November 9, 2009
by Justin J. Prochnow
Companies trying to stay ahead of the curve are constantly coming up with innovative and creative methods of advertising in order to generate buzz about their products. In the last several years, the use of blogs that endorse and promote products has become an increasingly popular form of media used in advertising. This use of blogs and other forms of new technologies that continue to percolate the advertising arena to promote products forces regulatory agencies like FTC to continually review their enforcement arsenal and determine whether the available enforcement guides and regulations are sufficient to keep up with the changing technological landscape. The approval of revisions to the FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising, which become effective Dec. 1, 2009, signifies FTCs recognition that the former FTC Guides were outdated, and represents the first revision to the FTC Guides in almost 30 years. For companies looking to promote products, it is critical to understand how the revised FTC Guides will be applied to blogs and other forms of newer media
First, its important to understand some of the basics. A blog is a type of Web site, usually maintained by an individual, which maintains an ongoing chronicle of information, often containing regular entries of commentary, descriptions of events, or other material such as graphics or video. As the prevalence of blogs has continued to rise at a rapid rate, focusing on topics ranging from sports and politics to movies and sex, and everything in-between, the use of blogs as a form of marketing or advertising to promote and endorse products has also risen. Some bloggers make no effort to hide their affiliation with a products sponsoring company; in other cases, it may not be clear that the opinions presented on a blog promoting a particular product are being subsidized by the sponsoring company. Additionally, there are many bloggers who have no connection to a company and are simply offering an unsolicited opinion about a product. The wide gamut of blogs and differing levels of affiliations to companies and products made it difficult for FTC to appropriate regulate this form of media. The revisions to the FTC Guides, in part, reflect the agencys efforts to address the issues raised by blogs and other media.
The FTC Guides provide guidance concerning FTCs regulation of endorsements and testimonials in advertising. The FTC Guides are located in the Code of Federal Regulations at 16 CFR Part 255. Essentially, 16 CFR § 255.0(b) states an endorsement is any advertising message consumers are likely to believe reflects the opinions, beliefs, findings or experiences other than the sponsoring advertiser. Consumer testimonials are considered a form of endorsement. The notice regarding the publication of the revised FTC Guides discusses comments received by FTC about certain of its revisions. In particular, the agency received numerous comments about the application of the FTC Guides to the new consumer-generated media, including blogs.
Not all uses of new consumer-generated media to discuss product attributes or consumer experiences should be deemed endorsements. The fundamental question, from FTCs perspective, is whether, when viewed objectively, the relationship between the advertiser and the speaker is such that the speakers statement can be considered sponsored by the advertiser and, therefore, decreed an advertising message. In other words, in evaluating positive statements made about a product or service, FTC will consider whether the speaker is (1) acting solely and independently, in which case there is no endorsement; or (2) acting on behalf of the advertiser or its agent, such that the speakers statement is an endorsement that is part of an overall marketing campaign. The facts and circumstances that may influence FTCs final determination of this question include:
whether the speaker is compensated by the advertiser or its agent;
whether the product or service in question was provided to the endorser for free by the advertiser;
the terms of any agreement;
the length of the relationship;
the previous receipt of product or services from the same or similar advertisers;
the likelihood of future receipt of such product or services; or
the value of the items or services received.
The fact that the advertiser or sponsor of the product may not have control over the specific statement made on a blog (or some other media form) does not automatically disqualify the statement from being deemed an endorsement by the advertiser; the main issue is whether the consumer-generated statements can be considered sponsored. Thus, a sponsor who buys a product with his or her own money and praises it on a personal blog will not be considered to be providing an endorsement, while promotion of a product by a blogger who is paid to speak about a particular product will be considered an endorsement, regardless of whether the blogger is paid directly by the sponsoring company or by a third party on behalf of the sponsoring company.
If the promotion is an endorsement, the FTC Guides provide further illumination regarding the regulatory requirements for an endorsement, such as the requirement to disclose any material connections between the endorser and the sponsoring company or the need for all endorsements to be truthful, and not misleading. Additionally, the FTC Guides include various examples that give an indication of how FTC is likely to treat certain situations; Example 8 to 16 CFR § 255.0 provides FTCs thought process concerning blogs under three different fact scenarios.
The revised FTC Guides also address the liability of endorsers and advertisers for endorsements made on blogs. While the agency recognizes advertisers do not always have complete control over the content of statements made on blogs, FTC pronounced, in its Notice, that if the advertiser initiated the process that led to the endorsements being made, such as funding the blog or providing free products to the blogger, the advertiser may be liable for misleading statements made by the blogger. Essentially, FTC has determined that by employing a blogger to endorse a product, the advertiser has assumed the risk that an endorser may fail to disclose a material connection or misrepresent the product. While the agency may consider the advertisers efforts to advise the bloggers of their responsibilities in determining what action is warranted, this clearly places a burden on the advertiser to monitor the statements made by a blogger with a connection to the advertiser.
The FTC Guides clearly indicate the agency is going to take a close look at endorsements made on blogs and other forms of consumer-generated media. The central question FTC will ask is: What relationship exists between the blogger/endorser and the advertiser or sponsoring company behind the product? If the company responsible for the product is ultimately providing some compensation or other benefits to the blogger in exchange for expressing his or her views about the product, FTC will consider such statements to be endorsements, subject to the FTC Guides.
Justin J. Prochnow is a senior associate in the Denver office of the international law firm of Greenberg Traurig LLP. His practice concentrates on legal issues affecting the dietary supplement and natural products industries. He can be reached at (303) 572-6562 or [email protected] .
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