Viral campaigns aren't immune from ad rules

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"Viral marketing" has been used as a catch-all term for word of mouth marketing, buzz marketing, stealth and guerilla marketing, grassroots marketing and influencer marketing. Though many in the industry resent being lumped in with all of these different types of marketing, it is all marketing - and advertising - just the same. For direct marketers, that means being aware of applicable legal obligations before embarking on such campaigns. A little knowledge can save you from a legal or public relations nightmare.

Compliance starts with Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices affecting interstate commerce. Under the FTC Act, "deception" includes misrepresentations or omissions likely to mislead consumers acting reasonably under the circumstances. "Unfairness" refers to ads that cause or are likely to cause substantial consumer injury, not reasonably avoided by the consumer and not outweighed by countervailing benefits to consumers or competition.

Given the nature of some viral campaigns (especially stealth/guerilla and some forms of word of mouth), an omission of a material fact is the most likely violation.

In what could be cited as one of the first FTC enforcement actions against a viral marketing campaign, Georgetown Publishing House Limited Partnership, Washington, settled charges with the FTC in the mid-1990s concerning its practice of mailing to consumers something that many of us have probably received: what appeared to be an independent book review torn from a magazine.

Attached to the "review" was a self-adhesive note with the handwritten, personalized message - "[Recipient's name], Try this. It works! J." - suggesting that the clipping had been sent by an acquaintance. The FTC did not find the marketing method itself to be deceptive, but rather the distribution of the fake book review. Georgetown agreed to refrain from misrepresenting that an ad is an independent book review or article and not a paid ad.

Anything that hides the nature of participants acting on behalf of an advertiser in a viral campaign likely would be considered deceptive. The FTC's Guides Concerning Use of Endorsements and Testimonials in Advertising are of particular importance for certain types of viral campaigns. The guides require not only that statements made by endorsers reflect the honest opinions and beliefs of the endorsers, but also that any connections between the endorser and the advertisers that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience) be fully disclosed.

The FTC states that "[a]n example of a connection that is ordinarily expected by viewers and need not be disclosed is the payment or promise of payment to an endorser who is an expert or well known personality ... However, when the endorser is neither represented in the advertisement as an expert nor is known to a significant portion of the viewing public, then the advertiser should clearly and conspicuously disclose either the payment or promise of compensation prior to and in exchange for the endorsement or the fact that the endorser knew or had reasons to know or to believe that if the endorsement favors the advertised product some benefit ... would be extended to the endorser."

Therefore, any marketing campaign involving individuals who have been compensated or otherwise induced to talk favorably about a product or service, without any disclosure of such compensation, is likely in violation of the FTC Act. For example, hiring street teams to go to clubs to show the features of or talk positively about a new wireless phone, without identifying their relationship to the manufacturer in some way, could be considered misleading. Hiring a third party to include favorable postings on a message board or chat room, without disclosure of any relationship, also could be misleading.

Apparently, others agree. The consumer group Commercial Alert last year asked the FTC to investigate what it called buzz marketing, stating that "companies are perpetrating large-scale deception upon consumers by deploying buzz marketers who fail to disclose that they have been enlisted to promote products." Commercial Alert thinks that a failure by buzz marketers to disclose that they are paid marketers and by whom they are paid is a material omission in violation of the FTC Act. The FTC has not yet responded to the request and has indicated that it currently is not looking into the issue, but that could change.

The good news is that disclosure does not seem to affect response rates, at least for word of mouth. A recent white paper by BzzAgent Inc. concluded that disclosure increases the validity of word of mouth interactions without reducing the breadth of campaign reach.

Beyond Section 5, direct marketers also need to know their obligations under regulations including the CAN-SPAM Act, the Telemarketing Sales Rule, the Telephone Consumer Protection Act and the Junk Fax Prevention Act, each of which can have implications for viral marketing if used as part of the campaign.

CAN-SPAM could come into play in forward-to-a-friend situations. The act applies to "commercial electronic mail messages" where the main purpose is the commercial advertisement of goods or services. The act requires that such e-mails contain: (1) a notice that the e-mail is an ad or solicitation; (2) a valid physical postal address; (3) a functioning opt-out method; and (4) an accurate e-mail header.

These disclosures may apply in a viral scenario, but any e-mail first must be "commercial" in nature. If it is, and a person is provided consideration or induced to forward the e-mail to a friend, the e-mail must comply with the act. Consideration includes rewards, coupons, discounts, payments or extra sweepstakes entries. However, a Web page with a "Click here to forward" feature that lets someone forward a message or link to someone else (and that gives no encouragement to do so) would not be considered an inducement.

Viral campaigns on the Internet have unique issues. If personally identifiable information is collected from consumers, the California Online Privacy Protection Act requires that any commercial Web site operator doing so give individuals notice of its privacy policies. Such policies must include specified information and be posted in a "conspicuous" manner on the site.

Personally identifiable information includes e-mail addresses or other identifiers that permit the physical or online contacting of a specific individual. Any viral Web site, blog site, chat room, message board, etc., set up to collect such information must comply.

Finally, because viral campaigns often are placed in a context to look like something other than advertising (fictitious blogs, fake news sites, etc.), the use of third-party intellectual property rights often is overlooked. Though there may be room for fair use, material protected by copyright and trademark law generally cannot be used for commercial purposes without permission.

Similarly, the use of a person's name, picture, voice or likeness for commercial purposes generally requires written permission. Viral sites, even if used for blogging or news dissemination, should be considered commercial in nature, meaning that they will not receive full protection of the First Amendment and likely are not protected by applicable fair use principles.

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