WASHINGTON, DC: Viral marketing in the US may soon be subject to tighter restrictions after a review of the current regulations by the Federal Trade Commission, which could be authorised to punish companies and users of social media for making misleading statements in brand testimonials.
Viral marketing, such as looking to spead positive word-of-mouth about a product, is becoming an increasingly popular strategy among brands, which often attempt to target key category "influencers".
New rules under consideration mean the FTC could hold companies to account when they have sent samples of their goods to bloggers and users of social media sites in an attempt to generate publicility, and the recipient then goes on to make false or misleading statements about a brand.
Individuals endorsing goods could also be liable for any claims they make about a brand which turn out to be false.
Richard O'Brien, the vice-president of the American Association of Advertising Agencies, wrote to the FTC stating that "regulating these developing media too soon may have a chilling effect on blogs and other forms of viral marketing."
The reason for this, he argued, is that "bloggers and other viral marketers will be discouraged from publishing content for fear of being held liable for any potentially misleading claim."
However, Richard Cleland, of the FTC's division of advertising practice, said new technology meant current rules needed to be updated, and that "word-of-mouth marketing is not exempt from the laws of truthful advertising."
The Word of Mouth Marketing Association has reported that social media marketing expenditure reached $1.4 billion (€1.0bn; $911m) in 2007, and forecasts this figure will grow to $3.7bn by 2011.
Data sourced from Financial Times; additional content by WARC staff