FTC to Regulate Bloggers Who Endorse Products

The Federal Trade Commission (FTC) has long prohibited deceptive and unfair business practices that affect American consumers. To assist businesses in avoiding such practices, the FTC publishes what it terms "Guides" on topics such as product endorsements and testimonials. Until this week, it was not entirely clear to what extent the FTC's rules apply to bloggers who review and endorse products, even though most would agree that it has long been clear that advertisers were already responsible for misleading blog entries that were done at the request of the advertisers. Unbeknownst to many consumers, bloggers sometimes receive compensation (through cash or free products) from companies in exchange for favorable reviews of their products.

As of December 1, 2009, the FTC's enforcement of deceptive and unfair business practices will specifically apply to bloggers who review products in exchange for money or free products, together with the companies that offered the payment to the bloggers. Under the newly revised Guide on endorsements and testimonials in advertising, which had not been revised since 1980, the FTC will require that bloggers disclose "material connections" with the seller of the product or service that the blogger is reviewing. The FTC clarified that a blogger receiving and reviewing a free product without the company's knowledge of the give-away would not establish a "material connection" requiring disclosure. This will allow a person to receive a product as part of a retailer's promotion, for example, and then blog a review of the product.

The FTC also updated the Guide to require advertisers that feature testimonials in their ads to clearly disclose what consumers should generally expect to experience with their products. The oft used "results not typical" following a testimonial, which was acceptable under the 1980 FTC Guide will no longer be sufficient to keep the FTC at bay after December 1. Instead, the results displayed in the advertisement should be as close to typical as reasonably possible. This is important in the blogging context, since once a blogger has been paid or compensated in connection with the blog entry, the advertiser is effectively responsible for the content of the blog entry as if the advertiser had made the same claims on its own site or ads. So, advertisers should be on the watch for its paid bloggers that might post false claims about the products or services at issue, as those falsities could be tagged against the underlying advertiser just as much as against the blogger.

For violations of the law, the FTC could fine bloggers or advertisers up to $16,000 per violation or could order them to reimburse financial losses of affected consumers. While these fines might only represent an extreme case, bloggers and advertisers would be wise to comply with the advice in the newly revised Guide. We also recommend that advertisers and bloggers clearly document their arrangements in writing ahead of time. Those obligations should include specific reference to the blogger's obligation to disclose the relationship in all blog entries. Having these obligations stated in writing can help the advertiser should the advertiser later discover that a compensated blogger has failed to properly disclose material connections, or failed to make substantiated claims about the products or services.

-- Molly Eichten is a member of the Larkin Hoffman Daly & Lindgren Ltd. Intellectual Property, Technology and Internet Practice.

Article originally published in Larkin Hoffman's IP/Tech Buzz.