FTC and Social Media

If you have been in a coma, away from computer access, or generally impervious to the blogging world, you might have missed the big to-do recently concerning new disclosure guidelines by the Federal Trade Commission (FTC). This is the federal organization that keeps watch over “truth-in-advertising,” among other things. You can see how well this outfit does its job by watching a few television ads, especially the pharmaceutical ones—does the name Jarvik bring up memories?

Among the many things the FTC tries to curtail are connections between celebrities and the products that they endorse. Being paid to do a TV ad is not exactly the same thing as saying something in the ad that isn’t true.

One of the things that did in the Pfizer ad with Dr. Jarvik (the man who engineered a heart pump) was that the ad showed consumers that since Jarvik takes Lipitor he’s able to row a boat, but the guy rowing the boat was a double. That is not truth in advertising.

The rowboat affair was a worse offense than the possibility that Jarvik, who has an MD but has no medical license, may have been practicing medicine on TV without a license when he recommended Lipitor. The point was that consumers were not informed that he is not a practicing physician and the word “doctor” left the impression that he was.

Along with overseeing what goes on with TV, radio, and print ads and endorsements, the FTC now plans to get serious about the Internet. Regarding online network marketing, the Commission says:

“The Commission disagrees with the assertion that modern network marketing programs are just updated versions of traditional supermarket sampling programs. The primary goal of those programs was to have the shopper who tasted the advertiser’s product continue down the grocery store aisle and purchase the product. The primary goal of the new viral marketing programs is to have these individuals ‘spread the word’ about the product, so that other consumers will buy it.”

Its viral nature is one fear the FTC has about the Internet, and it is a fear that doesn’t seem aimed at wine reviewers. It’s aimed at social networking.

Another thing the new FTC ruling looked at is the concept of endorsement. Here’s what they have to say about that:

“The Commission does not believe that all uses of new consumer-generated media to discuss product attributes or consumer experiences should be deemed ‘endorsements’ within the meaning of the Guides. Rather, in analyzing statements made via these new media, the fundamental question is whether, viewed objectively, the relationship between the advertiser and the speaker is such that the speaker’s statement can be considered ‘sponsored’ by the advertiser and therefore an advertising message…is the speaker: (1) acting solely independently, in which case there is no endorsement, or (2) acting on behalf of the advertiser or its agent, such that the speaker’s statement is an ‘endorsement’ that is part of an overall marketing campaign?

Even if that consumer receives a single, unsolicited item from one manufacturer and writes positively about it on a personal blog or on a public message board, the review is not likely to be deemed an ‘endorsement,’ given the absence of a course of dealing with that advertiser (or others) that would suggest that the consumer is disseminating a sponsored advertising message.”

Those two paragraphs alone should alleviate the concern of wine bloggers, provided they are not endorsing wines for anyone and provided they are not asked by anyone to produce a review. I’m remembering a conversation months ago when Tom Wark expressed on his blog, Fermentation, dismay that wine bloggers agreed to work with a marketing team—that could easily be seen as an endorsement by the FTC, and Tom was correct to point it out. But he was also screamed at by many bloggers.

In the last two FTC paragraphs above the words “consumer-generated,” and “new media” appear. This points to another contentious issue with wine bloggers.

The FTC clearly states that, with regard to product reviews, its new disclosure guidelines apply to new media (social media online). If free samples of product come with strings attached, the FTC holds the print media outfit and the advertiser to the same rules of endorsement as it holds any other media; it just does not require that the print media make disclosure to its readers. The reason it gives for this separate treatment is that the reviewer is an employee of the print media (magazine, newsletter, or newspaper). The reader knows this, and also knows the lines of responsibility. It’s understood that the review is at the end of that line.

The problem that the FTC has with the consumer-generated media is that it is impossible for both the consumer and the FTC to understand and know the lines between the producer/advertiser/marketer and the reviewer. Because of that ambiguity, the FTC requires that some social media product reviews must come with a disclosure, and that it is the advertiser/marketers responsibility to tell that to the reviewer.

In addition, it’s the advertiser’s responsibility to make every effort to ensure that what a blogger says is accurate. Here’s what the FTC says about that:

“The Commission recognizes that because the advertiser does not disseminate the endorsements made using these new consumer-generated media, it does not have complete control over the contents of those statements. Nonetheless, if the advertiser initiated the process that led to these endorsements being made—e.g., by providing products to well-known bloggers or to endorsers enrolled in word of mouth marketing programs—it potentially is liable for misleading statements made…”

After reading the many blogs that are “up in arms” over this issue and then reading the FTC explanation of the new guidelines I’ve come to the conclusion that there’s nothing for reputable wine bloggers to worry about—provided they simply state the facts. To me, the crucial point of the new FTC guidelines is summed up in the following paragraph:

“…a blogger could receive merchandise from a marketer with a request to review it, but with no compensation paid other than the value of the product itself. In this situation, whether or not any positive statement the blogger posts would be deemed an ‘endorsement’ within the meaning of the Guides would depend on, among other things, the value of that product, and on whether the blogger routinely receives such requests. If that blogger frequently receives products from manufacturers because he or she is known to have wide readership within a particular demographic group that is the manufacturers’ target market, the blogger’s statements are likely to be deemed to be endorsements…”

The FTC wants the advertisers to tell the bloggers that they must make a disclosure statement with their reviews.

The FTC also threw down a gauntlet to bloggers that I find interesting.

“…to the extent that consumers’ willingness to trust social media depends on the ability of those media to retain their credibility as reliable sources of information, application of the general principles embodied in the Guides presumably would have a beneficial, not detrimental, effect.”

The way I see it, wine bloggers have two options when they review wine: buy the wine or make a disclosure statement on the blog explaining that the wine was free but there were no strings attached to the review—none—and be sure to be able to prove it in the unlikely even that FTC asks (in an interview, one FTC spokesman said plainly that they haven’t the intention to monitor the thousands of blogs on the Internet, which once again implies where their focus is).

It’s probably a good idea to also say how you go about evaluating the wine (blind, not blind, with food, without food, with a group, by yourself, under water, on a mountaintop, whatever). It has nothing to do with disclosure for the FTC or for legal reasons, but it would make sense to the consumer.

If you are reading this entry anywhere other than on the vinofictions blog, be aware that it has been lifted without my permission (and without recompense), and that’s a copyright infringement, no matter that the copyright information appears with it.

Copyright Thomas Pellechia
October 2009. All rights reserved.

4 Responses to “FTC and Social Media”

  1. Mitch says:

    Thanks Thomas.

  2. as usual, thomas, you cut through the fog and find the important points. obviously, the FTC cannot oversee thousands of blogs. i wonder if in December, when I receive wine samples, if the senders will stipulate, “Please disclose on your blog that you received this bottle as a free sample”?

  3. Thomas says:

    Fredric,

    If my experience means anything in the wine business, you’ll be lucky to get one or two disclosure reminders.

    This issue brought to the fore the viral and potentially insidious nature of the Internet, as it applies to blogging. An awful large volume of stuff was said about this issue, but when you dig into it, it boils down to very little impact on credible blogging–the operative word is “credible.”

    I love the FTC’s ‘graph on the credibility issue. It was like a fine ginger snap.