FTC regulates blogging! Insights into the new world of paid influence

The US Federal Trade Commission has released its long-awaited update to its “Guides Concerning the Use of Endorsements and Testimonials in Advertising” to now cover blogging and social media.

The headline news is that:

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.

Those contravening the FTC Act can be fined up to $16,000 per post (it has been increased in the last year from the $11,000 that has been widely reported).

In other words, the world of paid influence that we explored at Future of Influence Summit will be regulated and laid open.

This whole thing is a minefield, and I wish had more time to run through all of the issues, but here are a few top-of-mind points that need to be made about this:

Do we really need it? As reputation and credibility become more visible and measurable we will be able to assess for ourselves whether a writer is biased. By this point most of us, young and old, can make judgments on credibility of sources. Soon that will supplemented with all sorts of other measures. Regulating this is quite likely not necessary, and may have all sorts of unintended consequences, as Jeff Jarvis points out.

This implies different standards for mainstream media and bloggers. It is very difficult to infer the precise implications of this revision, but it certainly appears that bloggers are being held to higher standards than mainstream media. If so, where are the boundaries between blogs or independent publishers and mainstream media? Why the different standards? Quite a few newspapers have lower ethical standards than most bloggers.

Enforcement. This announcement does not mean that fines will be handed out on all sides. The Orlando Sentinel reports:

“These are not regulations, these are guidelines,” said Betsy Lordan, a spokeswoman for the FTC. “We are saying, ‘We think it’s a good idea if you do this.’ If you violate the guides, you are not doing yourself any favors because you could have to pay a civil penalty. There are a lot of steps that have to happen.”

Scope. The new Guides suggest that any and all “material connection” including free products need to be disclosed. However it is standard practice to provide free copies of, for example, books for review, whether for mainstream media or blogs, and that is well understood by readers. It would be ludicrous to expect book reviewers to disclose the book had been given to them for free. However an FTC executive insists that you have to return a book after you review it, otherwise you have been compensated.

Related to this point, Brian Solis gets a clarification from Mary Engle, Associate Director for Advertising Practices at the FTC:

“Independent product reviewers, whether offline or online, would not be viewed as sponsored by the company whose products they are reviewing. But if bloggers regularly receive free products from a company, the blog audience might view their reviews differently than if they went out and bought the products on their own. Under those circumstances, bloggers should disclose they got the products from the company. This is consistent with the WOMMA code of ethics. And, companies who use bloggers to generate buzz about their products by sending free merchandise should have a policy that their bloggers should disclose.”

Formats for disclosure. There are no suggestions on how to disclose paid endorsements or material connections. Do they have to be within the post or article, or can they be in a general disclosures post, as many professional journalists do? Writers will have to use their judgment, however we can presume that specific endorsements should be disclosed in a visible fashion.

Implications for Twitter. The Guides explicitly apply to “social media”, not just blogs, however there is no indication of what is appropriate disclosure on Twitter, where just 140 characters are available for the endorsement as well as the disclosure. Will inserting “$” or “paid” suffice? Or must there be a link to a complete disclosure statement?

International implications. This is the US FTC, so in effect it applies solely to social media practitioners based in the US. While bloggers anywhere in the world are effectively addressing a US audience, the FTC are highly unlikely to act with regard to foreign bloggers. While similar legislation may be enacted in other jurisdictions, that probably won’t happen soon.

This entire issue has a long way to play out.