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Thursday, November 12, 2009

"New Media" Provisions of Revised FTC Endorsement and Testimonial Guides

The Federal Trade Commission recently announced that it has approved final revisions to its Guides Concerning the Use of Endorsements and Testimonials in Advertising (16 C.F.R. Part 255), which address endorsements and testimonials by consumers, experts, organizations, and celebrities in advertising.

The revised Guides (which have an effective date of December 1, 2009) add "new media" examples to illustrate the longstanding principle that "material connections" (e.g., monetary payments) between advertisers and consumer endorsers must be disclosed.

For more of this great article and how ERSP has addressed this development please follow here http://www.venable.com/new-media-provisions-of-revised-ftc-endorsement-and-testimonial-guides-10-20-2009/

Wednesday, October 14, 2009

ERSP in the News

Here are a couple of recent articles featuring ERSP:

Vibrant White tooth whitener:

ViLift anti-depressant formula:

Final Smoke quit spray:


How delicious was the irony of Roger Daltrey, lead singer for The Who, being selected as one of the headline speakers at the 56th Annual International Advertising Festival this past June? It was Daltrey, after all, who about thirty years ago asked the “Who Are You” question that today has become the hot potato for the regulators of viral marketing, more specifically, how and should it be disclosed who is doing all this talking?

Sometime later this summer or early fall, the Federal Trade Commission is prepared to alter the marketing landscape by releasing its revised FTC Guides Concerning the Use of Endorsements and Testimonials and one of the “deceptions de-jour” that the Commission will confront head-on is the failure of a blogger or spokesperson to disclose a material connection to those listening in on the “conversation.”

As we know, there are certainly other things at stake here with the proposed revisions to the FTC Guide besides disclosure of a material connection between the “talker” (or “influencer” as my friends at the Word of Mouth Marketing Association, aka WOMMA refer to them) and that special someone that we don’t (but should) know about. For example, at the top of the list is, of course, the much-discussed “typicality” disclosure issue. But let’s set aside the typicality debate (or is it “atypicality”) for the moment and applaud something that we can all agree on (I think): Transparency!

Its like breath of fresh air for us all out there, isn’t it? Now, granted, I come from the world of advertising self-regulation. A world predicated on good faith efforts and the voluntary cooperation of advertisers. We subsist on being transparent in what we do and, in fact, we make it a point of letting the outside world see the good and the arguably not-as-good work we do by making our case decisions available to the outside world. In fact, I believe the fundamental integrity of effective self-regulation is based on being transparent and that’s why we at the Electronic Retailing Self-Regulation Program welcome the efforts that marketers will be sure to take at becoming more transparent.

Sure, there are concerns out there about the shelf-life of word-of-mouth-marketing if there is some kind of draconian imposition of disclosure to the message being communicated. Advocates of unbridled word-of-mouth argue that such disclosure is counter-intuitive to the spirit of viral marketing – i.e., the genuineness of spontaneity and disassociation from mother ship and ultimately, that marketing is not truly “word-of-mouth” if the someone who is “spreading the word” is essentially an agent-for-hire. Well, I’m not buying the argument that requiring disclosure would rain on the parade of word-of-mouth marketing. The alternative of not knowing (and the subsequent realization) that someone has a material connection to the subject of our conversation would be much more damaging to the relationship with the consumer, right? One of the specific Codes of Conduct espoused by WOMMA pertains to the Honesty ROI: honesty of relationship, opinion and identity.

It’s actually this “material connection” question that has muddied the waters in word-of-mouth and become the real source of consternation. In fact, there is a long history of efforts to ensure that consumers have the appropriate information about material connections - i.e., infomercials using consumer reporter formats, call-ins to home shopping networks by employees and testimonials by family members and co-owners. This is just the latest “material connection” issue. More are sure to come…

It’s also important to note that any marketer who compensates a third-party consumer for communicating a message to another consumer without disclosing that the “word-of-mouth” is paid for already violates section 5 of the FTC Act which prohibits unfair and deceptive practices. So give the FTC a little credit here because they are deliberately trying to provide us with some up front guidance - when nothing really requires them to do so.

One of the real compelling aspects to this issue is when determining if the compensation is of substantial enough value to be “material.” One example proposed by the FTC involves a blogger who is provided with a free copy of video game and then writes a positive review of the game. The proposed verdict? - Material connection. Another proposed example involves an infomercial producer including consumer endorsements for an automotive additive product featured in a commercial, but because the product has not yet been sold, there are no consumer users. Extras interested in endorsing the product and who will receive a small payment are considered as having been “materially compensated” (because viewers would not expect that these ‘‘consumer endorsers’’ are actors being compensated to appear in the commercial). What about the kid who signs up to be part of a ‘‘street team’’ program that receives points that can be exchanged for prizes each time he or she talks to his or her friends about a particular advertiser’s products? This borders on something called “astroturfing,” and the proposed revisions to the Guides would find that requires disclosure is necessary because the connection is considered “material” to the listener.

The true lesson to be learned here is that bloggers and street journalists are now in the epicenter of the regulatory debate regarding disclosures about their relationship to products and marketers and the long-standing practice of employing third-party spokespeople is being closely scrutinized. So with increased liability heading straight toward the word-of-mouth marketer, the time is right to take stock and carefully examine practices and procedures to help address the disclosure issue up front. Written guidelines between agencies and clients, agreements with outside third-party experts or celebrity spokespeople should be considered as part of the equation.

The new age of transparency and disclosure will hardly mean the death of word-of-mouth marketing and as with any true day of reckoning, the strong and the brave will survive. Now, somewhere along the line will a well intentioned Cyrano de Bergerac be forced to disclose his connection in a relationship with a consumer he’s hoping to court? Maybe, but this ultimately will be a small sacrifice for an industry that so greatly treasures the priceless relationship between the marketer and its consumer.