Mary Engle, Associate Director of the Division of Advertising Practices at the Federal Trade Commission, Bureau of Consumer Protection, spoke at the 2009 KidLitosphere Conference. Her talk centered on the FTC's newly revised guidelines regarding bloggers and their use of online endorsements and testimonials.
When AP first broke the story, there was a lot of concern in the blogosphere, especially among children book reviewers, as to whether the FTC's disclosure requests would apply to them or not. Some bloggers may get paid for what they do, but most do not. Children book reviewers rely on, by and large, the ARCs (Advance Reader Copy) publishers send them. So did the newly revised FTC guidelines require children book reviewers to post on their blogs a notice stating they had received a copy of the book, free of charge, from the publisher? Does receiving a free book from a publisher means you were compensated for the review you wrote and posted on your blog?
Following is the transcript of Mary Engle's talk at the KidLitosphere Conference. It is posted to the CCF site with her permission and under her name. The transcript includes the Question & Answer session that followed her talk. Words in brackets, [ ], were added by CCF for clarification.
Good morning everybody.
Thanks for inviting me to talk to you today. First of all I would like to explain a bit about the FTC. The FTC is an independent agency of the federal government. We're the nation's consumer protection agency. We require tags on clothes that tell you how to clean them, the octane numbers posted on gasoline stations, the yellow energy guides on appliances, and the do not call telemarketing list.
We do a variety of consumer protection activities and one of the things we do is police false advertising. Section 5 of the Federal Trade Commission Act says 'Unfair or deceptive acts in commerce are prohibited' but that is broad and general and not that helpful for advertisers to figure out which advertisements are deceptive.
We have issued guidelines to put meat on the bones on section 5, to say how the FTC would apply section 5 to different situations. We also have guides for green marketing claims, biodegradable, recyclable claims etc. These guidelines are distinct from our rules and regulations. The things I mentioned before are rules and have the force of law. We can bring a case and assess penalties for violations. But guidelines aren't rules, they're guidance.
AP ran the first story last week and they got it wrong when they talked about $11,000 penalties for violations. That's wrong. That's for rules like the "do not call rule," etc.
The endorsement guides have been around since 1980. An endorsement is an advertising message that reflects the views of someone other than the advertiser. You might have a person saying, "I tried this product and lost 10 pounds." These are third party endorsements. It has to be an advertising message and it's important to remember this definition.
One thing that caused concern is "material connections," which are connections between the advertiser and the endorser that the audience wouldn't reasonably expect. For example it would be like last year we sued a company that advertised pills that cured cancer. There was a testimonial from someone who claimed that the pills cured his cancer.
But the person giving the testimonial was the president of the company. That has to be disclosed.
Typically in these types of advertisements it's someone in the family or an employee of the company or someone getting a cut of the product sales. Years ago we brought a case against a company that sold its pills through doctors who were getting a percentage of the sales of the pills they were selling but that fact wasn't disclosed. A patient ought to know whether his/her doctor is getting a cut off of the supplements/products he/she is suggesting the patient buy and use and which are being sold out of the doctor's office.
A few years ago we started to review our endorsement guides. One of the things we have seen, in the past few years, is that social media has exploded and our guides didn't have anything about that. They were pre-internet. So we needed to bring them up to date and include some examples on how we would apply section 5 to the use of endorsements in social media marketing. What we're thinking about is the example of where a company is paying people to post or tweet about specific products. But not just monetary cash, but also when you're getting free products.
For example, Procter and Gamble has a program where P&G sends samples of products to people and people talk about the products. That's "word of mouth" marketing. So we believe it's reasonable for you to know that when your friend is telling you about this great product, you need to know they're part of the P&G marketing program.
The problem is that, having seen all the commentaries since we issued the guides, we probably could have done a better job of describing distinctions between people who independently review products and people who are part of a marketing program. We see the distinction. It's an important distinction. I see a difference in people who get free books and write an independent review. I don't see that as you being part of the marketing department of publishers.
There's a lot of concern about us applying the "material connection" disclosure requirement to book reviewers. Two points need to be made about this:
One is that, even if we were to investigate a word of mouth program and got complaints, our investigation would be of the advertising company not of the blogger. In the P&G program example, we would investigate P&G if there was a problem. It's their job to tell their bloggers they need to tell folks they're part of their marketing program. But, of course, P&G can't make everyone do it. That's why we say the individuals have to disclose.
The other point, when we use the word "compensation," we got the question of does this mean compensation for IRS tax purposes. We have nothing to do with the IRS. I have no idea of what the requirements are in terms of, generally, whether you have to declare things. We didn't mean it that way. We wanted a different word than "pay", something that would reflect the fact that you're being compensated through, say, a free box of pampers every month because you're blogging about that company's products, one of them being Pampers.
QUESTION & ANSWER SESSION THAT FOLLOWED MS. ENGLE'S TALK:
Question: As a person who takes a book from a publisher, I do not have to put any type of disclosure on my blog?
Answer: No. You are independent. Your reviews are not endorsements under our endorsement guides. You're free to do so if you choose to, free to disclose you're getting a free book from the publisher. But in terms of, what I'm saying is, I don't see those kinds of reviews as endorsements, as advertising.
Question: What about links to amazon.com associate accounts?
Answer: amazon.com associate links, that's harder to answer. I'm expressing my views as an attorney at the FTC. I can't speak for the Commission itself. But I do give recommendations to the commission on what to do. I'm not giving binding legal advice here. We thought about that and I don't think we have a hard and fast position on that yet. We don't know all the facts. When we bring a case, we do an investigation and become familiar with the industry. So I'm a little bit uneasy in how I answer this one question. It's hard for us generally to give answers that might change depending on what the facts turn out to be. The case I mentioned earlier, where the doctor was getting a percentage of every bottle he sold, that's much more a clear case of what we had in mind when putting together these advertising guidelines.
Do people reading your blog, seeing a link to amazon.com, do they understand that you'll get a cut if they buy off of your link? A lot has to do with expectations or understanding of the consumer. Even from the traditional advertising end, we always approach it from the point of view of reasonable consumers. How would the reasonable consumer approach it?
What is implied by what's said? Since we approach it from the consuming audience's approach, it's going to depend on what the consuming audience understands. So if everyone understands that you're getting a cut from amazon.com, then that covers it.
Question: Just saying at the end of blog post, "I operate as an amazon.com affiliate," is that disclosure?
Question: Would amount of money made through an Amazon associate link, would that make a difference?
Answer: There might be things of insignificant value that are not material, or not significant enough to change the expectation of the audience. The guides say "material connections" have to be disclosed.
Question: What if you have it in the "about you" section of your blog or web?
Answer: That's not enough. Disclosures have to be prominent; readers need to be able to see them. So if they have to go looking for it it's essentially not there.
Question: Is the FTC interested in quality of work? Like one blogger that just blogs for one publisher?
Answer: We're not going to try to evaluate quality of reviews. But the scenario where someone is so linked to one publisher, and only gives positive reviews; at some point they might cross the line from being an independent reviewer to being part of the company. Since our focus would be on the company and not the individuals, in any investigation we would find out what the company is telling people, are they directing people to only give positive reviews?
Question: Book reviews are personal opinions, why would a newspaper not have to report they got a book for free and a blogger have to? [Note: right here, part of a question may have been left out. There was a question about why should a newspaper not have to report they got a book for free and a blogger have to. But then there was a separate question with someone saying isn't a book review different than a review of things like weight loss products or bookshelves because book reviews are subjective?]
Answer: I wouldn't want to draw a line between [whether the review is of something that is] subjective or objective. A lot of things are fairly subjective, whether offline or online. In our Federal Register notice, we didn't include examples of bloggers who are independent product reviewers online. We talk about the New York Times having a review [where the reader knows that the reviewer isn't getting paid for the products they review, on the one hand] and we talk about personal blogs [where the reader doesn't know that the person isn't paying for the products, on the other]. When there's no cue that the person is part of a marketing program then they have to disclose but, by implication, we swept in what you guys are doing and that was unintentional. We'll be putting out an FAQ answering a lot of the questions we've been getting since we issued the guides.
Question: Is there something we can do to give you more feedback to make distinctions between independent book bloggers and other bloggers?
Answer: We're setting up an email box for people to send in questions. We won't be able to answer questions individually. And we never intended to patrol the blogosphere. We couldn't do it even if we wanted to, and we don't want to. But the email box is intended for us to develop our FAQ.
Question: Your concern is about disclosure. You're not saying you can't have affiliate links [on your blog or website] but that if you have affiliate links you have to disclose them.
Question: When will the FAQ be available?
Answer: The FAQ will be up in the next few weeks.
Question: Where do we email our questions?
Answer: Email: firstname.lastname@example.org