generated a coupon for a free trial bag of this new brand. Again, her posting would not be deemed an endorsement under the Guides.
Assume now that the consumer joins a network marketing program under which she periodically receives various products about which she can write reviews if she wants to do so. If she receives a free bag of the new dog food through this program, her positive review would be considered an endorsement under the Guides.
The obvious conclusion being that there are no regulations or requirements if you want to share or blog about your personal opinions or your personal results with products - as long as you don't have a professional relationship or compensation arrangement with the merchant. If you do have a relationship or arrangement with the merchant, your opinions are considered an endorsement.
Another interesting consideration is found on Page 3:
An advertiser may use an endorsement of an expert or celebrity only so long as it has good reason to believe that the endorser continues to subscribe to the views presented.
This puts the responsibility on the merchant not to use outdated testimonials that may or may not still be true. This is especially important when the merchant updates or alters the product, or when competitors update or alter their products (which may mean the original endorser has since found a 'better' solution):
(c) When the advertisement represents that the endorser uses the endorsed product, the endorser must have been a bona fide user of it at the time the endorsement was given. Additionally, the advertiser may continue to run the advertisement only so long as it has good reason to believe that the endorser remains a bona fide user of the product. [See § 255.1(b) regarding the “good reason to believe” requirement.]
There are 5 more examples of very specific instances of this on Page 4 of the PDF document. The 5th example is of particular interest to bloggers:
Example 5: A skin care products advertiser participates in a blog advertising service. The service matches up advertisers with bloggers who will promote the advertiser’s products on their personal blogs.
The advertiser requests that a blogger try a new body lotion and write a review of the product on her blog. Although the advertiser does not make any specific claims about the lotion’s ability to cure skin conditions and the blogger does not ask the advertiser whether there is substantiation for the claim, in her review the blogger writes that the lotion cures eczema and recommends the product to her blog readers who suffer from this condition.
The advertiser is subject to liability for misleading or unsubstantiated representations made through the blogger’s endorsement. The blogger also is subject to liability for misleading or unsubstantiated representations made in the course of her endorsement. The blogger is also liable if she fails to disclose clearly and conspicuously being paid for her services. [See § 255.5.]
In this example the blogger is required to disclose her relationship with the merchant, meaning the compensation received for her opinion, and also that her results are not typical but rather personal experience.
The blogger should also NOT recommend this product for others with that condition, as her claim (ie her personal experience) is scientifically unsubstantiated - meaning there is not adequate research to support such claims.
Without this disclaimer, readers will believe her experience as truth, and the company and blogger are both liable for lack of same results by other users (ie misleading consumers).
From Page 5 of the PDF Document:
the advertisement should clearly and conspicuously disclose the generally expected performance in the depicted circumstances, and the advertiser must possess and rely on adequate substantiation for that representation.
In another example on Page 7 we see that the objective here is that opinions, endorsements, relationship and compensation are viewed in an accurate light - that they are either understood or fully disclosed:
Example 7: An advertisement for a recently released motion picture shows three individuals coming out of a theater, each of whom gives a positive statement about the movie. These individuals are actual consumers expressing their personal views about the movie.
The advertiser does not need to have substantiation that their views are representative of the opinions that most consumers will have about the movie. Because the consumers’ statements would be understood to be the subjective opinions of only three people, this advertisement is not likely to convey a typicality message.
If the motion picture studio had approached these individuals outside the theater and offered them free tickets if they would talk about the movie on camera afterwards, that arrangement should be clearly and conspicuously disclosed.
Pages 10-12 cover Material Connections, and include 9 more examples. The guide states that any material connection that is not reasonably expected by the audience (ie payment or free product), or any connection that might affect the weight or credibility of the endorsement, must be disclosed.
Examples 7 and 8 are of particular interest to us:
Example 7: A college student who has earned a reputation as a video game expert maintains a personal weblog or “blog” where he posts entries about his gaming experiences. Readers of his blog frequently seek his opinions about video game hardware and software.
As it has done in the past, the manufacturer of a newly released video game system sends the student a free copy of the system and asks him to write about it on his blog. He tests the new gaming system and writes a favorable review.
Because his review is disseminated via a form of consumer-generated media in which his relationship to the advertiser is not inherently obvious, readers are unlikely to know that he has received the video game system free of charge in exchange for his review of the product, and given the value of the video game system, this fact likely would materially affect the credibility they attach to his endorsement.
Accordingly, the blogger should clearly and conspicuously disclose that he received the gaming system free of charge. The manufacturer should advise him at the time it provides the gaming system that this connection should be disclosed, and it should have procedures in place to try to monitor his postings for compliance.
Example 8: An online message board designated for discussions of new music download technology is frequented by MP3 player enthusiasts. They exchange information about new products, utilities, and the functionality of numerous playback devices.
Unbeknownst to the message board community, an employee of a leading playback device manufacturer has been posting messages on the discussion board promoting the manufacturer’s product. Knowledge of this poster’s employment likely would affect the weight or credibility of her endorsement. Therefore, the poster should clearly and conspicuously disclose her relationship to the manufacturer to members and readers of the message board.
This FTC update to advertising & endorsement guidelines is the first since 1980, and was necessary due to the ever-growing influence of social media - and the web in general - on consumer buying habits.
Personally, I think it's a good thing. Disclosure equals transparency, and transparency equals trust. The more honest and objective we are in our promotions, the more likely we are to gain our readers' trust.
Up to this point skepticism has been running high and increasing every single year. Consumers are wary of scams, and wary of review sites in general. Casual polls have indicated that most consumers believe review sites are paid to endorse specific products, and therefore can't be trusted as a source for honest reviews.
The new FTC guidelines should serve to increase consumer trust over time, and ultimately result in higher conversion rates for compliant publishers.
That said, the lines drawn here are still not entirely clear. When TechCrunch asked for clarification, they were given the following response:
The question as we put it in the notice we published today is whether, viewed objectively, the blogger is being sponsored by the advertiser. (We list a number of factors to consider.) Independent product reviewers, whether offline or online, would not be viewed as sponsored by the company whose products they are reviewing.”
This leaves Affiliate Marketers asking the all-important question: Are we sponsored by the merchant, or are we independent product reviewers? If we purchase the product ourselves, are we required to disclose our relationship with the merchant as an affiliate, or disclose the fact that we earn commission on sales generated by our affiliate link within the review?
Michel Fortin discusses the FTC Update as it relates to both affiliate marketers and those who run affiliate programs in his post titled Is This The End of Affiliate Marketing?
There are many things that are not 100% clear in the released updates & documents, but some clarification was found when FastCompany interviewed Richard Cleland, assistant director, division of advertising practices at the FTC. Richard said:
The bloggers have to look at how they do their blogging, their business practice, and figure out the way that consumers will best get the message that this is a sponsored post. In terms of clear and conspicuous, the criteria there is that the consumers will notice the disclosure. Disclosures can be made in different ways, whether you make it outside of the text but in proximity to blog, or incorporate it into the blog discussion itself--those are the issues that bloggers will have discretion about."
He went on to clarify that the government is not out to slap 5-figure fines on violating bloggers, but rather that they may receive a warning and an opportunity to comply. He states there will be no monetary penalty on the first violation.
(Hear that collective sigh of relief? 😉 )
For clarification, these federal guidelines are effective as of December 1 2009 and affect the use of testimonials and endorsements and disclosure of material connections in advertising in the United States.
The bottom line:
If you are US-based and you don't already have disclaimer and disclosure statements posted on your blog or website, now is a good time to create those pages and make sure the links to those pages are plainly visible to your readers.
Also, make it a point to be as clear and honest in your reviews or product discussions as possible. Your relationship with the merchant should be obvious, your opinions should be stated as such, your results should be qualified, and you should basically go out of your way to be as objective and transparent as possible.
And otherwise... carry on. 😀