The FTC's Mad Power GrabThe commission's preposterous new endorsement guidelines.
Posted Wednesday, Oct. 7, 2009, at 6:29 PM ET
If you're a blogger and you write about goods or services—and what blogger doesn't write about books, movies, music, theater, restaurants, home theaters, laptops, manicures, clothing, tutoring, bicycles, cars, boats, cameras, strollers, watches, lawn care, pharmaceuticals, gourmet food, maid service, hair care, concerts, banking, shipping, or septic tank service from time to time?—then you've just made yourself vulnerable to an investigation from the Federal Trade Commission.
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StumbleUponIn new guidelines (PDF) released Oct. 5, the FTC put bloggers on notice that they could incur an $11,000 fine if they receive free goods, free services, or money and write about the goods or services without conspicuously disclosing their "material connection" to the provider. The FTC guidelines extend even to Facebook and Twitter posters. If you received a gratis novel from the publicity department of a publisher and posted a tweet about it without disclosing that the book was a freebie, you become an "endorser" in the FTC's view. It could—in the name of consumer protection—hit you with a fine. The 81-page guidelines, which also mandate stringent celebrity endorsements rules, will take effect Dec. 1.
When we think about power-mad federal agencies, the FTC rarely comes to mind. This outfit usually busies itself with credit card fraudsters, intrusive telemarketers, potential violators of antitrust law, and the like. The new guidelines are meant to address another one of the beats that the FTC walks—advertising fraud. The new guidelines, which are not law, are designed to give advertisers guidance on how to stay in compliance with the endorsement and testimonial appendages of the FTC Act, and they mark the first update since 1980.
The guidelines have to be read to be believed. They are written so broadly that if you blog about a good and service in such a way that the FTC construes as an endorsement, the commission has a predicate to investigate. The only way stay on the FTC's good side is with a "clearly and conspicuously" posted disclosure of the "sponsors" who provided you with the good or service (or money) to blog about the good or service. As I read the guidelines, the FTC could investigate you if you did disclose but it was not satisfied with the disclosure.
Why is the FTC intent on hounding bloggers? It says it isn't, that the target is the growing blog-for-money business. According to the Word of Mouth Marketing Association, the biz was worth $1.35 billion in 2007. The Los Angeles Times identifies IZEA as one major company that helps advertisers place paid pitches in blogs and Twitter feeds.
A law blog produced by the Washington law firm of Arnold & Porter breaks down who, under the new guidelines, the FTC would regard an "endorser" who must disclose:
The FTC states that it will consider a number of factors including (1) whether the speaker was compensated; (2) whether the product was provided for free; (3) the terms of any agreement; (4) the length of any relationship; (5) previous receipt of products or likelihood of future receipt from the same or similar advertisers; and (6) the value of any items received. The revised Guides further state that it may not matter that the advertiser does not control whether the speaker reviews the product positively.
Seeking guideline clarification, blogger Edward Champion interviewed FTC spokesman Richard Cleland on Monday. In Cleland's view, a blogger who kept a free book that he reviewed on his site would have to disclose this "compensation."
"If there's an expectation that you're going to write a positive review," Cleland told Champion, "then there should be a disclosure."
The FTC would also take interest in blogs that keep Amazon Affiliates links on their pages or display an advertisement for the book under review, Cleland expressed.
Champion swarmed Cleland with a set of smart hypotheticals, to which he scarily responded:
These are very complex situations that are going to have to looked at on a case-by-case basis to determine whether or not there is a sufficient nexus, a sufficient compensation between the seller and the blogger, and so what we have done is to provide some guidance in this area. And some examples in this area where there's an endorsement.
In other words, the vagueness of our guidelines doth make suspects of you all.
That's not just my usual free-speech paranoia barking. The Arnold & Porter blog concludes that the FTC is likely to "define 'endorser' broadly and companies may be wise to begin inventorying to whom they are, directly or indirectly, providing free product."
Allowing these guidelines to take effect would be like giving the government a no-knock warrant to investigate hundreds of thousands of blogs and hundreds of millions of Facebook, MySpace, and Twitter users for … saying nice things about goods and services. Cleland tells Ad Age that a restaurant employee who gave his eatery a good review on Yelp would have to disclose. Given the billions of opinionated postings on the Web, there would be no end to FTC's work.
Because of a pesky thing called the First Amendment, the guidelines don't apply to news organizations, which receive thousands of free books, CDs, and DVDs each day from media companies hoping for reviews. But if the guidelines don't apply to established media like the New York Review of Books, which also happens to publish reviews on the Web, why should they apply to Joe Blow's blog? Regulating bloggers via the FTC while exempting establishment reporters looks like a back-door means of licensing journalists and policing speech.
Nobody likes deceptive advertising or fishy bloggers. But I'd rather wade through steaming piles of unethical crap on the Web than give the FTC Javertian powers to pursue shady advertorial. This is one of those cases in which the government's solution is 10 times worse than the problem.
Addendum, 8:15 p.m. Ron Hogan has his own list of hypotheticals for the FTC.
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Jeff Bercovici also waves the First Amendment flag over the FTC guidelines at Daily Finance. He's very good. Flag me at and montior Twitter feed for evidence of payola. Come and get me, FTC coppers! (E-mail may be quoted by name in "The Fray," Slate's readers' forum; in a future article; or elsewhere unless the writer stipulates otherwise. Permanent disclosure: Slate is owned by the Washington Post Co.)
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There may be an inadvertent bright side to this. A while back, Apple went after a guy who ran a rumor website for publishing some corporate secrets leaked to it by an Apple employee and refusing to disclose his source. Part of the argument of Apple's lawyers was that blogs and websites aren't real journalism and so the site in question wasn't entitled to the kind of First Amendment protection that, say, the New York Times would have had if it had run the same story. Well, it seems to me that the legal implication here is that, if you are going to hold blogs and similar web sources to the same ethical standards that you can apply to print journalism, then it follows that they indeed do fall under the general umbrella of legitimate journalism, and so enjoy the same protections as the rest of the press. Whether or not the FTC really thought this through is another question, but I bet the next time that some blogger or operator of a web site is hauled into court by somebody like Apple the defendant's attorney will make this case.
-- dfs
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I just skimmed the FTC document (which in itself makes a good case for the "government isn't the solution, it's the problem" mantra). Toward the end, it suggests that manufacturers are responsible for checking to make sure bloggers include the vaguely mandated disclosures.
Good news for out-of-work PR people, I guess, because a company of Sony's size would have to add a small department of people to do the checking, contact non-complying bloggers, verify that the disclosures have been added and that the wording meets FTC's vague standards, etc., etc.
One would think that the Federal Trade Commission might employ someone with an understanding of trade, but I guess not. Judging from this document it seems like a bureau full of hacks.
-- butterwb
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