FTC toughens ad rules in US

07 October 2009

WASHINGTON, DC: Advertisers, celebrities and online bloggers in the US will now be considered liable for any false claims they make while promoting products and services, new guidelines from the Federal Trade Commission state.

In its Guides Concerning the Use of Endorsements and Testimonials in Advertising, the FTC laid out a number of updated rules governing both online and offline ads, amending some procedures that had not been modified for almost three decades.

Executions featuring consumer testimonials must now explicitly state the average outcome customers can expect when using a product, rather than focusing on the results that are the most impressive, but are also atypical, and then adding disclaimers.

Bloggers will be required to disclose any links they have with brand owners, who often provide web users with financial or other forms of reward to review or comment on their goods.

Similarly, these online authors will be held liable if any such statements are misleading, and they are then found to be connected in some way with manufacturers.

Celebrities will be subject to similar provisions regarding the disclosure of their relationships with companies when appearing outside of traditional forms of advertising, such as on social media platforms or when on talk shows.

These high-profile spokespeople may also be held responsible for erroneous comments they make about goods they are officially endorsing.

One key reason for the FTC's decision to revise the existing regulations in these areas is the increasing number of advertisers that are attempting to utilise electronic word of mouth.

Spending in this area reached $1.35 billion (€916m; £848m) last year, and is forecast to climb to a total of $3.7bn by 2011, according to the Word of Mouth Marketing Association.

Anthony DiResta, a partner Manatt, Phelps & Phillips and general consul of WOMMA, argued "all the worst fears of businesses have come true."

"Brands that sponsor blogs or pay bloggers to cover events could face increased legal risk when held accountable for the statements of their bloggers."

While the FTC is "trying to get a grip on this new media ... in doing this they're saying they need full and complete disclosures," he added, a process which poses some substantial challenges.

"How do you give effective disclosure on a tweet that's 140 characters or on a message on a cell phone? When it's a new product, how do you say what typical results are?" DiResta asked.

Richard Cleland, assistant director for the FTC's division of advertising practice, said "in 1980 most of all advertising was disseminated by the advertisers themselves; today a good part of that advertising is being disseminated by users."

"There will be some accommodations for the type of media involved. But if the required disclosure can't be made, then that kind of medium might not be appropriate for advertising."

Data sourced from Financial Times/AdAge; additional content by Warc staff