DMers work to comply with FTC freebie rule

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FTC puts regulation protecting kids online under review
FTC puts regulation protecting kids online under review

Bloggers and marketers will soon have to disclose any freebies and payment arrangements made in exchange for product reviews. After the Federal Trade Commission voted on October 5 to alter guidelines that call for penalties of up to $11,000 per violation, direct marketers are studying how to stay in compliance with the agency.

"There's been a lot of focus on how it affects publishers and bloggers, but this announcement equally affects marketers," said Andy Beal, an Internet marketing consultant. "The FTC is looking for greater disclosure, and as marketers, we'll have to ask ourselves some tough questions."

The guidelines, effective December 1, address endorsements by consumers, experts, organizations and celebrities. It is the first time in 29 years the guides have been updated. Several marketing executives said they welcome the clarifications and see them as a positive move.

Under the revised guidelines, advertisements that feature a consumer and convey his or her experience with a product or service as typical, when that is not the case, will be required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the guidelines - which allowed advertisers to describe unusual results as long as they included a disclaimer such as "results not typical" - the revised guides no longer contain this safe harbor.

The revised guidelines also include examples that illustrate the principle that "material connections" — payments or free products — between advertisers and endorsers must be disclosed.

David Churbuck, VP of global digital marketing at Lenovo, said it is important "to make sure we're compliant" with legal implications of the guides.

"I want that objectivity and church and state separation," Churbuck said. "We don't pay people to mention us."

Churbuck added that bloggers who write about Lenovo products are treated the same as mainstream reporters.

"We don't give them products or pay them," he said. "The [review] products are on loan and they need to be recovered."

"Most marketers and bloggers get that disclosure is a must," added David Berkowitz, senior director of emerging media and innovation at 360i. "We're happy to see this formalizes what we've been doing for a long time."

Beal said the guidelines will go further, differentiating between traditional and guerilla marketers.

"If you already operate at a high level of transparency, it's nothing but a good thing," he said. "On the flip side, you have guerilla marketers and those using the opaqueness of this relationship to get their products pitched, and they will have to rethink" their strategies.

Beal said the guidelines also apply to social networks. "I see a lot of Tweets that link to products and services," he said. "You have 140 characters. That's a challenge for disclosure."

Churbuck added that there is no agreement on the issue within the marketing community, and that there is contention regarding "blogola" — a riff on "payola."

"It's a big deal within the social media crowd, and it's a very divisive issue," he said. "I'm in the "against" crowd...What I'm saying is, I'm not paying anyone for this. I won't go to a third-party agency with a quarter of a million dollars of Thinkpads and say, 'Go get me word of mouth.' That may work for disposable diapers and Hamburger Helper, but it doesn't work with a Ford Focus."

The Electronic Retailing Association, a trade association for Internet retailers, endorsed the altered guidelines as a way root out marketers who do not disclose pay-for-blog policies.

"ERA fully supports enforcement against businesses and individuals that cut corners and jeopardize the healthy and vibrant $300 billion electronic retailing sector," said Julie Coons, president and CEO of ERA, in a statement.

The guides are administrative interpretations of the law intended to help advertisers comply with the Federal Trade Commission Act; they are not binding law themselves. The FTC would have the burden of proving that the challenged conduct violates the FTC Act.

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