FTC revisions impact online, social media marketing

If your business is active in Internet and social media marketing, you may have to make some significant changes by December 1st, 2009

The Federal Trade Commission (FTC) recently announced revisions to its guidelines for endorsements and product reviews – guidelines, we might add, that before now hadn’t been revised in almost 30 years.

According to an article posted by CNN, the guidelines affect product endorsements that appear in a “New Media” format, such as on blogs and social media sites. The upshot of the revisions is this:  If an individual or company is being compensated in some way – be it money, free products or some other form – to endorse or review a product on a blog or social media site, they have to disclose the relationship publicly. If they fail to do so, they could risk a fine of up to $11,000 per incident.
The revisions are having more than just a small impact. Just take the case of Mid America Chevy Dealers.

Earlier this month, the association of Chevy dealerships announced a promotion that lets six area mothers test drive Chevy’s new Equinox and Traverse crossover vehicles for a full month. The association also provides each mother with gas money and $150 in groceries. In exchange, the mothers are required to review the vehicles on blogs hosted by a Chevy promotional site.

Though cautioned to be truthful about the shortcomings of the vehicles, the women are promised rewards such as free massages if they persuade a reader to take a test drive.

Proponents of the FTC’s position say that bloggers who fail to inform consumers of this type of quid-pro-quo relationship could improperly sway readers. Those bloggers might feel compelled to minimize certain deficiencies in the vehicles in order to appease “the hand that feeds them,” so to speak. Full disclosure of this affiliation, the FTC argues, would arm consumers with crucial data they need to make a fully informed decision.

On the other hand, some critics argue that the revisions are an attempt by big government to stifle free speech in the blogosphere. Others say they single out online media for excessive scrutiny.

“Significantly, the new rules place requirements on social media from which traditional print and television media are exempt,” writes Tim Jones in a legislative analysis published on the Electronic Frontier Foundation’s Web site. “For instance, if a blogger publishes a book review, the rules will require her to disclose whether she received a free copy of the book from the publisher. Book reviews in print media face no such restrictions.”

In any case, what does all of this mean for you as a business? What should you do to comply with the new regs?

1)   Review your online marketing presence. Examine how your business markets itself in the blogosphere and in social media. Is all of your Web material created internally, or do you work with external partners? Who writes your blogs and status updates? Employees? Members of a professional association?

2)   Determine how each of these content producers are compensated. It’s important to note that “compensation,” according to the FTC, does not have to consist of money. It can take the form of free products, free services, a business partnership, referrals, etc. Any sort of quid-pro-quo relationship can be viewed by regulators as “compensation.”

3)   Disclose everything. Are your bloggers employees who receive a regular salary for their work? Disclose it. (The actual dollar amount is unnecessary.) The goal of the regulation is to let consumers know what may or may not be influencing the opinions of the bloggers.

4)   Do a reverse analysis. Determine how you and your business are taking part in the marketing of other companies. Do you write blogs or social media content for business partners? Are you being compensated in any way for that material? If so, you also will have to disclose your agency’s relationship to the companies and associations you’re marketing.

5)   Most importantly: Talk to your attorney. It’s critical to seek out the services of a competent attorney to ensure that you’re complying with these regulations. Neither this site nor any other that is not skilled in the practice of law can provide you with legal advice, and none of the material you are reading here consists of such.

As New Media continues to evolve and play a much more significant role in marketing, regulators will continue to closely monitor its use. We at corecubed are committed to keeping you informed about the latest developments when it comes to online marketing. Together, we can stay on the forefront of cutting edge communication as we look forward to 2010.

See the video below about the revisions:

Click here to view the text in a PDF of the newly revised FTC guidelines.