November 5


FTC Says Bloggers Must Disclose Freebies

A Closer Look at the Moneyby Aaron Titus

The FTC recently announced new guidelines requiring bloggers to disclose when they get freebies in exchange for reviews. Adopted by a vote of 4-0, this is the first update of the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising in 29 years. The rules go into effect on December 1, 2009.

The FTC press release emphasizes that under the new rules, “both advertisers and endorsers may be liable for… failure to disclose material connections between [them].” Material connections include payments or free products, which must be disclosed in a “clear and conspicuous” manner. Both bloggers and advertisers may face FTC sanctions without proper disclosure, even if the advertiser contracts with an ad agency.

Here’s the bottom line: Bloggers– Clearly disclose whether you received payment or a free product when giving endorsements. Advertisers– Make sure social media marketing plans require your ad agencies and paid bloggers to disclose whether an endorsement is paid.

But bloggers shouldn’t worry too much. Simply saying something good about a product is not enough to break the new rules. Instead, there must be a “material connection” between the advertiser and endorser. This is generally understood to mean that the advertiser 1. provides consideration (ie, payment or free product), 2. in exchange for an endorsement. When this happens, the editorial independence of the endorser becomes questionable, and the relationship between the advertiser and blogger must be disclosed.

Simply blogging about a free sample will not break the FTC rules. For example, blogging positively about a free product you received from a coupon or free store sample is OK because the article is completely independent and outside the control of the advertiser. In contrast, that same blogger who receives a free product in exchange for a product review must clearly state that he or she has been compensated for their opinion.

The FTC has indicated that they plan to enforce the provisions primarily against advertisers, rather than bloggers. This creates interesting challenges for advertisers, many of whom are already reeling from social media overload. Purely consumer-generated reviews will not create liability for advertisers. However, if the advertiser initiated the process that led to consumer endorsements (for example, by providing free products to bloggers or enrolling word-of-mouth marketing programs), then the advertiser might be liable for whatever those consumers say.

In addition, simply using an ad agency doesn’t break the chain of liability. Unless advertisers are careful, they may incur liability if their advertising agency gives a free product to a blogger, who then fails to disclose the gift. Advertisers should remember that paid bloggers can now incur liability on advertisers, and in this sense, they should treat paid bloggers just like any other employee or company agent.

Tips for Advertisers:

  1. Tell Your Bloggers: Always require bloggers to include standard language such as “PAID ADVERTISEMENT,” “PAID PRODUCT REVIEW,” or similar conspicuous and unambiguous language in their posts whenever you send them free products.
  2. Watch Your Bloggers: Advertisers will be liable for misleading statements from paid bloggers. However, you may mitigate liability if you “advise [paid bloggers] of their responsibilities and… monitor their online behavior.”
  3. Tell Your Advertising Agency: In your advertising agency contract, require them to insist that bloggers disclose gifts.
  4. Ask for Indemnity: Require indemnity from your advertising agency, should they fail to notify the blogger, and treat paid bloggers like employees for liability purposes.

Tips for Advertising Agencies (especially Social Media):

  1. Market Your Knowledge: Advertisers will appreciate that you know about this new regulation. Let advertisers know that your knowledge puts you in a position to decrease their liability.
  2. Tell Your Bloggers: See above.
  3. Watch Your Bloggers: See above.

Tips for Bloggers:

  1. Be Clear: If you got paid, or if you got a free product, disclose it up front. There are no magic words. You may use plain English to describe your relationship with the advertiser in your article. If you would rather opt for the legalese-disclaimer approach, try something catchy like “I shamelessly took a free widget from Acme Co. in exchange for this review,” or “I have sold my soul and this review to Acme Co. And all I got in exchange was a free widget.” The good standby, “Paid Product Review,” should work fine (if you have no personality).
  2. Be Conspicuous: If you choose to take the legalese-disclaimer approach, your disclosure should be somewhere readers can easily see it, such as the top of the page, or before the first sentence of the article. While all-caps or bold words may not be necessary in every circumstance, they may aid in making the text stand out.
  3. Don’t Worry Too Much: First, ethical bloggers already disclose their connections with advertisers. Second, you won’t incur liability unless you are actually acting on behalf of a company when you write a product review. As a truly independent blogger, you can still write anything you want about any product you want (within the limits of the law). Now you just have to disclose whether you got paid for your opinion.

It will be interesting to see how Twitter advertisers react to this new regulation. Perhaps a shorthand for “Paid Product Review” will develop in the Twittersphere, much like “RT” for Retweet. May I be the first to suggest, “PPR,” “Paid,” or my favorite, “:-$”

Note: The author received no free products or services from the FTC (or anyone else, for that matter) in exchange for this blog article.


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