On August 26, 2010, a public relations firm, Reverb Communications, agreed to settle the Federal Trade Commission (FTC) charges relating to misleading online endorsements. Reverb was hired by developers of a video game application to promote the game app. Reverb had its employees pose as independent disinterested customers and post game reviews at the online iTunes store, while not disclosing the financial connection Reverb had with the game developers.
The proposed settlement order requires Reverb to remove any posted endorsements that say that the reviewers are independent consumers and fail to disclose connection with the game developers. Also, going forward Reverb and its employees cannot post reviews without disclosing such material connections.
This settlement order should not come as a surprise given that last year the FTC revised its Endorsements and Testimonials Guides to include all media – including blogs and social networking sites. The previous Guides were written in 1980 and did not extend to social media. The legal principles, however, stayed the same. The Guides reflect three basic principles:
1. Endorsements must be truthful and not misleading;
2. If the advertiser doesn’t have proof that the endorser’s experience represents what consumers will achieve by using the product, the ad must clearly and conspicuously disclose the generally expected results in the depicted circumstances; and
3. If there’s a connection between the endorser and the marketer of the product that would affect how people evaluate the endorsement, it should be disclosed.
The full text of the FTC press release relating to the settlement is available here: http://www.ftc.gov/opa/2010/08/reverb.shtm
The full text of the Revised Guides is available here:
Also, I recommend all bloggers, users of social media sites and online businesses to review the following helpful Q&A posted by the FTC relating to the Revised Guides: