FTC: Bloggers must disclose material connections to endorsed products

In a unanimous vote this morning, the US Federal Trade Commission has decided to enact changes to federal code regarding truth in advertising and in product endorsement, including the first such extensions to regulate the activity of bloggers. Acknowledging that bloggers may be individuals who publish their opinions online without compensation, but with a wide audience, the FTC voted to enact new regulations beginning December 1 to compel bloggers to reveal all material connections that may have led them to endorse a product, even if that endorsement honestly reflects how bloggers feel about it.

The amendments will come in the form of changes to the FTC's Guides Concerning the Use of Endorsements and Testimonials in Advertising, last amended in 1980. During a public comment period, the FTC acknowledges it received several comments from unnamed citizens arguing that the nature of new online media makes it impossible to draw a distinct dividing line between, say a "blog" and a "publication," or a "commercial blog" and a "personal blog" (both may include advertising).

But commissioners openly disagreed with what it admitted was a large plurality, if not a majority, of comments: They concluded that the nature of new media does not fuzzify any connection that may exist between a person whose published comment states a product is good, and the manufacturer who may have supplied that person with the product (and perhaps something else) with the expectation that the person would publish an opinion of that product one way or the other.

"For example, a blogger could receive merchandise from a marketer with a request to review it, but with no compensation paid other than the value of the product itself," reads this morning's public notice of changes to the FTC's Guides (PDF available here). "In this situation, whether or not any positive statement the blogger posts would be deemed an 'endorsement' within the meaning of the Guides would depend on, among other things, the value of that product, and on whether the blogger routinely receives such requests. If that blogger frequently receives products from manufacturers because he or she is known to have wide readership within a particular demographic group that is the manufacturers' target market, the blogger's statements are likely to be deemed to be 'endorsements,' as are postings by participants in network marketing programs."

A positive review becomes an endorsement, according to new FTC guidelines, when a blogger receives something from the manufacturer. It does not have to be in exchange for the endorsement -- there's no underlying "tit-for-tat" or back scratching involved. In an effort to draw a clear distinction of when an endorsement happens, commissioners offered three hypothetical situations: If a blogger makes a positive comment about a product and never received anything of economic value from its manufacturer (e-mails or press releases don't count), then it's not an endorsement. On the opposite extreme, if a blogger makes the same positive comment and the blog is capable of advertising the product to such an extent that it can even generate coupons for potential buyers, it's not an endorsement if the blogger still didn't receive anything of economic value from the manufacturer.

If the blogger did receive something, it's an endorsement.

What if the blog is an internal one for a company or organization that employs the blogger, and not meant for the general public? It's not an endorsement yet, says the FTC. If the manufacturer is able to quote from that blog in its own marketing, and the blogger enabled the manufacturer to do so, however, then it's an endorsement.

Up until now, many have questioned whether the FTC should have or claim the authority to regulate what they consider to be individuals' free expression. In an effort to draw the appearance of a clear black-and-white issue, the commissioners this morning explain that it's not free expression that they're trying to regulate -- instead, they're trying to curb the use of deception in the marketplace.

To do this, the FTC clearly place bloggers in the realm of "consumer-generated media" -- which is a risky choice given the fact that even major media publishers, quite obviously, produce online publications that they call "blogs." By equating bloggers with consumers, the FTC takes steps to point out that any consumer activity done under the influence of a marketer, is subject to federal regulation and guidelines. This way, a manufacturer or vendor cannot use its influence upon a blogger in place of influencing a commercial publisher, under the premise that guidelines that regulate major media don't apply to minor media.

Would major media publishers be suddenly disinclined to refer to their products as blogs, now that federal regulations regarding liability for fraud and deception will apply to them as well? No, it would appear from the FTC's notice this morning, because the same laws that applied to them in 1980 will still apply to them today, whether they call their publications "blogs" or "scrolls" or "smoke signals."

So what must bloggers do? Would they be allowed, for instance, to post boilerplate disclaimers mentioning the fact that they tend to receive the products they review? Yes, the FTC decided, under the notion that if such disclaimers were factual and well-written, it can't and shouldn't do anything to stop them from being posted.

But any disclaimer should be clear and conspicuous, not hidden. The FTC acknowledges it can't do much about the fact that disclaimers used in advertising are typically ignored by viewers (which is a big problem in the case of pharmaceuticals), but bloggers can do something to make their material connections to the products they write about more obvious.

In an amendment to an example the FTC has used before, commissioners outlined a case where a hypothetical game reviewer actually receives a video game system from its manufacturer, and posts a positive review about it on his blog: "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," commissioners write, "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."