Disclaimer: This is of course not legal advice, and we are not attorneys.
On Monday, the Federal Trade Commission updated its Guides Concerning the Use of Endorsements and Testimonials in Advertising. The FTC’s last update to its Guides came in 1980, and I think it’s safe to say a lot has changed in the advertising world since then.
With the revised Guides, there is now regulation set in place about the results of products given in online blogs, product reviews, and testimonials. It is important to understand that these Guides are not binding law, but rather interpretations of law expected to assist advertisers in keeping their testimonials and ads aligned with the regulation.
According to the revised Guides, advertisements will be required to clearly state the results that consumers can generally expect to receive from the product or service. Since 1980, advertisers have been able to convey unusual results in a testimonial as long as they included “results not typical” or another similar disclaimer. Failure to do so could send a lawsuit from the FTC your way.
What Constitutes An Endorsement By Bloggers Or Word Of Mouth Marketers
The revised Guides also include new examples that demonstrate if any “material connections” between advertisers and endorsers exist, they must be disclosed. “Material connections” includes payments, free products, or any other incentive an endorser might receive from an advertiser.
These examples also include messages communicated by bloggers or other “word-of-mouth” marketers, and exactly what constitutes as an endorsement for that specific blogger. Decisions will be made on a case-by-case basis, but the revised Guides specify that any cash or in-kind payment a blogger receives for the review of a product is seen as an endorsement. The bloggers who receive the endorsement will now need to disclose the “material connections” they share with the seller of the product or service. Similarly, if a company uses a sponsored research organization’s findings in an advertisement, the advertisement will now need to disclose those “material connections” between the advertiser and the research organization.
Here is a new example added to the Guides from the FTC’s website:
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.
Impact on Internet Marketing
According to Socialnomics.net, there are over 200 million present blogs, and of these blogs a majority of them have content updated daily. Also, Socialnomics.net claims that 78% of consumers trust peer recommendations, and only 14% of consumers trust advertisements. What consumers tend not to realize when reading a review, testimonial, or blog about a product or service, is that the endorser might have received an incentive, such as monetary payments, free products, or a free trip, in order to write that positive review of the product or service. With consumers following peer evaluations blindly like a game of Marco Polo, they are often deceived by a result that is not typically found to be true for most consumers. Your paid endorsement, just like an advertisement, is misleading if it makes deceptive or untrue claims.
This will have a huge impact on review and affiliate sites (which already have been adversely affected by recent changes to AdWords policy). Their basis on making money is to provide reviews and testimonials about products or services and facilitate traffic to the corresponding landing pages. Well, if these sites are pushing products and services with reviews and testimonials that come attached with endorsements, consumers will know that those reviews and testimonials are biased. Another point is that the testimonials from these sites will have to clearly define whether or not the result they experienced from the product or service is in fact a ‘typical’ one that most consumers will also experience.
Rich Cleland, assistant director of the FTC’s advertising practices division, said the disclosure must be “clear and conspicuous,” no matter how the advertiser or endorser explains it. Application of Revised Guides on Your Company This will have big results come December 1st, when the regulations are put in effect. If your company’s landing page is filled with testimonials that were only written thanks to endorsements, then there will be lots of new pressure to find actual consumers to write factual testimonials. If your product’s advertisements are under scrutiny from the FTC, how willing do you think new consumers would be to try your product or service? Consumers are sharp, and will find companies who have websites filled with positive reviews and testimonials. These would obviously be reviews and testimonials without the help of endorsements. Lastly, if your company is struggling to get good product or service reviews from your consumers without endorsements, then maybe you need to reassess the value-adding benefits you are providing to your consumers.
By: Nicholas Haertel
Paid Search Staff
Disclaimer: This is of course not legal advice, and we are not attorneys.
