It is a task often relegated to the office interns: posting promotional content to outside social media sites.
Despite the fact that this practice is officially frowned upon in the Federal Trade Commission’s 2009 endorsement guidelines, companies will often engage paid individuals – either employees on the payroll or outside bloggers who receive compensation in the form of a free sample – to post positive reviews online, including to places like Twitter, personal blogs, or online public forums without identifying the connection between the commenter and the product being commented on.
The FTC’s endorsement guidelines seek (among other things) to ensure that unbiased positive reviews online can be considered credible, while also ensuring that positive reviews that are partially the result of some sort of compensation be acknowledged as such. The FTC’s guidelines encourage not just that bloggers acknowledge compensation, but also that the companies offering the promotion notify bloggers of the guidelines and then ensure that the guidelines are followed.
The New York Times reported last summer on a settlement reached between the FTC and Reverb Communications. According to the report, employees of Reverb, a public relations firm, were posting positive iTunes Store reviews about Reverb client products. “[Reverb] engaged in deceptive advertising by having its employees write and post positive reviews of clients’ games in the Apple iTunes Store, without disclosing that they were being paid to do so,” according to the article. The FTC’s settlement with Reverb reportedly included an agreement to remove all inadequately identified iTunes Store reviews, but no monetary penalties or admission of illegal activity.
Also last year, as reported in a post on the Citizen Media Law Project blog, clothing retailer Ann Taylor LOFT sent invitations to bloggers, offering a “fall fashion preview” and “special gift” to bloggers who agreed to write about the event. The FTC commenced an enforcement proceeding against Ann Taylor LOFT for violation of the blogger guidelines, but ultimately chose not to pursue action, instead noting that the company had incorporated a written policy prohibiting similar conduct in the future.
K&L Gates’ blog on technology, media and technology, ”TMT Law Watch”, reported earlier this year on another FTC enforcement. As reported, a musical instruction company called Legacy paid “Review Ad Affiliates” to give positive reviews for site’s musical instruction services. Those affiliates subsequently failed to provide adequate notice of their material connection with the promoter. “Affiliates received substantial commissions (20-45%) on sales of each product resulting from a referral,” TMT Law Watch reported. Although Legacy required affiliates to sign a contract committing to follow FTC guidelines, there was no monitoring system in place to ensure that the guidelines were followed. In its enforcement complaint the FTC stated “that the Affiliates’ reviews were false and misleading, that the failure to disclose the financial relationship was a deceptive practice, and that these acts and practices constituted unfair or deceptive acts or trade practices in violation of Section 5(a) of the FTC Act,” according to the post.
Under its administrative settlement with the FTC, Legacy agreed to monitor and conduct monthly reviews of 100 of its “Review Ad Affiliates,” including the top 50 review producers and a random sampling of 50 more affiliates. Legacy must also institute a system through which payment will be stopped to any affiliate that does not adequately disclose its material connection to Legacy when posting reviews. In addition to a civil penalty of $250,000 and a requirement to notify its employees of the settlement, the Legacy must carry out these reviews of its affiliates and report them to the FTC for the next 20 years.
Some companies have taken measures to preemptively ensure compliance with the FTC guidelines. For example, AdAge reported earlier this month on an undertaking by the social media influence ranking site Klout to provide free products to people with significant social media influence. Aan ccording to AdAge, the initiative would provide products, or “Perks,” to those with large influence on social media outlets. “Klout addresses the FTC rules by sending a card along with the ‘Perk’ that states that recipients aren’t required to do anything at all,” AdAge reported, “but they should disclose that they’ve received a sample if they decide to write about it.”
A question is whether this kind of passing the buck to bloggers (“you’re on notice that you shouldn’t do anything we wouldn’t do”) really complies with the guidelines, much less the spirit of the guidelines. The Legacy case raises the specter of enforcement proceedings against companies for failing to adequately monitor compliance. But generally, evidence of compliance should be able to be found in actual resulting conduct. As Forbes noted last year, it can be difficult to measure the impact of the guidelines when the intent isn’t clear. An FTC director was quoted by Forbes, “Our goal is not to bring enforcement actions. [Our goal is] to help people be educated so we don’t have to bring enforcement actions.”
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Kate Tummarello, a Research and Social Media Intern with Mirsky & Company and a reporter at Roll Call/Congressional Quarterly, contributed to this post.
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