Official FTC Rules Regarding Blogging Compensation

A couple of months ago, I noted that the FTC was considering revising its rules regarding who must disclose compensation, and the rules are official now, taking effect December 1.  According to the FTC’s press release, “The notice incorporates several changes to the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, which address endorsements by consumers, experts, organizations, and celebrities, as well as the disclosure of important connections between advertisers and endorsers.”  The release also says that the Guide is linked, but, as of the time of this post, it isn’t.  Nonetheless, the key portion of the release, which applies to bloggers, states:

The revised Guides also add new examples to illustrate the long standing principle that “material connections” (sometimes payments or free products) between advertisers and endorsers – connections that consumers would not expect – must be disclosed. These examples address what constitutes an endorsement when the message is conveyed by bloggers or other “word-of-mouth” marketers. The revised Guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service. Likewise, if a company refers in an advertisement to the findings of a research organization that conducted research sponsored by the company, the advertisement must disclose the connection between the advertiser and the research organization. And a paid endorsement – like any other advertisement – is deceptive if it makes false or misleading claims.

Once the actual Guide goes live, I’ll take a look at it.

Antitrust Workshops

The last time the DOJ and the FTC devised guidelines governing horizontal mergers, it was 1992.  Seventeen years later, the agencies are coming back to the guidelines, hosting a series of workshops across the country.  (Source:  DOJ Presser.)

The topics that will be considered include:

• the overall method of analysis used by the agencies;
• the use of more direct forms of evidence of competitive effects;
• market definition;
• market shares and market concentration;
• unilateral effects, especially in markets with differentiated products;
• price discrimination;
• geographic market definition;
• the relevance of large buyers;
• the distinction between uncommitted and committed entry;
• the distinction between efficiencies involving fixed and marginal cost savings;
• the non-price effects of mergers, especially the effects of mergers on innovation;
• and remedies.

Later today, the DOJ will post a series of discussion-starting questions, which can be found here, when the page goes live.

FTC, Bloggers, and Compensation

Change must be coming soon, or else the AP wouldn’t have felt compelled to write up a story about proposed “FTC Plans to Montior Blogs for Claims, Payments.”  (I say “change must be coming soon” because the proposed guidelines (PDF) linked to by the AP are from November and the public comments period has expired, so there is ostensibly something brewing.)

Anyway, as I don’t want to diminish the AP’s timeliness and all that, let’s take a look at what some of the proposed guidelines would do to the average blogger or tweeter.

First, “the only relevant criterion in determining whether a statement is an endorsement is whether consumers believe it reflects the endorser’s views.”  In other words, “it does not matter whether the statements made by an endorser are identical to or different than those made by the sponsoring advertiser.”  (Page 12)

Second, and this is where we begin to see some teeth, is that “advertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers. [Furthermore] endorsers may also be subject to liability for their statements.” (Page 13)  (It should be noted that the proposed guidelines acknowledge that there are parties out there that would like to see private causes of action made out of these principles, but the FTC states that “the Guides merely provide insight into how the Commission interprets existing laws, and do not, in and of themselves, create substantive law.” (Page 10 n.12)  The statements leading to liability, the proposal goes on to say, may be express or implied.

Third, the FTC is proposing a new list of principles which are not currently found in the Guides.  These principles are:

1. “[A]n advertisement employing endorsements by one or more consumers about the performance of an advertised product or service will be interpreted as a representation that the product or service is effective for the purpose represented in the endorsement. Consumer endorsements convey not only that the advertised product or service worked for the consumers depicted in the advertisement, but also that it will work for others.” (Page 14)
2. “[A]n advertiser who uses consumer endorsements must possess and rely upon adequate substantiation to support efficacy claims made through endorsements, just as the advertiser would be required to do if it had made the representation directly.”  Furthermore, anecdotal consumer endorsements in and of themselves are not sufficient “to substantiate claims requiring scientific evidence.” (Page 15)
3. “[A]n advertisement employing an endorsement reflecting the experience of an individual or a group of consumers on a central or key attribute of the product or service will likely be interpreted as representing that the
   endorser’s experience is representative of what consumers will generally achieve with the advertised product in actual, albeit variable, conditions of use.” (Page 17)
4. “[D]isclaimers regarding the limited applicability of an endorser’s experience to what consumers may generally expect to achieve are unlikely to be  effective, and therefore that the Guides’ current safe harbor for such disclaimers should be eliminated.”  (This refers to those little blurbs seen most often in weight-loss ads that say “Results not Typical.”)  Thus, “the advertiser
   should clearly and conspicuously disclose the generally expected performance in the depicted circumstances.” (Pages 18 – 49)

Third, there are also proposed clarifications to use of “expert” endorsers, such as doctors, testing organizations, and hospitals.  “[A]n expert endorser must possess the level of expertise that the ad implies he or she has.”  (Page 54)  For example, a doctor endorser of a hearing aid should probably be a doctor of audiology, not exercise physiology.  Also, if an endorser claims to be a bona fide independent testing organization, but it really isn’t, “the endorsement would be deceptive.” (Page 55)  In addition, the reason a hospital might endorse a particular non-prescription drug over another may not have anything to do with the drug’s efficacy; this may be deceptive.  (Page 55)

It’s worth taking a look at the entirety of the proposed guidelines because there are a lot of examples which clarify things a little.

It also bears mentioning, as I have noted in previous posts and have recently placed in my disclaimer, that I receive no compensation from anybody when I discuss products or services.  If that ever changes, I’ll note it.