Wednesday, August 24, 2011

FTC and Blogging Guest Post by Attorney Bruce C. Cohen

Bruce C. Cohen, Attorney at Law
925 Edna Ave., Kirkwood, Missouri, 63122


I. The Federal Trade Commission (FTC ) has new regulations concerning the use of endorsements and testimonials in advertising, 16 CFR Part 255. These new regulations, amending the FTC's 1980 regulations, were effective December 1, 2009. The new regulations are applicable to what the FTC describes as new media, which includes blogging.
A . The FTC has issued interpretive guides which may be found at: Guides Concerning the Use and Endorsements and Testimonials in Advertising (hereinafter referred to as “Guides”),

II. Endorsements are defined at 255.0(b) as:
For purposes of this part, an endorsement means any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser. The party whose opinions, beliefs, findings, or experience the message appears to reflect will be called the endorser and may be an individual, group, or institution.”
For enforcement purposes, the FTC looks at positive statements about a product. Accordingly, a book review that recommends a book in whole or in part, could be considered an endorsement within the meaning of 255.0(b). The FTC will treat endorsements and testimonials as the same under these regulations, 255.0(c).

III. 255.1 General considerations.
(a) Endorsements must reflect the honest opinions, findings, beliefs, or experience of the endorser.
 Furthermore, an endorsement may not convey any express or implied representation that would be
deceptive if made directly by the advertiser....
(d)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 [see Sec. 255.5]. 
Endorsers also may be liable for statements made in the course of their endorsements.”
The principal change in this section is the addition of endorsers' liability. This means that a blogger could face liability for an endorsement.
IV. The regulations distinguish between consumer endorsements and exper endorsement. Consumers are actual users of the product. Experts are individuals with some sort of superior knowledge or experience that might influence a decision to use a product.
A. Consumer Endorsements (255.2):
If an advertiser uses a consumer endorsement about a product's performance, the advertiser must be able to substantiate that performance. How does one substantiate or measure the effect or performance of a book of fiction? The Guides provide several examples of what might constitute an endorsement in the context of blogging.
Example 8 (Guides, p. 50) uses a lady blogging about a new dog food, and its effects on her pet. Let us change dog food in the FTC's Example 8 to a book. The first two examples are instructive. If a consumer buys a book with her/his own money, then writes about a book in a blog, this review would not constitute an endorsement. Similarly, if a book store tracked the consumer's purchases and gave her a gift certificate for the book, her blog still would not be an endorsement, since the publisher did not instigate the consumer's acquisition of the book.
The third example is not quite as on point since there is no objective or quantitative effect from the product. If the consumer got the book through participation in a publisher's marketing program such as a club or reward program, then the blog could constitute an endorsement, even if the blogger was not required to write about the book. Regardless, the Commission will, of course, consider each use of these new media on a case-by-case basis for purposes of law enforcement, as it does with all advertising. (Guides, p.8).
B. Expert Endorsements (255.3):
If an advertiser uses an expert's endorsement for a product, the expert's credentials must in fact give the endorser the expertise that he or she is represented as possessing with respect to the endorsement. Except in the possible case of a professional paid book reviewer, this section should not affect most book reviewing bloggers.

V. 255.5 Disclosure of material connections.
When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed.”

This is the principal section of concern for bloggers. The FTC will look to see whether a positivee statement about a book is sponsored. The FTC will seek to determine whether the blogger is acting solely independently, or acting on behalf of the publisher or its agent. At page 9 of the Guides, the FTC explains, postings by a blogger who is paid to speak about an advertiser's product will be covered by the Guides, regardless of whether the blogger is paid directly by the marketer itself or by a third party on behalf of the marketer. The FTC will look at several factors to determine whether or not a blogger is acting independently including: whether the speaker is compensated by the advertiser or its agent; whether the product or service in question was provided for free by the advertiser; the terms of any agreement; the length of the relationship; the previous receipt of products or services from the same or similar advertisers, or the likelihood of
future receipt of such products or services; and the value of the items or services received. (Guides, p. 9)

When an item is provided for free, the FTC will look at the value of the item. The FTC explains at page 10 of the Guides: “For example, a blogger could receive merchandise from a marketer with a request to review it, but with no compensation paid other than the value of the product itself. In this situation, whether or not any positive statement the blogger posts would be deemed an endorsement within the meaning of the Guides on, among other things, the value of that product, and on whether the blogger routinely receives such requests. If that blogger frequently receives products from manufacturers because he or she is known to have wide readership within a particular demographic group that is the manufacturer's target market, the blogger's statements are likely to be deemed to be endorsements, as are postings by participants in network marketing programs.”

The Guides include the following example of the applicability of 255.5 to blogging (Guides, p.79):

Example 7: A college student who has earned a reputation as a video game expert maintains a personal
weblog or ``blog'' where he posts entries about his gaming experiences. Readers of his blog frequently seek
his opinions about video game hardware and software. As it has done in the past, the manufacturer of a newly
released video game system sends the student a free copy of the system and asks him to write about it on his
blog. He tests the new gaming system and writes a favorable review. Because his review is disseminated via a
form of consumer-generated media in which his relationship to the advertiser is not inherently obvious, readers
are unlikely to know that he has received the video game system free of charge in exchange for his review of 
the product, and given the value of the video game system, this fact likely would materially affect the credibility
they attach to his endorsement. Accordingly, the blogger should clearly and conspicuously disclose that he
received the gaming system free of charge. The manufacturer should advise him at the time it provides the 
gaming system that this connection should be disclosed, and it should have procedures in place to try to
monitor his postings for compliance.”
Example 7 meets several of the FTC's criteria for sponsorship. The college student is an expert. Accordingly, it is expected that his opinion will influence his readers. He receives an item of substantial value from a manufacturer who has sent the students several items in the past. The parties have an established relationship. However, even with these significant factors, the example only suggests that the blogger should make a disclosure, and not that he must make such a disclosure. This example is instructive for the case of an average amateur reviewer who receives an advance reading cop of a $7.95 paperback. The reviewer who receives a free book should make such a disclosure, but is not required to make such a disclosure.

There is no required language for a disclosure. A simple statement that “Reviewer received a free copy of X from ____” should be sufficient.

Copyright 3/17/10

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