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Legal Review: The FTC Fires a Warning Shot After AnnTaylor’s Blogging Adventure

11 Jul, 2010 By: Gary D. Hailey, Jeffrey D. Knowles, Venable LLP’s Advertising Response


Back in the 1950s, the level of violence in television shows was very low. In most of the TV westerns of that era — Gunsmoke, Wyatt Earp, Have Gun Will Travel and the like — episodes didn’t end with the good guy shooting the bad guy. Instead, they usually ended with the good guy firing a warning shot into the air, which caused the bad guy to immediately stop trying to get away and throw his hands into the air in surrender. Not particularly realistic, perhaps, but there was a lot about the 1950s that wasn’t particularly realistic.

The Federal Trade Commission’s (FTC) recent closing letter to AnnTaylor Stores was the equivalent of Marshall Dillon firing a warning shot at online marketers and bloggers. There was no bloodshed, but the FTC definitely sent a message. And that message is that you’d better take the agency’s revised Endorsement and Testimonial Guidelines seriously.

The revised guides, which went into effect late last year, require advertisers to disclose any “material connection” between advertisers and endorsers. The examples in the guides include one involving a blogger who is sent a new video game system by a manufacturer, which he then reviews favorably on his blog. According to the FTC guides, “The blogger should clearly and conspicuously disclose that he received the gaming system free of charge.”

According to the AnnTaylor Stores closing letter, the FTC investigated the apparel retailer because
AnnTaylor gave gifts to bloggers who attended the preview of its summer 2010 fashion collection. Many of those bloggers failed to disclose that when they blogged about the preview. The FTC didn’t investigate the individual bloggers, but looked into whether AnnTaylor had taken sufficient steps to prevent or correct the failure of the bloggers to disclose the “material connection.”

According to www.jezebel.com, 31 bloggers attended the preview. How much swag did they get? Each was promised a “mystery” gift card with a value of up to $500 if he or she posted coverage of the event to their blogs within 24 hours of the event. The minimum value of the gift cards was only $10 according to the Los Angeles Times, which broke the story in January.

Why didn’t the FTC force AnnTaylor to sign a consent agreement rather than closing the investigation with any formal enforcement action? According to its closing letter, the agency’s staff had a number of reasons for its decision. First, the January 2010 preview was the only one AnnTaylor had ever held. Second, only a small number of bloggers were involved, and some of them did disclose that they had been given gift cards. Third, AnnTaylor adopted a written policy in February 2010 (shortly after the Times and others blew the whistle on them — undoubtedly not a coincidence) stating that the company would never again give gifts to bloggers without first telling the blogger that he or she was expected to disclose the gift in his or her blog.

The letter closes by stating that the FTC staff expects that AnnTaylor “will both honor that written policy and take reasonable steps to monitor bloggers’ compliance with the obligation to disclose gifts they receive” from the company.

In our experience, this issue arises most frequently in the affiliate marketing context, where a client’s affiliates endorse the company’s products in their blogs, tweets or Facebook pages. The FTC’s closing letter demonstrates that marketers should have a written policy governing disclosures by affiliates and should do some monitoring of affiliates to determine whether the policy is being observed or ignored. The FTC does not expect marketers to be perfect. As long as you have a reasonable written policy and take some steps to enforce it, you probably won’t find yourself staring down the barrel of the FTC’s Colt .45.


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