Wednesday, October 07, 2009

PRSA Responds to FTC's New Rules for Blog-Marketing

The following is a bulletin just sent to PRSA members from Michael Cherenson, APR, PRSA chair (who visited our chapter last year). He presents a clear analysis of the new FTC guidelines.

The Federal Trade Commission (FTC) has issued final changes to its Guides Concerning the Use of Endorsements and Testimonials in Advertising. While advisory in nature, the new guidelines will reset standards of behavior that public relations, marketing and advertising professionals should adopt to avoid violating underlying laws against unfair competition and false advertising.

The guide changes, as set out in the FTC's notice, make three key departures from previous guidance that could impact public relations practice:
  • The FTC advises that "endorsers" as well as advertisers can be held liable for false or unsubstantiated claims or for failing to disclose material connections between the parties.
  • The guides no longer offer the "safe harbor" whereby testimonials can be qualified by a "results may vary" disclaimer.
  • Regarding endorsements, the guides specify that celebrities should disclose relationships with advertisers.

While the FTC will approach each potential violation on a case-by-case basis, the new guidelines will impact how professionals should approach some common practice scenarios. Here are some applications of the guidelines: 

  • Bloggers who receive cash or in-kind payment (including free products or services for review) are deemed endorsers and so must disclose material connections they share with the seller of the product or service.
  • Any firm that engages bloggers by paying them outright to create or influence editorial content or by supplying goods or services to them at no cost may be liable if the blogger does not disclose the relationship.
  • Advertisements or promotions that feature a consumer who conveys his or her experience with a product or service as "typical" should clearly disclose what results consumers can generally expect or specify how the results were unique to the individual circumstances.
  • If research is cited in an advertisement or promotion, any sponsorship of the research by the client or the marketer should be clearly disclosed.
  • Celebrities who make endorsements outside the context of traditional ads, such as on talk shows or in social media, should disclose any relationship with the advertiser or marketer.

From an ethics perspective, the new guidelines parallel key transparency principles in the PRSA Code of Ethics, as well as Professional Standards Advisory PS-9 condemning "pay for play" practices. However, for practitioners, the guidelines go beyond ethics to recommended practice to avoid legal liability. While the ethics are clear, the triggers and nature of adequate disclosure are not fixed. As I recommended in a recent PRSAY blog post, thorough understanding and self-regulation can help public relations professionals avoid legal repercussions.

While the guidelines are advisory in nature, failure to comply increases the risk of professionals finding themselves in violation of the law. Moreover, non-compliance can result in a communication from the FTC warning professionals against the potential offending action. If that warning is not heeded, it may be followed by a cease-and-desist order. Intentional violation of that order may result in referral to FTC enforcement, which may include civil monetary penalties.

  There has been information circulating publicly on the new guidelines that is confusing and conflicting. With this notice, PRSA hopes to bring members up to date on the facts as currently understood. This information is based on FTC documents and an in-depth conversation with a Commission staff attorney. Going forward, PRSA will continue to provide you with information, clarification, case studies and interpretations as they unfold.
Best regards,
Michael Cherenson, APR