Janice A. Oser, Esq.

Under consumer protection laws and regulations, you should be able to tell when an advertisement is an advertisement – that is, paid for, a factor that needs to be weighed in determining the credibility of the information it contains. It isn’t always easy to tell, but it should become easier with respect to postings on the Internet and other new media under some regulations that will become effective on December 1, 2009.

The new regulations have been issued by the Federal Trade Commission (FTC), an independent federal agency charged with issuing rules and regulations protecting consumers from “unfair and deceptive practices,” prohibited by Congress in legislation passed in 1938. A paid-for advertisement parading as an objective recommendation is unfair and deceptive.

Under the new regulations, a blogger (that is, someone who publishes in “new consumer-generated media”) who has been paid for writing up a product or service will be required to disclose that fact, “clearly and conspicuously.” The disclosure requirement would also likely be triggered if the blogger regularly receives free samples of products discussed or a single high-priced item.

According to an Associated Press article in the New York Times (“Bloggers Must Disclose Payments for Reviews, October 5, 2009), many companies pay bloggers for their write-ups or give them free products or trips. The article goes on to state that, in contrast, at “traditional journalism outlets,” products borrowed for reviews generally have to be returned. (Not review copies of books, apparently. Witness the shelves of “Review Copies” for sale at second-hand book stores.)

In any event, the FTC acknowledges that bloggers may be subject to different disclosure requirements than reviewers in “traditional media,” that is, newspapers, magazines, television, or radio. In general, the FTC does not consider reviews published in traditional media to be “sponsored advertising messages” or “endorsements” subject to the disclosure requirements of the new regulations.

The FTC elaborates on the meaning of “reviews published in traditional media” as “where a newspaper, magazine, or television or radio station with independent editorial responsibility assigns an employee to review various products or services as part of his or her official duties, and then publishes those reviews.”

According to the Associated Press article in the Times, violating the new rules could bring fines up to $11,000 per violation, and bloggers or advertisers could also face injunctions and be ordered to reimburse consumers for financial losses stemming from “inappropriate” product reviews (that is, presumably, reviews not accompanied by the required disclosure).

So bloggers and advertisers need to pay attention.

Following are three examples given in the new regulation of content on or in “consumer-generated media” that would be considered sponsored advertising messages, hence, endorsements, and subject to the new disclosure requirements:

“Example 7: A college student who has earned a reputation as a video game expert maintains a personal weblog or ‘blog’ where he posts entries about his gaming experiences. Readers of his blog frequently seek his opinions about video game hardware and software. As it has done in the past, the manufacturer of a newly released video game system sends the student a free copy of the system and asks him to write about it on his blog. He tests the new gaming system and writes a favorable review. Because his review is disseminated via a form of consumer-generated media in which his relationship to the advertiser is not inherently obvious, readers are unlikely to know that he has received the video game system free of charge in exchange for his review of the product, and given the value of the video game system, this fact would materially affect the credibility they attach to his endorsement. Accordingly, the blogger should clearly and conspicuously disclose that he received the gaming system free of charge.

“Example 8: An online message board designated for discussions of new music download technology is frequented by MP3 player enthusiasts. They exchange information about new products, utilities, and the functionality of numerous playback devices. Unbeknownst to the message board community, an employee of a leading playback device manufacturer has been posting messages on the discussion board promoting the manufacturer’s product. Knowledge of this poster’s employment likely would affect the weight or credibility of her endorsement. Therefore, the poster should clearly and conspicuously disclose her relationship to the manufacturer to members and readers of the message board.

“Example 9: A young man signs up to be part of a “street team” program in which points are awarded each time a team member talks to his or her friends about a particular advertiser’s products. [“Talks to” here presumably means “puts in or on a blog” – the FTC commentary to the new regulations includes phrases about bloggers “speaking.”] Team members can then exchange their points for prizes, such as concert tickets or electronics. These incentives would materially affect the weight or credibility of the team member’s endorsements. They should be clearly and conspicuously disclosed, and the advertiser should take steps to ensure that these disclosures are being provided.”