In October 2009, the Federal Trade Commission (FTC) updated its Guides concerning the Use of Endorsements and Testimonials in Advertising. (Read the Press Notice). These Guides provide information and examples to illustrate how the FTC applies Section 5 of the FTC Act (15 U.S.C. 45) to the use of endorsements and testimonials in advertising. (Read the FTC Notice of Adoption of Revised Guides)(FTC Notice of Adoption).
The updates were accomplished after a comment period and go into effect on December 1, 2009. This article discusses the portions of the updates that specifically apply to bloggers, notes areas of uncertainly, and provides advice on implementing the requirements.
But first, a disclaimer: I am an attorney and have been following this issue for some time. However, I am not providing you with formal legal advice or representation in any manner. My opinions here are personal opinions based on legal knowledge and nothing more. If you have a website that will be heavily impacted by the updates, and you have legal concerns, I advise that you discuss the matter with your own attorney.
The Requirements in a Nutshell
The process under the updates is pretty simple. If you receive a free product to review on your website or blog, or if you post on forums or twitter about such a product as part of a word of mouth advertising campaign, you generally will need to disclose that you received a free product. If you are paid to post, you must disclose that. There are various factors that apply on a case-by-case basis to determine definitively if you must disclose, but outside of personal blogs that do not normally do reviews and do not usually work with brands, a blog that reviews products will usually have to disclose its connection with the company. Those disclosures must be "clear and conspicuous." Whether the updates apply to disclosure of the use of affiliate links is one of several areas of uncertainly.
The guides also include updates to address celebrity and expert endorsements, and consumer testimonials. This article generally does not discuss those items. Why the Guides were updated and whether they were done so reasonably or fairly, I will leave for others to discuss and debate.
Seems simple enough right? If you are comfortable, you can stop reading here. Or you can go on to see all of the details on what each pertinent Guide and example says, pertinent FTC commentary, and how to implement them. If you want something in between, you can skip to the Putting It Altogether Section near the bottom. In the alternative, you can read my even shorter version published as a post on Beauty and Fashion Tech.
Individual Sections and and Requirements
When looking at each section, only those portions relevant to discussing the updates are provided. For a full version of the FTC commentary on the updates, including the full text of the Guides, visit the FTC Notice of Adoption of the Revised Guides.
Section 255.0 (16 CFR Part 255): Purpose and Definitions
Under Section 255(a), the FTC makes clear that “the Guides do not purport to cover every possible use of endorsements in advertising.” That determination will depend on the specific factual circumstances of each case. The Guides are meant to provide a basis for voluntary compliance by advertisers and endorsers (which includes bloggers in some circumstances). However, practices that are inconsistent with the Guides may result in corrective action by the FTC, including the imposition of fines.
At the heart of the updates is the definition of an endorsement, which was not changed, and a new example that illustrates how that definition will be applied to bloggers.
Section 255(b) provides the definition of an endorsement:
For purposes of this part, an endorsement means any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser. The party whose opinions, beliefs, findings, or experience the message appears to reflect will be called the endorser and may be an individual, group, or institution.
A new example, Example 8, was added to illustrate when a blogger might be considered to be an endorser:
Example 8: A consumer who regularly purchases a particular brand of dog food decides one day to purchase a new, more expensive brand made by the same manufacturer. She writes in her personal blog that the change in diet has made her dog’s fur noticeably softer and shinier, and that in her opinion, the new food definitely is worth the extra money. This posting would not be deemed an endorsement under the Guides.
Assume that rather than purchase the dog food with her own money, the consumer gets it for free because the store routinely tracks her purchases and its computer has generated a coupon for a free trial bag of this new brand. Again, her posting would not be deemed an endorsement under the Guides.
Assume now that the consumer joins a network marketing program under which she periodically receives various products about which she can write reviews if she wants to do so. If she receives a free bag of the new dog food through this program, her positive review would be considered an endorsement under the Guides.
Additional Information Based on the FTC Commentary: The commentary concerning the updates makes clear that whether a blogger will be considered an endorser will be determined on a case-by-case basis. “[T]he 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’” (FTC Notice of Adoption at 8). The FTC provides this advice:
The facts and circumstances that will determine the answer to this question are extremely varied and cannot be fully enumerated here, but would include: whether the speaker is compensated by the advertiser or its agent; whether the product or service in question was provided for free by the advertiser; the terms of any agreement; the length of the relationship; the previous receipt of products or services from the same or similar advertisers, or the likelihood of future receipt of such products or services; and the value of the items or services received. An advertiser’s lack of control over the specific statement made via these new forms of consumer-generated media would not automatically disqualify that statement from being deemed an “endorsement” within the meaning of the Guides. (FTC Notice of Adoption at 8-9).
One of line of commentary of note is this statement: “[P]ostings by a blogger who is paid to speak about an advertiser’s product will be covered by the Guides, regardless of whether the blogger is paid directly by the marketer itself or by a third party on behalf of the marketer.” (FTC Notice of Adoption at 9).
The FTC also provides a few specific examples:
Although other situations between these two ends of the spectrum will depend on the specific facts present, the Commission believes that certain fact patterns are sufficiently clear cut to be addressed here. For example, 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,” as are postings by participants in network marketing programs. Similarly, consumers who join word of mouth marketing programs that periodically provide them products to review publicly (as opposed to simply giving feedback to the advertiser) will also likely be viewed as giving sponsored messages. (FTC Notice of Adoption at 9-10)
Finally, a footnote mentions that the fact that, although a blogger might be free to not say anything about a product, that fact does not change the view that positive statements should be deemed to be endorsements. (Notice of Adoption at 10, fn 22).
Section 255.1 General considerations (The Honest Opinion Requirement)
Section 255.1(a) requires honest opinions:
Endorsements must reflect the honest opinions, findings, beliefs, or experience of the endorser. Furthermore, an endorsement may not convey any express or implied representation that would be deceptive if made directly by the advertiser. [See §§ 255.2(a) and (b) regarding substantiation of representations conveyed by consumer endorsements.]
Under Section 255.1(d),
[a]dvertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers [see § 255.5]. Endorsers also may be liable for statements made in the course of their endorsements.
New to this section is Example 5 to illustrate when liability might attach:
Example 5: A skin care products advertiser participates in a blog advertising service. The service matches up advertisers with bloggers who will promote the advertiser’s products on their personal blogs. The advertiser requests that a blogger try a new body lotion and write a review of the product on her blog. Although the advertiser does not make any specific claims about the lotion’s ability to cure skin conditions and the blogger does not ask the advertiser whether there is substantiation for the claim, in her review the blogger writes that the lotion cures eczema and recommends the product to her blog readers who suffer from this condition. The advertiser is subject to liability for misleading or unsubstantiated representations made through the blogger’s endorsement. The blogger also is subject to liability for misleading or unsubstantiated representations made in the course of her endorsement. The blogger is also liable if she fails to disclose clearly and conspicuously that she is being paid for her services. [See § 255.5.]
In order to limit its potential liability, the advertiser should ensure that the advertising service provides guidance and training to its bloggers concerning the need to ensure that statements they make are truthful and substantiated. The advertiser should also monitor bloggers who are being paid to promote its products and take steps necessary to halt the continued publication of deceptive representations when they are discovered.
Additional Information Based on the FTC Commentary: The commentary makes clear the intention to place a burden on the advertisers to assure that bloggers are informed of the need to disclose, and places a risk of liability not just on the bloggers who write about a product, but also on the advertisers.
Section 255.5 Disclosure of Material Connections
Section 255.5 is the disclosure requirement:
When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed.
New is Example 7:
Example 7: A college student who has earned a reputation as a video game expert maintains a personal weblog or “blog” where he posts entries about his gaming experiences. Readers of his blog frequently seek his opinions about video game hardware and software. As it has done in the past, the manufacturer of a newly released video game system sends the student a free copy of the system and asks him to write about it on his blog. He tests the new gaming system and writes a favorable review. Because his review is disseminated via a form of consumer-generated media in which his relationship to the advertiser is not inherently obvious, readers are unlikely to know that he has received the video game system free of charge in exchange for his review of the product, and given the value of the video game system, this fact likely would materially affect the credibility they attach to his endorsement. Accordingly, the blogger should clearly and conspicuously disclose that he received the gaming system free of charge.
There is also an example, Example 8, concerning word of mouth marketing for posts to internet forums.
Additional Information based on the FTC Commentary: The commentary makes clear that it views “new media” as the type of situation where often the consumer would not reasonably expect a connection between the endorser and the advertiser. The FTC also expressed its expectation that advertisers provide guidance to bloggers about the disclosure requirements. (See Notice of Adoption at 38-39).
The FTC addressed the question of whether the receipt of a product without any monetary compensation must be disclosed, answering the question generally in the affirmative:
The threshold issue is whether the speaker’s statement qualifies as an “endorsement,” under the Guides. If not, no disclosure need be made. However, if the statement does qualify as an “endorsement” under the construct set forth above for determining when statements in consumer-generated media will be deemed “sponsored” (see Section II.A.2 of this notice), disclosure of the connection between the speaker and the advertiser will likely be warranted regardless of the monetary value of the free product provided by the advertiser. For example, an individual who regularly receives free samples of products for families with young children and discusses those products on his or her blog would likely have to disclose that he or she received for free the items being recommended. Although the monetary value of any particular product might not be exorbitant, knowledge of the blogger’s receipt of a stream of free merchandise could affect the weight or credibility of his or her endorsement – the standard for disclosure in Section 255.5 – if that connection is not reasonably expected by readers of the blog. Similarly, receipt of a single high-priced item could also constitute a material connection between an advertiser and a “sponsored” endorser. (Notice of Adoption at 41).
Putting it All Together: What Does It Mean? What is Still Uncertain?
After all that lengthy overview, the bare bones of the updates simple. There are four main points:
(1) Bloggers who receive products for review from companies or intermediaries (e.g. PR firms), or who are paid for their reviews, generally must disclose that relationship when they give a positive review of the product. If a blogger purchases a product on his or her own, there is no disclosure requirement, as there is nothing to disclose. In circumstances where a person reviews on a personal blog a product that they received unsolicited, disclosure likely would not be required, unless perhaps the product was valuable. How valuable is unknown. The FTC will decide such issues on case-by-case basis. See FTC commentary concerning section 255(b) for more information (the pertinent parts are above in that section of this article). Note that a paid post would always require disclosure. I cannot think of any circumstances when it would not.
(2) Bloggers must provide accurate statements and honest opinions. Stating, “I thought Product X cured my acne,” would be fine if, as a blogger, you really believed that. Stating, “Product X cures acne,” may be too broad, because it falls outside of the realm of personal opinion. Stating that Product X also cures wrinkles when there is no representation from the manufacturer that it does so, would be impermissible. However, stating, “I noticed that in addition to treating may acne, the product seemed to make my wrinkles appear smaller,” should be acceptable, provided that it is a true statement. Be honest and don’t make broad generalizations and you will likely be in compliance with the Guides.
(3) Connections to advertisers must be “fully disclosed,” and those disclosures must be “clear and conspicuous.” The FTC does not set out details about how to disclose, but based on the requirement of “full” disclosure and statements in examples about “clear and conspicuous” disclosures, it is my opinion that the mere existence of a disclosure page on a website is insufficient. The Guides clearly envision specific disclosure, which would require it to be in the material where a product is discussed and reviewed or in a post that has been made in exchange for monetary compensation. A proper disclosure could be accomplished in a couple of ways:
- State in the text of the review that the product was sent by a representative of the company. For example, a review could open with the line, “I was sent a new body lotion from the ABC company to try for review.”
- Provide a disclosure at the end of the review. For example, provide a statement such as: “This review is based on a products sent by a representative of the company.” Such a statement could also add, “for more please see my disclosures page” with a link to a disclosure page that more fully explains the site’s policies about receiving and reviewing free products. For an example of a disclosure page, see Beauty and Fashion Tech’s Disclosure Page.
- A paid post could either state that it is paid in the text or, like the example above, could state: “The author received monetary compensation from the manufacturer for reviewing this product.” It could then also provide a link to a disclosure page if desired.
(4) Failure to Comply can result in in fines and liability. Will the FTC be policing the standard everyday blogger? Probably not. However, the Guides are meant to help assure voluntary compliance, and certainly the FTC would look into any complaints about any given site. In any event, even if enforcement seems impractical or unlikely, I suggest that it is in your best interests as a blogger, and in the best interests of the blogosphere as a whole, to comply with the Guides.
A Few Uncertainties
Not everything was answered by the updates and commentary.
(1) What about Affiliate Links? When the updates where in the comment period, I routinely saw opinions that the updates would also require disclosure of affiliate links. Nowhere do the Guides, examples, or commentary state that the use of affiliate links must be disclosed. However, it isn’t that simple. In a sense, the use of an affiliate link, which can provide monetary compensation, is an “endorsement” of the item linked to. There is also this line in the commentary: “[P]ostings by a blogger who is paid to speak about an advertiser’s product will be covered by the Guides, regardless of whether the blogger is paid directly by the marketer itself or by a third party on behalf of the marketer.” (FTC Notice of Adoption at 9). That line appears to be in relation to Pay to Post services, but could it also be interpreted to mean that bloggers are required to disclose affiliate links? There is no clear answer to the question and I am not going to attempt to provide one here. Instead, I suggest this:
- If you have a website that is likely to be scrutinized by the FTC, for example a site that focuses on or sells items of particular concern to consumer advocates (for example, fad diet products or nutritional supplements of questionable efficacy) and that routinely or exclusively receives compensation for reviews, directly sells products under the appearance of being a blog, or makes heavy use of affiliate links, it is in your best interest to disclose anything that might fall under the guides, including affiliate links. If you directly sell products under the appearance of being a blog or have a site that appears to be a personal blog but is actually set up to tout a product and makes heavy use of affiliate links, I suggest that you contact an attorney for advice.
- If you want to assure full conformance with the Guides, you may want to disclose affiliate links, even though it is not clear that you are required to do so.
- Disclosing the use of affiliate link may build reader confidence in your site and might actually help you in the long run regardless of whether doing so is required by the Guides.
(2) Are the Guides applied retroactively? My opinion is that they are not, but there is some room for disagreement. The FTC Notice of Adoption specifically states an effective date of December 1, 2009. There are various statements from the FTC in other circumstances stating a policy to apply the interpretations that were in effect at the time any issue arose. There are also various legal opinions that interpretations should not be retroactive in other contexts—especially when a monetary penalty for noncompliance may be imposed. However, the Guides merely provide assistance in interpreting existing law. Also, consider an item published before December 1, 2009, that remains on a website after that date. Or, perhaps an old article is republished after that date. Does it then have to make any required disclosures at that time? My gut says “no,” but an argument can be made that it does. Overall, my suggestion is this:
- If you have a website that is likely to be scrutinized, it may be in your best interest to update older material to comply with the Guides.
- Everyone else probably does not need to worry about retroactivity. But complying retroactively might increase trust among readers, so it could be a good practice on a personal policy basis. Personally, I plan to work through older posts and comply where needed (I had previously tended to informally disclose anyway, making the process not as difficult for me.)
(3) I do Pay to Post. Must I disclose the amount I am paid? The Guides do not answer this question. Instead, they state that you must “fully” disclose your “connection” with the advertiser. Does that include the amount of payment? My guess is that, in most cases, simple disclosure that you were compensated is enough. However, one could envision circumstances where a large amount of compensation would affect a consumer’s viewpoint and must be disclosed. At that point can the blogger state that a “large” amount of compensation was given without stating the amount? Again, there is no definitive answer, and I am not going to attempt to give one at this time. If you receive large sums of money for paid posts or do numerous paid posts that result in a substantial overall income, you may wish to consult with an attorney.
(4) What about negative reviews? Here is an item of interest. The Guides repeatedly refer to positive reviews of products, leading to a strong inference that a negative review of a free product need not provide a disclosure. However, I suggest that giving such a disclosure is a good idea—it can build reader trust if they see that your receipt of a free product does not always lead to a good review.