Bloggers, Marketers & Affiliates Beware! FTC Has Laid The Smackdown!

[blur]

To maybe move this in a different direction, I went to the page and read the summary of the revised statutes and there is one thing I have a question about:

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.

So, if I'm reading this correctly, that every time a seller gives cash or product for a review that those arrangements must be disclosed also? If Joe pays Jane $50 for a review then that cash exchange must be disclosed? If an author gives out 23 copies of their software for a review/endorsement, then that must be disclosed with the testimonial/endorsement/review.

Am I correctly reading this or making mountains from ant hills.

[darrin_cooper]

Yes, you are absolutely reading it correctly. I don't think you have to disclose how much, but the fact that cash was exchanged & there was a recipient.

It's already happening, seriously start watching commercials, not just the late night ones, but Medical Professional style commercials. I've seen a bunch today, and at the end, they are disclosing the fact that there are paid actors. If you are in the U.S. then you can verify this. I don't know what's happening oveseas in regards to commercials.

But the example I have seen is the Rostaia eye commercial, about contacts & eye drops. ( I spelt it wrong I know).

Also, yes, you are also correct in these types of disclosures, where a prominent & note worthy blogger & now company TechCrunch was started & outed one company PayPerPost for the model they had. PayPerPost used to give Bloggers money for product reviews without proper disclosures. Now, it's required of members of PayPerPost that they must state that they are being paid for their review. It's a common sense approach to a problem.

If you OWN something, or you promote it out of your own self-interest & expect to get paid, you should fess up disclose that information.

Originally Posted by blur

To maybe move this in a different direction, I went to the page and read the summary of the revised statutes and there is one thing I have a question about:

So, if I'm reading this correctly, that every time a seller gives cash or product for a review that those arrangements must be disclosed also? If Joe pays Jane $50 for a review then that cash exchange must be disclosed? If an author gives out 23 copies of their software for a review/endorsement, then that must be disclosed with the testimonial/endorsement/review.

Am I correctly reading this or making mountains from ant hills.

[David McKee]

Originally Posted by MichaelHiles

I just drank the most delicious beverage. It is called Diet Coke. It was cold and crisp, and I really liked it. I will likely drink another one soon.

This post is the express opinion of the author, and is protected under the 1st Amendment.

I am going to say what no one else is... The FTC, along with most of the other agencies of the Government, destroys everything it touches. That is doubly true with regard to Capitalism.

I state for the record that I am a Free Market, Ayn Rand Capitalist, and that Government governs best which governs least.

The bottom line is there will always be scammers - in fact here is the ultimate question:

Q: What does a scammer do when the government runs his business out of town???
A: He runs for office.

Well, that was my rant - I suppose I should tie it in to Internet Marketing: I intend to continue to use the excellent business practices I have been using. And then convert my quickly devaluing paper money to gold (have you seen the price rise today?!?!)...

And to the buyer (and the FTC) I say, as always: "Caveat emptor"

-DTM

[darrin_cooper]

I like Kool Aid.

Dan, you should try working in one of the Big 3 Accounting Firms or a large consulting firm. Your anologies about owning Coca Cola is the same concepts & rules and responsibilities set out in large companies who provide services for clients.

At these types of firms, you have to disclose EVERY stock you have, every relationship you have, EVEN your family members potential conflicts of interests. A lot of people just won't get it, but it simply about stating involvements & intentions by being open & transparent. And NO, in most of your cases, it's NOT "direct selling" --that's the point your are missing here.

My example goes back to a prominent & note worthy blogger & now company TechCrunch was started & outed one company PayPerPost for the model they had. PayPerPost used to give Bloggers money for product reviews without proper disclosures. Now, it's required of members of PayPerPost that they must state that they are being paid for their review. It's a common sense approach to a problem. Now, in regards to TechCrunch, whenever this blogger has interests, whether it be stock ownership in a company, or they have some type of monetary or secondary interest, in the blog posts, they CLEARLY state that fact, even disclosing sometimes number of shares, etc.

But hey, if the kool aid is too sweet for ya, just don't drink it......

If you OWN something, or you promote it out of your own self-interest & expect to get paid, you should fess up disclose that information.

Originally Posted by Dan C. Rinnert

What if he owns stock in Coca-Cola? What if he has a mutual fund that has some shares in Coca-Cola? What if he has a family member that works for Coca-Cola? What if he does business with Coca-Cola? What if he does business with a company whose largest client is Coca-Cola? Or, what if he just wants to make sure that people buy Diet Coke because he enjoys it and wants to make sure they don't stop making it any time soon?

In any of those cases, isn't he "selling" Diet Coke to profit from it? In each of those cases, he benefits in some way if Diet Coke sells.



Yep. Keep drinking that Kool-Aid.



Looks to me like it puts a greater burden on people that weren't committing fraud to begin with, while those that were committing fraud will just continue to do so, no?

[blur]

OK - So I have some more questions on this. I work for a company that uses testimonials A LOT in their marketing. We provide a client a service then the client sends us a testimonial.

Let's say the client pays full price for the service and they in no way get any benefits from the testimonial, what do we have to disclose? I mean we're dealing with professionals, organizations, and branches of the US Gov.

[MichaelHiles]

darrin, the problem is that word-of-mouth marketing is based on opinion. It's the most effective form of marketing - and it is usually the result of someone's personal experience with a product, service, or company. In some instances, I have liked a product so much, I have bought stock in a company (Sirius Satellite is one... Apple is one). I preach the virtues of certain products wherever I go, high and low.

The FTCs decision today essentially blocks my own expression of favor for a product that I regard highly if I don't also disclose the contents of my personal financial portfolio. I refuse to do either... stop talking about products and services that I like and disclosing my personal financial portfolio whenever I make a recommendation.

According to the FTC, this is against their rules.

It will make criminals out of millions of people daily without them ever realizing they are breaking the law.

[darrin_cooper]

Blur,

Overall, you aren't providing enough information to discuss your situation. But I'm pretty sure your legal dept. should be verifying sales/marketing materials before its put out in public.

However, it's the "statements & claims" made in the testimonial that's the issue. And it's not any old type of testimonial, it's about RESULTS based testimonial. Now, if there is a "results based testimonial" then that has to be backed up with a disclosure (it seems like the standard is going on the front pages or easy to find, etc), whereas, they will need to define whether if that person providing the testimonial received monetary compensation, OR, a freebie for giving that testimonial, AS WELL AS, a statement stating that results may be different.

Do you see the audit trail that's formed here?

In specifically answering your scenario, if a client pays for a service, receives no benefit, and provides you a testimonial, your company would have to disclose the "relationship" of the person providing testimonials.
For example: All representatives providing testimonials are Real/Actors/ have been given/not given compensation for their testimonial."

remember, Testimonials is only ONE aspect of the guidelines & legislation.

Originally Posted by blur

OK - So I have some more questions on this. I work for a company that uses testimonials A LOT in their marketing. We provide a client a service then the client sends us a testimonial.

Let's say the client pays full price for the service and they in no way get any benefits from the testimonial, what do we have to disclose? I mean we're dealing with professionals, organizations, and branches of the US Gov.

[darrin_cooper]

Mike,

I completely agree with you. And there's nothing wrong with word-of-mouth.

The example I gave was just of a blogger who discloses the relationships. I think the difference is when you represent a COMPANY and generating $120,000 a month, and your blog is focused on reviewing companies/products/services --when it has ADVERSE & SUBSTANTIAL effects on a company based on your statements, there's a big difference.

There are various different scenarios, all I'm saying is that disclosure is the best policy. But again, it's DIFFERENT, when you are someone with no influence & someone with influence. It's like having the Oprah effect.

Maybe this is how we need to look at? Ask yourself Do I Have The Oprah Effect? Can your statement, or opinion adversely effect a company largely as a whole? There's so many ways to look at this Mike, and as I stated earlier, its a Framework, put in the hands of people, and going to be executed by the FTC.

I personally think it's a good thing, as long as you use common sense.
From a consumer stand point, it's good, cause it will weed out the noise.
But it all depends on IF & ONLY IF, a large number of consumers are hurt by decisions made by a product owner or product promoter. That's how I look at it.

Originally Posted by MichaelHiles

darrin, the problem is that word-of-mouth marketing is based on opinion. It's the most effective form of marketing - and it is usually the result of someone's personal experience with a product, service, or company. In some instances, I have liked a product so much, I have bought stock in a company (Sirius Satellite is one... Apple is one). I preach the virtues of certain products wherever I go, high and low.

The FTCs decision today essentially blocks my own expression of favor for a product that I regard highly if I don't also disclose the contents of my personal financial portfolio. I refuse to do either... stop talking about products and services that I like and disclosing my personal financial portfolio whenever I make a recommendation.

According to the FTC, this is against their rules.

It will make criminals out of millions of people daily without them ever realizing they are breaking the law.

[MichaelHiles]

We depart in agreement with your belief that this sort of over-reaching, generalized draconian policy enacted by any form of government is a good thing.

The common sense in question is the common sense that is missing in the brains of the masses, who are incapable of discerning fact beyond a sound byte. Media overload has short circuited the general populace's ability to think in any rational manner.

Therefore, the government is looked to as the nanny, to protect people wherein ignorance abounds.

No FTC regulation is going to solve the root of the problem, that problem being the irony of the "information age" spawning quite possibly the most ignorant human beings to grace this planet since Lucy walked across Africa.

But while we're at it, I want to be able to apply the FTC regulation to bloggers that promote politicians and political agendas that fail. I want full disclosure of bloggers that get money from PACs to promote social reforms and other various policies. That way, when the program ends in complete disaster, all the media outlets that promote these things are held equally liable for their efforts.

Originally Posted by darrin_cooper

Mike,

I completely agree with you. And there's nothing wrong with word-of-mouth.

The example I gave was just of a blogger who discloses the relationships. I think the difference is when you represent a COMPANY and generating $120,000 a month, and your blog is focused on reviewing companies/products/services --when it has ADVERSE & SUBSTANTIAL effects on a company based on your statements, there's a big difference.

There are various different scenarios, all I'm saying is that disclosure is the best policy. But again, it's DIFFERENT, when you are someone with no influence & someone with influence. It's like having the Oprah effect.

Maybe this is how we need to look at? Ask yourself Do I Have The Oprah Effect? Can your statement, or opinion adversely effect a company largely as a whole? There's so many ways to look at this Mike, and as I stated earlier, its a Framework, put in the hands of people, and going to be executed by the FTC.

I personally think it's a good thing, as long as you use common sense.
From a consumer stand point, it's good, cause it will weed out the noise.
But it all depends on IF & ONLY IF, a large number of consumers are hurt by decisions made by a product owner or product promoter. That's how I look at it.

[David McKee]

Originally Posted by MichaelHiles

darrin, the problem is that word-of-mouth marketing is based on opinion. It's the most effective form of marketing - and it is usually the result of someone's personal experience with a product, service, or company. In some instances, I have liked a product so much, I have bought stock in a company (Sirius Satellite is one... Apple is one). I preach the virtues of certain products wherever I go, high and low.

The FTCs decision today essentially blocks my own expression of favor for a product that I regard highly if I don't also disclose the contents of my personal financial portfolio. I refuse to do either... stop talking about products and services that I like and disclosing my personal financial portfolio whenever I make a recommendation.

According to the FTC, this is against their rules.

It will make criminals out of millions of people daily without them ever realizing they are breaking the law.

Agreed - the FTC essentially has run up against the First Amendment and it will be interesting to see how the current crop of gov-mint types will deal with this when the first test case comes to court.

Frankly, they are trying to regulate opinion. Well, here's an opinion which I take full responsibility for: The FTC is an overreaching and bloated department full of hacks who never ran a business themselves and would not be able to if they tried, but who think they know what you should think and say...

That's my opinion and I don't intend to back it up - the FTC has done that for me.

-DTM

[claytons]

Guys...I think everyone's missing the bigger point here.

I think disclosure and transparency and requiring "truth" is all lovely...and I'm not afraid of it at all.

We can all say how we're so great about being ethical marketers etc. We certainly are, we never make false claims, our testimonials are true, and even the pictures are true :-)

BUT...the bigger concern is that the regulations also talk about holding the advertiser responsible.

So...what if it becomes too big of a liability for any company to have an affiliate program as they can't possibly police everyone's blogs etc.

What if...you have a product in the clickbank marketplace and an affiliate breaks the rules...you're the advertiser...are you now liable for the fines too? And while we're at it...is clickbank the advertiser? Could they possibly survive as a company with that potential liability ? Is simply having an affiliate agreement where people swear they won't do this enough to protect advertisers?

All these questions and more...are what could have the biggest impact...

[Centimetro]

Originally Posted by claytons

Guys...I think everyone's missing the bigger point here.

I think disclosure and transparency and requiring "truth" is all lovely...and I'm not afraid of it at all.

We can all say how we're so great about being ethical marketers etc. We certainly are, we never make false claims, our testimonials are true, and even the pictures are true :-)

BUT...the bigger concern is that the regulations also talk about holding the advertiser responsible.

So...what if it becomes too big of a liability for any company to have an affiliate program as they can't possibly police everyone's blogs etc.

What if...you have a product in the clickbank marketplace and an affiliate breaks the rules...you're the advertiser...are you now liable for the fines too? And while we're at it...is clickbank the advertiser? Could they possibly survive as a company with that potential liability ? Is simply having an affiliate agreement where people swear they won't do this enough to protect advertisers?

All these questions and more...are what could have the biggest impact...

Very good point. Recently we've already seen major companies cut off their affiliate program in certain regions to avoid new taxes. This seems like an even bigger deal

[5starAffiliatePrograms]

Originally Posted by claytons

Guys...I think everyone's missing the bigger point here.

BUT...the bigger concern is that the regulations also talk about holding the advertiser responsible.

So...what if it becomes too big of a liability for any company to have an affiliate program as they can't possibly police everyone's blogs etc.

All these questions and more...are what could have the biggest impact...

Really good point! Not that I think affiliate marketing is going to go away or anything, but merchants and affiliate networks are going to have to carefully stay on top of this, amend their TOS and do more policing or something.

[5starAffiliatePrograms]

Originally Posted by blur

OK - So I have some more questions on this. I work for a company that uses testimonials A LOT in their marketing. We provide a client a service then the client sends us a testimonial.

Let's say the client pays full price for the service and they in no way get any benefits from the testimonial, what do we have to disclose? I mean we're dealing with professionals, organizations, and branches of the US Gov.

You don't have the financial side to disclose then. But you still have the other part of the guidelines to deal with and disclose. You either need to be able to back up and show proof that their results are usual and customary OR you need to state that their results are not average and disclose what the average person can expect.

So if it's a weight-loss product and your testimonial lost 20 lbs in a month you have to disclose that the average customer only loses 2 lbs (if that's the case) which would seriously reduce the impact of the testimonial.

“Under the revised Guides, advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect.”

[David McKee]

Originally Posted by claytons

Guys...I think everyone's missing the bigger point here.

I think disclosure and transparency and requiring "truth" is all lovely...and I'm not afraid of it at all.

We can all say how we're so great about being ethical marketers etc. We certainly are, we never make false claims, our testimonials are true, and even the pictures are true :-)

BUT...the bigger concern is that the regulations also talk about holding the advertiser responsible.

So...what if it becomes too big of a liability for any company to have an affiliate program as they can't possibly police everyone's blogs etc.

What if...you have a product in the clickbank marketplace and an affiliate breaks the rules...you're the advertiser...are you now liable for the fines too? And while we're at it...is clickbank the advertiser? Could they possibly survive as a company with that potential liability ? Is simply having an affiliate agreement where people swear they won't do this enough to protect advertisers?

All these questions and more...are what could have the biggest impact...

Like I said - the government destroys everything it touches.

-DTM

Read Atlas Shrugged - Because it may be coming to a town near you.

[5starAffiliatePrograms]

HEY guys. This is pretty cool!

A tool to help you generate a disclosure policy and button for your site.

Disclosure Policy Generator

[nimcus38318]

Originally Posted by 5starAffiliatePrograms

HEY guys. This is pretty cool!

A tool to help you generate a disclosure policy and button for your site.

Disclosure Policy Generator

What a great find!! Thank you for pointing all of us in a constructive direction to deal with the latest FTC shenanigans!

[David McKee]

By the Way Darrin Cooper... I love your Avitar! Guy Fawkes for President, or at least let's get him down in the basement of the Whitehouse...

[darrin_cooper]

Absolutely! I feel very close to the movie! That's how I roll!

Oh yeah, it looks like that what I've been saying is proving very true.
And it's only more evident by the day. Health ads on TV & online, have been diminished.
I'm seeing ads that really & truly reflect the FTC regulations.
Ads that use to have endorsements with people talking in them, at the end, the ad is clearly stating if that endorser have received or not receive a result, as well as noting if the endorser was paid or not paid.

Bottom line, here's the rule of thumb, if you do not have an audit trail of the claims made, you are in violation. That goes for United States & anyone product online overseas as well.
Hate the government all you want, but this is definitely one regulation that actually has substance and great value, if you can see the bigger picture.

Originally Posted by David McKee

By the Way Darrin Cooper... I love your Avitar! Guy Fawkes for President, or at least let's get him down in the basement of the Whitehouse...

[Lee56]

Originally Posted by darrin_cooper

It's definitely ALL Marketers, offline, online, everywhere...I was just watching a television commercial, about the Eye Drops, I believe the problem was Rostastia...But this time, at the end of the 30 second spot, there was a major difference, they said the following:
Paraphrased:"XXXX, is an actor and not a doctor. And XXX, has been compensated for this commercial" ---

It's definitely happening already. I never heard that line ever in the commercial & now I do.

I wonder where the sales letter fictional persona fits into all this? I don't use one, but I'm curious. Copywriter Michael Fortin has an old post on his site about using an alias in the sales letter. Basically it sounds like it's fine as long as no false claims are made about the product, although I may have missed something. I think here should be some sort of statement like in the commercial you mentioned. "XXX is a fictional character." Some marketers compare to pen names on books, but that is not the same at all. The pen name on a book doesn't have an author's bio? Anyway I'm glad to see the FTC is taking steps to bring honesty to marketing online.

[opportunitiesaplenty]

Originally Posted by claytons

Guys...I think everyone's missing the bigger point here.

I think disclosure and transparency and requiring "truth" is all lovely...and I'm not afraid of it at all.

We can all say how we're so great about being ethical marketers etc. We certainly are, we never make false claims, our testimonials are true, and even the pictures are true :-)

BUT...the bigger concern is that the regulations also talk about holding the advertiser responsible.

So...what if it becomes too big of a liability for any company to have an affiliate program as they can't possibly police everyone's blogs etc.

What if...you have a product in the clickbank marketplace and an affiliate breaks the rules...you're the advertiser...are you now liable for the fines too? And while we're at it...is clickbank the advertiser? Could they possibly survive as a company with that potential liability ? Is simply having an affiliate agreement where people swear they won't do this enough to protect advertisers?

All these questions and more...are what could have the biggest impact...

This is so true.I posted on this exact concern when this whole thing came to light a few weeks ago. Companies are very sensitive to liability. This increases their liability, and decreases their ability to mitigate risk. They have only one option; shut down their affiliates, with the exception of a select few, highly vetted affiliates. This could very easily kill the affiliate marketing industry as we know it today.

The more cynical among us could point to this as yet another way the government is trying to take away a bit more of our liberty and make it more difficult for us to be independent. The more dependent upon them we are the more control they have. All in the name of protecting the people, of course.

Thankfully, I'm not that cynical......