The FTC regulates behaviour so that it stays consistent with the
Federal Trade Commission Act. It produces guidance designed to help
companies keep in line with that Act. It is this guidance which has
been changed to protect consumers from reviews by bloggers who have
been secretly paid by the producers of goods. The guide affected is
the FTC's Guide Concerning the Use of Endorsements and Testimonials
in Advertising, it said.
"'Material connections (sometimes payments or free products)
between advertisers and endorsers – connections that consumers
would not expect – must be disclosed," said an FTC statement. "The
revised Guides specify that while decisions will be reached on a
case-by-case basis, the post of a blogger who receives cash or
in-kind payment to review a product is considered an
endorsement."
"Thus, bloggers who make an endorsement must disclose the
material connections they share with the seller of the product or
service," the regulator said.
The new guidelines also govern the way that famous people behave
on social networking sites. If they promote, even informally, goods
or services they will have to disclose any commercial relationship
they have with the company behind them.
"The revised Guides also make it clear that celebrities have a
duty to disclose their relationships with advertisers when making
endorsements outside the context of traditional ads, such as on
talk shows or in social media," the FTC said.
The UK already has a law that bans misleading actions or
omissions by traders. When a trader falsely represents itself as a
consumer, or where a paid-for advert is disguised as editorial
content, there can be a breach of the Consumer Protection From
Unfair Trading Regulations.
"We already have rules in the UK in force that require
transparency and if somebody is concealing their motives for a
commercial practice, there could be an offence punishable by up to
two years in prison, so penalties are tough," said Struan Robertson, a technology law expert at
Pinsent Masons, the law firm behind OUT-LAW.COM.
Robertson said that even blogs which are small personal projects
could be caught by the Regulations if they derive a benefit from
their association with a company and do not disclose it.
"The Regulations give courts a lot of scope to decide what would
and would not count as being an unfair commercial practice," he
said.
The change to the FTC's guidelines is the first since 1980.
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