FTC to Social Marketers: Keep it Real, or We'll Take Action - Ed Keller - MediaBizBloggers

After a lengthy process of review and comment, the FTC issued new advertising guidelines late last year that cover social media and word of mouth marketing. The goal was to make clear that just as the Commission can take action against deceptive, fraudulent, or unfair business practices in advertising, they will do so against deceptive practices in social media as well.

And last week the FTC issued its first rebuke under the new guidelines, settling a case against PR agency Reverb, which it charged had engaged in deceptive advertising by having employees pose as ordinary citizens while posting game reviews online and not disclosing that the reviews came from paid employees working on behalf of the game developers.

The action, which technically is subject to a thirty day review period before being finalized, is a clear reminder that the FTC intends to take action against both brands and agencies acting on their behalf if they are not open, honest, and transparent in their social media activities.

In the press release announcing the action, Mary Engle, the Director of the FTC's Division of Advertising Practices stated: "Companies, including public relations firms involved in online marketing, need to abide by long-held principles of truth in advertising. Advertisers should not pass themselves off as ordinary consumers touting a product, and endorsers should make it clear when they have financial connections to sellers."

As I wrote here in a previous post, the purpose of the FTC Guidelines are to insure that brands and individuals engaged in social media are fully transparent in terms of their relationships, and are responsible for the accuracy of what they say. More specifically:

· Advertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose a material connection between themselves and their endorsers. This includes their relationship with bloggers and others who are compensated to promote or review a product.

· Endorsers may also be subject to liability for their statements.

· The communicator of the message must be transparent and honest.

· The FTC will require substantiation, or an appropriate basis for claims being made.

According to Tony DiResta, a partner with the Advertising, Marketing & Media practice of Manatt, Phelps & Phillips, LLP and General Counsel of the Word of Mouth Marketing Association (WOMMA), "As a practical matter, social media -- and all forms of WOM, Web 1.0, and Web 2.0 - - is now a regulated industry; and all stakeholders are responsible for compliance with the FTC Guides. As a result, all marketers, agencies, and brands must develop a 'culture of compliance' where the vocabulary of risk management is a central aspect of an advertising strategy." (For those who want to know more, I encourage you to read a longer Q&A I had last year with Tony, where he discussed the impact of the FTC Guidelines and steps businesses should take.)

The WOMMA Ethics Code provides a strong guidepost to help marketers plan your social media disclosure activities. (Disclosure: I am on the WOMMA Board of Directors.) In part, they say that any word of mouth or social media marketing should include:

• Disclosure of identity: Make meaningful disclosures of your relationships or identities with consumers in relation to the marketing initiatives that could influence a consumer's purchasing decisions.
• Disclosure of consideration or compensation received: Do not engage in marketing practices where the marketer/sponsor or its representative provides goods, services, or compensation to the consumer (or communicator) as consideration for recommendations, reviews, or endorsements, unless full, meaningful, and prominent disclosure is provided.
• Disclosure of relationship: Any brand or representatives involved in a word of mouth initiative on their behalf should disclose the material aspects of their commercial relationship with a marketer, including the specific type of any remuneration or consideration received.

WOMMA has also created an Ethics Toolkit that defines best practices, baseline rules, and asks 20 questions to help you ethically comply. What is all comes down in the end, is that there should be genuine honesty in communication. That's what makes consumers turn to word of mouth and social media for advice, recommendations, and help in making product choices. If you're honest, your efforts will be rewarded. If you're dishonest, it will be come back to haunt you. The bottom line for marketers is that you are being watched, not only by consumers (who have an uncanny sense of smell for what's real and what's fake), but now also the FTC.

Ed Keller, CEO of the Keller Fay Group, has been called "one of the most recognized names in word of mouth." The publication of Keller's book,The Influentials, has been called the "seminal moment in the development of word of mouth." Ed can be contacted at ekeller@kellerfay.com.

Read all Ed’s MediaBizBloggers commentaries at Ed Keller - MediaBizBloggers.

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