New FTC guidance affecting online advertising takes effect December 1, 2009

On December 1, 2009, the Federal Trade Commission (FTC) will adopt new Guides Concerning the Use of Endorsements and Testimonials in Advertising.  The new Guides can affect a wide variety of online commercial activity, including product reviews by bloggers and websites that allow consumers to rate of products and services. 

Section 5 of the Federal Trade Commission Act (5 USC  45(a)) prohibits the use of “unfair or deceptive acts or practices in or affecting commerce.”  In the new Guides, the FTC applies Section 5 to new media (such as blogging, consumer ratings, and social media), as well as other endorsement activities. 

According to the revised Guides:

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. 

The revised Guides include several guidelines to keep in mind when publishing an endorsement.  Specifically:

  • endorsements must reflect the honest opinions of the endorser;
  • an endorsement may not be presented out of context or reworded in any way so as to distort the endorser’s experience or opinion with the product;
  • when an endorsement represents that the endorser uses the product, the endorser must actually use it; and
  • when a material connection exists between the endorser and the seller of the product, the connection must be fully disclosed. 

The first and last points above are especially applicable to bloggers, social media sites, and consumer-generated reviews.  The Guides include several examples that describing how the FTC might apply the Guides to online activities.  These examples include the following scenario about a blogger who favorably reviews a product:

A college student who has earned a reputation as a video game expert maintains a [blog] where he posts entries about his gaming experiences. . . . The manufacturer of a newly released video game stem sents 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 favorably review. … 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 monitor his postings for compliance.

The Guides also include the following example relating to consumer-generated reviews and discussion board posts:

An online message board designated for disucssions of new music download technology is frequented by MP3 player enthusiasts. . . . Unbeknownst to the message board community, an employee of a leading playback device manufacturer has been posting messages on the discussion board promoting the manufacturer’s product. . . . [T]he poster should clearly and conspicuously disclose her relationship to the manufacturer to members and readers of the message board.

The FTC published the Guides in the October 15, 2009 issue of the Federal Register.  The Guides take effect on December 1, 2009.

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