DO YOU HAVE AN ONLINE ENDORSEMENT POLICY? The FTC thinks you should

About this time last year, the blogosphere was up in arms about the prospect that a blogger could be fined $11,000 for failing to disclose a relationship with the maker of any product endorsed online.  The cause of the uproar was the Federal Trade Commission’s new take on an existing policy dealing with the endorsement of products.  While the threats of bloggers fined and thrown in jail were greatly exaggerated, it has become clear an online endorsement policy can save you should the FTC come knocking.

The FTC online endorsement guidelines are not new law, but an effort to apply existing law to emerging media.  The FTC has always frowned upon misleading endorsements of products.  

Regulating that behavior online, however, has not been easy.  The updated guidelines target online endorsements because the FTC feels it is easier to mislead consumers online than in traditional media.  The FTC has clarified innocent mistakes will not be the subject of large fines and the stimulus package is not employing hundreds of people surfing the net looking for violators.  Instead, the FTC will investigate complaints received from consumers.  It will then seek to obtain compliance with the rules and only punish blatant or repeat offenders.  

TWO CASE STUDIES

Two recent actions show how the guidelines are enforced and how to avoid trouble.  The second public action by the FTC was fairly clear cut.  A public relations firm had employees provide glowing reviews or comments about the firm’s clients.  The PR firm then received a commission of the sales of those products purchased on the sites where their employees were posting.  There was no disclosure of the relationship.  

The FTC filed a complaint against Reverb Communications.  Reverb Communications settled with the FTC in August of 2010.  Pursuant to the settlement, the firm had to stop engaging in this conduct, remove any online endorsements that were still out there, keep documents for five years and be prepared to prove compliance should the FTC request proof in the future.  Although the FTC has said it would come after advertisers rather than bloggers, the FTC did not go after any of the firm’s clients.  The FTC did not levy any fines.

Considering this seems to be the very blatant behavior targeted by these new regulations, white hat marketers should be less concerned about innocent violations slipping through the cracks.  If the firm was not fined in this situation, it would be hard to fathom a situation when a first-time offender would be fined an excessive amount.  

The first FTC investigation against Ann Taylor Loft was a little more complicated.  It all started when Ann Taylor threw a party to preview their summer clothes.  Bloggers were provided gifts when they covered the event.  Apparently, not every blogger disclosed the fact they were given gifts when they wrote about the party and summer collection.

The FTC dropped the investigation citing the fact this seemed to be an isolated incident, there was only one party, only a few people posted about it and some actually made a disclosure, Ann Taylor had a written blogging policy, albeit after the fact, and there was a sign at the event reminding bloggers to make the disclosure.  The FTC clearly put the onus of compliance on the advertiser, Ann Taylor in this case, and not the individual bloggers.

The first investigation raised the question of whether FTC was harder on online behavior than traditional print.  Would any print media covering the Ann Taylor event have to disclose the giveaways?  The FTC has responded to these concerns by claiming most people reading a movie, restaurant or fashion review in a newspaper realize the reviewer did not have to pay for the movie, meal or clothes.  The FTC believes the online world is not so clear.

So what is the takeaway?

The guidelines have a broader implication than you might originally think.  Consider a computer company that establishes a blog and Facebook page.  When the employees post on the Facebook Fan page, do they have to disclose they are employees?  They are getting paid for their services, although they are not getting any extra compensation to post on the company page. What if the sales force is given the newest laptop to try out?  Does the company have to know if any of the sales staff have personal blogs so they can make sure they are not ”endorsing” the company’s products without fully disclosing the fact the computer was given to them or that they are company employees?  What about the sales staff’s personal Facebook pages?

These are the plausible innocent violations that may occur.  The FTC is not likely going to drop the hammer on conduct like this, but no company wants to the be named in a legal column about FTC investigations.  The FTC has said that simply listing your employer on your social media profile is not enough if it takes someone extra clicks to discover the relationship.  Unless you prevent all of your employees from ever posting anything online, there is no guaranteed safeguard to prevent technical violations.  You can, however, take easy steps to minimize the risks.  

1. Have a written policy that covers both targeted efforts with outside bloggers and for your employees to address the questions raised above.  You should notify your employees and your targeted bloggers that they should disclose any gifts or economical connections.  The FTC has made it clear; there are no magic words in the disclosure as long as the relationship is clear and conspicuous.  The facts that Ann Taylor developed a policy and included a reminder of the disclosure requirements at the event were big reasons their investigation was dropped.

2. Anytime a gift is sent to a blogger, include a written reminder of the notice requirements in the package.

3. Use some effort to monitor bloggers you know have received something of value who are blogging about your products.  Conduct random self-audits and keep records to show your written policy is more than empty words on a piece of paper.

4. There are programs that provide shorthand disclosure notices for folks concerned about the limitations of Facebook and Twitter.  

Have fun on the company Facebook page that reminds people that some people posting on there may be affiliated with the company, and when in doubt, assume they are.  By showing you are making an effort to prevent these things, you should minimize any ire of the FTC – unless, of course, you are paying for “anonymous” reviews.