FTC Endorsement Guidelines Address Online Communications
We recently began a discussion about the proliferation of Web 2.0 and how that poses various legal risks to business owners. For example, in 2009, the Federal Trade Commission (FTC) issued its first update in almost 30 years to its "Guides Concerning the Use of Endorsements and Testimonials in Advertising." The updated guidance mandates disclosure of any “material connections” between a person endorsing a company, product or service, and the company/product/service being endorsed.
One oft-cited example: bloggers have to disclose any payments or in-kind donations, or “freebies," they receive in return for reviewing a product or service. Employers may also incur liability if their employees engage in online communications promoting a product or service of the employer and the employees don’t disclose the fact they work for the business being promoted. Significantly, the FTC suggests that an employer may help mitigate liability by instituting, and consistently enforcing, appropriate employee policies on social media and other online communications.
The FTC’s “Facts for Businesses” begins with a helpful explanation of the basis for the new guidelines:
Suppose you meet someone who tells you about a great new product. It performs exactly as advertised and offers fantastic new features. Would that endorsement factor into your decision to buy the product? Probably.
Now suppose you learn that the person works for the company that sells the product – or has been paid by the company to tout the product. Would you want to know that when you’re evaluating the endorser’s glowing recommendation? You bet. That common-sense premise is at the heart of the revised Endorsement Guides issued by the Federal Trade Commission (FTC), the nation’s consumer protection agency.
The Revised Endorsement and Testimonial Guides themselves offer employers a couple illustrations to help them understand the updated rules. The FTC’s press release also offers some information. The FTC also gives additional explanation of the guidelines for bloggers in its multimedia library about the endorsement guidelines.
*Update: Thanks to Brett Trout for alerting me to my typo -- I inadvertently said the regs were effective last year, but they went into effect in 2009.