A New Sheriff in Cyberspace?
Those who frequent the Wild West of social media know that the online world is a new frontier for all sorts of viral or anonymous campaigns to promote ideas, products or services. Many of these campaigns have been funny; some have been outrageous. And none had been clearly subject to any sort of regulatory guidance that specified whether a commenter or reviewer had to disclose that someone may have paid for a promotion, plug or other content – that is, until last year, when the Federal Trade Commission announced there was a new sheriff in town.
In October 2009, the FTC issued revisions to its guides about what constitutes a deceptive or misleading testimonial or endorsement of a commercial product or service and clearly stated that these revised guidelines would apply to all paid-for advertising, endorsements and testimonials in whatever forum, including webcasts, blogs, tweeting and social media. Pursuant to those revised guides, any online post, tweet or other published content that (i) promotes or otherwise makes any representation, in any manner, about a product or service or the user of a product or service; and (ii) is posted by a person or entity that either is materially connected with or who has received consideration from the seller or provider is supposed to disclose that material connection (unless that connection should have been reasonably expected by consumers) or risk being deemed deceptive advertising. In particular, the FTC specified that employees of a manufacturer or distributor of a product or service or any one who receives cash or in-kind payment to review a product or service should clearly disclose that relationship.
Several online commentators shot back at the revised guides, arguing that they would become a means to expand the government role in cyberspace. The FTC deflected these concerns, contending that it was merely protecting consumers from being deceived by paid or self-interested hucksters that failed to disclose the sort of relationships that might affect how a consumer reads a particular review or testimonial. Some bloggers griped, but generally held further fire.
The FTC has recently reached into its holster and issued a public notice describing its first negotiated enforcement action with respect to its new sponsorship ID guidelines and online content. The notice announced a negotiated settlement order with an online promoter, Reverb Communications. Reverb allegedly posted positive reviews of mobile gaming applications (“apps”) without identifying that: (i) it had been hired to promote the games; and (ii) it was receiving a percentage of the games’ sales. See http://www.ftc.gov/opa/2010/08/reverb.shtm.
The proposed consent decree is fairly limited. Among other matters, the agreement bars Reverb and its sole owner from misrepresenting that its representatives are independent, ordinary consumers or from making user claims about a product or service without disclosures sufficient to be perceived and understood by the ordinary consumer. What is a sufficient disclosure may vary depending on the medium. Also, Reverb must take down positive reviews that did not disclose that it or its employees had been paid to promote certain apps, notify its employees of the FTC requirements and submit a report regarding its efforts to the FTC. Although the proposed consent decree did not fine Reverb, and Reverb did not admit wrongdoing, this warning shot by the FTC should inform any online or other media campaign intended to boost interest, whether in a company’s own products or services or those of an entity that advertises on a company’s media outlets. Finally, because the FTC cannot shoot first and ask questions later, the proposed consent agreement is available for public comment through September 27, 2010.
Given the fighting spirit of many bloggers, the comments may prove to be yet another shooting match.