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FTC Maintains Attention on Online Endorsers

7 Feb, 2012 By: Gregory J. Sater


Under the Federal Trade Commission’s (FTC) Endorsement and Testimonial Guidelines, the FTC will view it as deceptive and therefore unlawful under the FTC Act if an endorser of a product in the online environment – a blogger, product reviewer, or commentator – posts, tweets, or E-mails something good about a company or its product when there is an undisclosed “material connection” between that endorser and the company or product which he or she has just endorsed.

The FTC, for example, considers the giving of any free or discounted product to a blogger, reviewer or commentator to be a “material connection” between the marketer and the “influencer” in question, which means the connection must be clearly and conspicuously disclosed. Under this authority, the FTC commenced an investigation of Hyundai Motor America that the agency just closed favorably for Hyundai.

Apparently, Hyundai had used a vendor to design and operate a promotional campaign during which bloggers were offered gift certificates as an incentive for them to include links to videos of Hyundai Super Bowl ads, or to otherwise comment on the Hyundai Super Bowl ads, in their blog postings. The bloggers, or some of them, had done this but had failed to publicly disclose the “material connection” they had to Hyundai as a result of the gift certificates.

After investigating the facts, the FTC recently issued a “closing letter” ending its investigation because, the agency explained, Hyundai had a social media policy in place that said that material connections such as the one mentioned above were supposed to be disclosed, and because it wasn’t Hyundai who had set up the blogger incentivization program but a vendor of Hyundai’s. Also, as soon as the problem was identified, Hyundai addressed it.

This, of course, is not always how such a case ends for the company involved. The FTC has not shied away from stronger actions with bigger consequences. Last year, for example, the FTC went after a company called Legacy Learning Systems because many of its online affiliates had websites, blog posts, tweets, or other forms of online content that looked like they had been written by regular people – regular consumers who simply loved Legacy Learning’s products – when, as online affiliates, each of them was being paid a bounty for referring customers to Legacy Learning.

That wasn’t disclosed by the affiliates, and as a result Legacy Learning paid $250,000 to the FTC and now is the subject of a consent decree. That document orders, among other things, that every month the company must spot check its top 50 affiliates (those who have referred them the most customers) to make sure that in the affiliates’ tweets, on their websites, etc., they are clearly and conspicuously disclosing that they are being paid for referring customers.

A week ago, the New York Times reported on Amazon.com taking down the products of a company whose leather case for the Kindle was getting amazing reviews and 5-star ratings on Amazon.com, after it came out that the company had sent purchasers of the product an offer to refund the full price they had paid for the product if they posted a review of it on the website. While the company did not instruct the customers to post a 5-star score or a positive review, its offer to refund customers posting on Amazon.com clearly could lead to positive reviews by virtue of being a “material connection.” It is the failure of the enthusiastic product reviewers to disclose that connection which in the appropriate case could be viewed as an FTC Act violation.

Gregory J. Sater is a partner in Venable LLP’s Advertising, Marketing and New Media Group. He can be reached via E-mail at gjsater@venable.com.


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