Washington

FTC Wants Full Disclosure in Ads

Commission guidelines will toughen endorsement policy and cover bloggers 10/11/2009 10:00:00 AM Eastern

BC/DC on the ABCs of FTC Marketing

The FTC provided a series of instructive hypotheticals as part of the guideline revisions it published in the Federal Register. Click here to read several examples of the FTC’s wit and wisdom. Click here to read more.

Consumers are long used to startling before-and-after photos in weight-loss ads, followed by the caveat that “your results may vary.” Starting Dec. 1, that vague distinction will carry little weight with the Federal Trade Commission.

Guideline changes issued by the agency last week will toughen policy on everything from endorsements to disclaimers to financial relationships with product companies. The move will undoubtedly put a crimp in on-air and marketing plans. And for the first time, it will cover bloggers.

Marketers were once safe to use before-after photos in weight-loss ads, so long as they included the now-familiar disclaimer that results could vary, must now point out what typical weight losses would be. In addition, bloggers who test and endorse products must disclose their financial relationships to the companies, and stars who talk up items or services on TV talk shows must come clean about any ties they have to the marketers or makers.

“Disclosure is appropriate because…consumers might not realize the celebrity was a paid endorser, rather than just a satisfied customer,” read the commission’s statement. The FTC also makes it clear that celebrity endorsers, not just the marketers that employ them, will be liable for false and deceptive claims.

The decision to include bloggers in the guidelines targets a growing social marketing trend in which advertisers are looking beyond traditional spots to create online buzz for a product. “What the commission has put forth today is very scary for companies that rely on word-of-mouth to promote their products,” says David A. Zetoony, a consumer-protection attorney with Bryan Cave LLP.

The FTC said a key factor in establishing whether a blog posting is an endorsement requiring disclosure was whether the blogger had been paid or supplied with the product for free. An advertiser’s lack of control over a blog would not necessarily inoculate the blog from being considered an endorsement.

Determining factors would include the value of the product supplied and under what circumstances the product was reviewed, according to the FTC: “If [a] 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 'endorsements,’ as are postings by participants in network marketing programs. Similarly, consumers who join word-of-mouth marketing programs that periodically provide them products to review publicly (as opposed to simply giving feedback to the advertiser) will also likely be viewed as giving sponsored messages.”

Not surprisingly, the blogosphere was abuzz with reaction. Billionaire blogger Mark Cuban wrote in an entry that he was worried about disclosing his love for IHOP breakfasts, and that he tipped enough to cover a free breakfast the other day. “I immediately called my law firm of Bakem, Shakem and Takem and had them assign their best attorneys to figure this out,” he wrote.

The guidelines aren’t regulations, but guidance on what would trigger the FTC to ask the Justice Department to file suit against a blogger or company.

“These new guidelines are consistent with what I call a new era of glasnost in marketing,” says Adonis Hoffman, senior VP and counsel to the American Association of Advertising Agencies (AAAA). It is now, Hoffman says, an era “where even arguably subtle marketing relationships are forced into the sunshine by government regulations.”

Hoffman adds that compliance could make ads more expensive, and the expense could be passed on to the consumer. “The FTC’s guidelines are a mixed blessing,” he says. “On the one hand, they will provide greater transparency for consumers, especially in new and cutting-edge media campaigns using buzz and viral marketing. On the other hand, the guidelines will make it more costly to substantiate claims and to comply with new rules.”

Results for marketing companies will undoubtedly vary. The operative question will be, by how much.

E-mail comments to jeggerton@reedbusiness.com

BC/DC on the ABCs of FTC Marketing

The FTC provided a series of instructive hypotheticals as part of the guideline revisions it published in the Federal Register. Click here to read several examples of the FTC’s wit and wisdom. Click here to read more.

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