Are You Disclosing? What You Need to Know about FTC Rules and Social Media

social media how toHave you wondered about U.S. Federal Trade Commission (FTC) disclosure regulations? Wondering whether you’ve been compliant?

Keep reading for a detailed understanding of FTC rules and regulations on endorsements and testimonials in social media.

Some background…

Any time the US Government implements new regulations, there is discussion, debate, information and plenty of misinformation.

Nearly 2 years ago, in December 2009, the FTC revised, for the first time in 3 decades, its rules and regulations about endorsements and testimonials in advertising.

The prior rules were made long before the Internet and needed to be updated to account for this new type of media. Since implementing the new FTC Disclosure Guidelines PDF for endorsements and testimonials in advertising, bloggers have been given a multitude of interpretations, rules, best practices and how-to’s. Sadly, most of the information has been more scare tactics than useful.

disclosure

Disclosure: Good for you, good for your audience. Image: iStockphoto

When do you have to make the disclosure?

The FTC guidelines for endorsements and testimonials in advertising say if there is a connection between the endorser and the seller of the product or service, full disclosure is required.

What is a connection?

There’s no specific definition of what is meant by connection. However, if there is a contractual obligation—whether written or verbal—to post something about a product or service, there is definitely a ‘connection’ that should be disclosed.

If, however, you bought the product and just wanted to talk about it, that might not be sufficient to establish that there is some connection with the seller of the product or service. If your readers (or viewers, if you’re doing a video; listeners, if you’re doing a podcast) believe you may have received a product or service for free or are being paid to talk about it, a simple reference that you paid for the item, while not required, would help the reader understand that a connection to the brand or company does not exist.

What is an endorser?

An endorser can be an individual, group or institution. By providing information about your experience, belief, findings or opinions, you are now taking on the role of “endorser,” and therefore you would need to somehow communicate your relationship with the product or service you’re sharing about.

When you think of an endorser, you may immediately picture celebrities or people in those paid infomercials shown late at night. Just like those compensated celebrities or actors, each of us takes on a similar role of spokesperson many times a day. In talking to our friends and family about the things we like or don’t like, we’re the same those celebrities.

compensated endorser

Here we see Colonial Penn Life Insurance is endorsed by a television celebrity.

Companies, educational institutions, civic groups, professional groups and the like communicate with their public. If they share information about a product or service, the organization itself—in encouraging its public to use or buy the item—may be taking on the role of a spokesperson.

Even though we may not think an organization can give a recommendation about a product or service, they do and would need to disclose any relationship. For example, a dental practice only recommends a certain brand of toothpaste. Maybe it’s just a personal preference of the dentist. If, however, the toothpaste company pays the dental practice or provides free product, the practice would need to tell the patients about their relationship.

What is full disclosure?

FTC guidelines do not give example of what full disclosure means. There are no magic words or specific phrases suggested. It also does not say if the disclosure must be within the text of a written post or at the end, or where specifically it must be. The language states that the disclosure must:

“… clearly and conspicuously disclose either the payment or promise of compensation prior to and in exchange for the endorsement or the fact that the endorser knew or had reason to know or to believe that if the endorsement favored the advertised product some benefit, such as an appearance on television, would be extended to the endorser.”

As you can see, there’s a lot left open for interpretation as to the “how” and “where” this disclosure must be made. The focus is on what the consumer or average reader understands to be a disclosure. The average reader is not going to know that he or she needs to click on an icon and navigate to other pages or read a page of disclosures to try to figure out if the link is an affiliate or if the awesome widget you’re telling them they can’t live without was given to you for free.

To quote the marketing genius Joe Dirt from the 2001 movie of the same name, “It’s not what you want, it’s what the consumer wants!“  This couldn’t be truer.

To whom do the rules apply?

The FTC guidelines apply to both traditional advertisers and those of us in new media. There is no significant distinction between a major brand and blogger. If you talk about products or services (either in written form or spoken word), then you are either providing advertising or a testimonial and these rules apply to you.

These voluntary guidelines apply to anyone who’s providing an advertisement or testimonial. In addition, though, social media strategists, consultants, gurus, masters, superheroes and PR agencies and their employees should be well-versed on this topic because they, too, may become liable if they are advising clients or bloggers to engage in action that is clearly contrary to the guidelines.

What does voluntary mean?

While we’d all like to think that voluntary means you can choose not to comply, that’s a bit of a misunderstanding. Voluntary in this sense means that there is no police system that will come after you.

However, advertisers and those providing testimonials do run the risk of having administrative action taken against them for noncompliance. This is not like other laws where failure to comply means a bright line consequence. Keep in mind, though, that choosing not to comply can produce a number of expensive consequences.

Why did these rules come about?

accountable

Complaints: A way to hold businesses accountable. Image: iStockphoto

As with most laws, these disclosure guidelines came about because the FTC began getting complaints from consumers who felt duped or misled. Enough people complained that bloggers and those with websites were leading them to purchase products or services because the writer was getting some type of compensation to give their review, insight or testimonial.

Rather than getting honest information, consumers felt they were being lied to by what was portrayed as an unbiased source. In fact, though, the bloggers and content providers were hawking goods and services and singing their praises while being compensated. Were they lying? Probably not. Did the consumer feel lied to? Many did.

As a result of the desire for what was seen as greater consumer protection, after almost 30 years the FTC updated their rules. They now apply to pretty much anyone who would be deemed an endorser of a product or service.

Consequences of noncompliance

As with most governmental regulations, noncompliance carries with it some sort of fine. The FTC administrative procedures are handled within the Commission. Penalties for noncompliance can range from a written warning and request to provide full disclosure to the maximum of an $11,000 civil fine (per incident).

Noncompliance

Noncompliance is a failure to follow regulations. Image: iStockphoto

Keep in mind that the FTC must follow due process and that an alleged violator will not just get handed a bill for $11,000. First he or she will receive a written letter detailing the FTC’s position regarding noncompliance. In addition, the $11,000 fine is a maximum penalty. There are many other options for compliance enforcement.

Is the FTC reading my blog or visiting my website?

With millions of blogs and websites under the jurisdiction of the FTC—these include all US-based domains, hosts and servers—the task of monitoring every one of these sites falls on a small number of people. Because these are real people who work for the FTC, even on their own time they are often on the Internet. As such, they may come across your blog by happenstance.

When compliance is your job, everything you encounter is often read through that lens. This means that even if the FTC monitors are not coming to your site based on a complaint, they may very well be checking out your site for other reasons.

What should bloggers do?

There has been a lot of discussion about how to comply with these disclosure laws. I’ve heard of bloggers hiring lawyers to get guidance, I’ve seen companies start up just to provide some type of third-party notification system and I’ve listened as bloggers lament feeling like they’re losing a competitive advantage because they disclose but their competitors do not.

The problem here is that so many want to comply but don’t really want to be “clear and conspicuous.” The rule is not aiming for sending readers on a scavenger hunt around your blog to find a disclosure page; using icons that are neither standardized, recognized nor understood by the consumer to be a type of disclosure; or burying the disclosure.

Disclosure is evaluated through the eyes of the consumer, not what we think we can get away with while being as vague as possible.

The “how to” is tricky because much will depend on your readers, your content and how the information is presented. The basic KISS principle goes a long way with this, however. Keep it simple, smarty! If not for our readers, we’re nothing. Why not trust that they want to support the site?

What exactly should a blogger do? Just tell your readers in some way how you obtained the product, if you were provided a complementary service or if clicking a link within your post could somehow mean you get a commission or some type of compensation.

Honestly, it’s not very complicated. If you can seamlessly disclose within the text (e.g., “Company A sent me this widget to try,” “I received a complementary or reduced-cost stay at Hotel XYZ,” “Affiliate links are used and I may receive a commission if you click”) that is the best. However, including a disclosure at the bottom of the post is easily done as well. What I don’t think is a best practice is the use of incomprehensible icons or a generic “see my disclosure policy” link.

The disclosure policies I’ve seen on a vast majority of sites are inadequate. Using a general boilerplate disclosure policy is fine if you actually read it and understand what it says. One of the 26 ways to enhance your blog includes having a good disclosure policy. A succinct and accurate disclosure policy, if nothing else, can go a long way in offering some protection if ever the FTC reviews your blog.

As of this writing, no individual bloggers have been fined or sanctioned by the FTC. That’s not to say everyone is complying or that what is happening now is acceptable to the agency. All it means is that the FTC has chosen not to formally sanction bloggers at this time.

Why brands and PR reps need to know about disclosure rules.

First, education is key. In my experience, brands and PR reps take a hands-off stance when working with bloggers. To ensure that bloggers have autonomy in what they write, brand and PR reps often provide little direction. In fact, those running a campaign should set out the requirements very clearly. A simple disclosure at the end of a post would be all that is needed. Although, I think icons such as these might just make disclosure much more interesting.

money

A humorous way of disclosing you were paid cash for your testimonial. Image: Louis Gray

schwag

Witty disclosure about stuff we all get. Image source: Louis Gray

Shortly after implementing the guidelines, the FTC began an investigation of a blogger outreach program by Ann Taylor stores. The company held a private fashion preview for select bloggers and expected those bloggers to post content in exchange for gifts.

After an investigation, the FTC did not recommend enforcement action against Ann Taylor. The decision was based on a number of factors; one being that during the investigation process Ann Taylor implemented a blogger disclosure policy. It’s important to note that Ann Taylor had engaged a PR agency to carry out this blogger outreach program but the FTC chose to deal directly with the brand.

More recently, though, the FTC fined Legacy Learning Systems $250,000 for having affiliates write reviews under the guise of being ordinary consumers or independent reviewers. While the Legacy situation was unique because it involved a company specifically soliciting its affiliates for what were advertised as “unbiased” reviews, it is important in that no affiliates were fined.

Rather, the company was held responsible and must, in addition to paying a significant fine, monitor many of its affiliates for a period of time. Whether the company knew of the disclosure laws pertaining to its affiliates is irrelevant. The fact is the company was held responsible for its actions in directing compensated affiliates to pose as unbiased.

For brands and PR agencies, the key to compliance is setting standards. Some bloggers do a great job with disclosure. For the most part, though, they don’t. Ultimately, it is your brand or your client, and you should feel comfortable setting out basic expectations as to how you will protect your company or your client.

Do the disclosure rules apply to social media?

Absolutely! While it is slightly more complicated because there are often character or word limits, some type of disclosure or notice to readers is required. When anyone other than the brand itself touts a product or service, the FTC disclosure laws require disclosure so that the potential consumer knows there is some relationship and the recommendation or information could be biased.

Twitter is the biggest challenge because of the 140-character limit. There have been suggestions to use certain hashtags such as #sp, #spon #ad, #aff or the like. There’s no single set standard though, which makes it difficult for consumers. So far, the FTC has not gone after allegedly misleading tweets. They may in the future, so it’s something to be mindful of. That being said, given the pervasiveness of pushing blog posts to Twitter, using retweet buttons, retweeting and losing space it might be a bigger challenge than anticipated.

Facebook offers more characters, so there should be no excuse not to include some type of disclosure. However, as with Twitter, there are a multitude of automated programs that post blogs, tweets or other types of status updates or shares that make disclosure standards difficult. They key here, though, is if you can make a disclosure in some way, you should.

Location-based and location review/rating mobile apps bring a new set of challenges. When the FTC disclosure rules were promulgated there were one or two, if any, location-based mobile apps. Checking in to a location may lead someone to believe you are endorsing it. You may even write something or offer a tip to others who go there in the future. If you’re compensated to write about the location or experience, that should be disclosed.

In addition, while some mobile apps of this sort will prevent you from checking in or offering recommendations if you are not actually at the location, keep in mind that if you don’t actually have the experience, don’t write about it regardless of whether the app allows you to or not.

social media

It's important to follow all disclosure guidelines in social media. Image: iStockphoto

Final Thoughts

The reason the rules exist is to protect consumers. Consumers have a right to know the information they read online is truthful and accurate. The FTC disclosure guidelines are not onerous, overly detailed or difficult to understand. There are few ethical standards when it comes to blogging. In some ways it’s still the wild west on the Internet. Brands and many PR agencies were already aware of disclosure needs for advertising and testimonials when it related to traditional media. The new guidelines moved those same standards into the new media realm.

Readers are essential to every blogger’s success. FTC disclosure rules for bloggers are easy to comply with, if you’re willing to trust that your readers want you to be successful. This is an opportunity to raise the bar. We just have to be willing to see this as a good thing.

What are your thoughts? Do you think the FTC disclosure rules are easy to comply with whether you’re a blogger, a brand or a PR rep? Leave your comments in the box below.

Images from iStockPhoto and Louis Gray.

Internet Success Hub - We are an online media consultancy based in Singapore. We specialize in online video marketing, search engine optimization (SEO), web traffic generation and web design. Contact us to find out how to grow your business online, today!

Comments are closed on this post.

Blog