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Setting the Record Straight on the FTC's Testimonial and Endorsements Guide

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President and Chief Executive Officer of the Interactive Advertising Bureau, Randall Rothenberg recently took a shot at the FTC on the Huffington Post for its newly introduced Testimonial and Endorsements Guide. Here is our response:

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Dear Mr. Rothenberg:

I saw your open letter in the Huffington Post regarding the Commission's recently
revised Guides for the Use of Endorsements and Testimonials in Advertising. You say the FTC
is ignorant, disingenuous, and just generally doesn't get new media - but in the nicest way. In
all seriousness, I appreciate the opportunity to clarify our position. I believe we share the goal of
making sure corporate malfeasance by a few doesn't diminish the credibility and utility of social
media for all.

There has been a strong reaction to the revised Guides, as you note - much of it based on
fundamental misunderstandings about what the Guides are and do. For example, many people
have objected, as you do, that the Federal Trade Commission can fine people for violating the
Guides, but the Commission can't fine people one penny for violating the Guides. Indeed, the
Guides are not "rules" and there is no monetary penalty for violating them. Rather, the Guides
are intended to help advertisers comply with the FTC's bread-and-butter statute, the FTC Act.

Your critique mainly focuses on another issue: whether the Commission is holding new
media to a different standard than traditional media, or holding "individuals more liable than
larger corporations."

That's not the case. Let me explain why.

The FTC Act prohibits "unfair or deceptive acts or practices in commerce." When the
FTC challenges a false or misleading advertising claim - or a deceptive omission - we look at it
from the viewpoint of a reasonable consumer. The question to be answered is whether
reasonable consumers take away a deceptive message from the ad.

So when we evaluate whether an endorsement is deceptive under the FTC Act, consumer
expectations are key. For instance, consumers understand that celebrities in ads are paid for their endorsements, so the Guides make clear that advertisers don't have to disclose that fact. But let's take another example. A Wall Street Journal reporter interviewed a blogger who, "after a
favorable review," got "a Flex crossover vehicle for a year and a gas card. 'It was love at first
sight,' Ms. Smith wrote in her blog, after test-driving the car." She and other bloggers were
"flown to Santa Barbara by Electronic Arts to work out with Oprah Winfrey's personal trainer,"
were hosted at the Four Seasons and got "makeovers as they [wrote] about taking a 30-day
challenge on an upcoming fitness video program for the Nintendo Wii." Miguel Bustillo and
Ann Zimmerman, "Paid to Pitch: Product Reviews By Bloggers Draw Scrutiny," Wall Street
Journal, April 23, 2009. This blogger apparently disclosed that she was compensated for these
reviews, but if she hadn't, do you think a consumer reading her review for the Flex would expect
that she had gotten to use it free for a year? Do you think a consumer would want to know that,
even if Ford hadn't thrown in the gas money? And if the blogger doesn't disclose that, how will
consumers know?

That doesn't mean we will be pursuing individual bloggers. Our concern is with the advertisers who pay consumers to talk up their products and make it look like independent
consumer opinion. Companies don't always pay in the form of cash, though, so we included
examples in the Guides where consumers are compensated through free products.

Your letter says no harm, no foul. Don't enforce truth in advertising on the Web because
hey, this is all so new, and ads online aren't always delivered in tidy boxes like in the newspaper.

Ignore word of mouth marketing, blog advertising networks, and all the other techniques now
employed by large, sophisticated companies - the kind you complain that we're somehow letting
off the hook - that are searching for the pot of gold at the end of the marketing rainbow: good
word of mouth, even if it's purchased.

Social media marketing is here to stay, and we have enough respect for advertising on the
Internet and the important role of the blogosphere as a marketplace for public opinion to hold it
to the same standard we apply to advertising in any other medium.

One last thing. The Guides relate only to advertising - commercial communications (and
the FTC Act applies only to acts or practices in commerce). Are there instances where it can be
hard to distinguish advertising from editorial content? Yes. But that's true whether you're
talking about Twitter or traditional media (think advertising vs. advertorials vs. editorials). The
Guides illustrate some of the factors relevant to distinguishing social media advertising from
editorial content when marketers use consumers to generate their marketing messages. But
where the message is advertising, online disseminators have an obligation to ensure it is not
misleading, just as marketers using traditional media do. This includes, when it's not otherwise
clear from the context, identifying when the endorser has a relationship with the marketer.
So go ahead and blog that halibut recipe.

Very truly yours,

Mary K. Engle