Info, Law, IP & Ethics

FTC   FTW

Last October, the Federal Trade Commission introduced a new of set of rules that would require bloggers, tweeters, etc… to disclose any free products they received or financial interests in products they review.  As Wired Magazine put it, the FTC is trying to, “prevent the net from being flooded with paid-for reviews which appear to be the work of everyday netizens, but are actually paid for with free products.”  The FTC issued these regulations in the hope of making the Internet a more open and trustworthy place for consumers seeking honest product reviews.  Some see this as an encroachment on free speech on the Internet, oppose the regulation, and say the FTC is over stepping its bounds.  However, the FTC has long regulated advertising and endorsements, and introducing such oversight will help create a more trustworthy and open market for consumers.

So, what we are really talking about here is when a company gives a product to some reputable blogger in return for a product review.  Furthermore, it doesn’t apply to professional journalists or traditional media organizations.  According to the FTC, it generally,  “does not consider reviews published in traditional media to be sponsored advertising messages”. It’s only aimed at citizen bloggers who aren’t affiliated with an established media organization.

For example, my friend Sam writes a blog for Role Playing Games.  During the year or so he’s been writing it, he’s developed a pretty decent sized group of readers.  Every now and then, a publisher will send him a new game in hopes that he’ll write about it and his readers will go out and buy the game.  Under the new rules, he would be required to mention in the review that he received the copy for free.

There’s nothing inherently wrong that with that kind of product promotion.  In fact, it’s a pretty common practice called pay-per-post.  Product developers and manufactures can’t wait to give out their latest products to market influencers.  People listen to what they say and it’s a great way to get the word out about a new product or service.  However the FTC, is saying that this type of marketing counts as a product endorsement and must be disclosed to consumers to prevent deceptive practices.

So, what if instead of reviewing role-playing games, Sam writes about houses, home improvement, etc…  Now what if a landscaping company gave Sam $5,000 or a fancy new patio, and he wrote a glowing review for that company, but didn’t tell his readers he had been paid to write the review.  If you were shopping around for a contractor to do your backyard, wouldn’t you want to know that recommendation had been paid for?

This gets at the heart of the issue and the argument goes something like this.  People trust established sites and the fact that may receive free products doesn’t affect that trust, so they don’t have to disclose freebies.  But, consumers don’t know if they can trust every Dick and Jane blogger out there, so they have to disclose if they’ve received free products or payments from the company whose products they are writing about.

Believe it or not, bloggers have a pretty big influence on consumer purchasing decisions, and marketers know it.  According to research conducted by Jupiter Research and summed up by Marketing Vox, “blogs factor in to critical stages of the purchase process, weighing most heavily at the actual moment of a purchase decision”.  That means that people make decisions to purchase or not purchase a product based on what a bloggers say about it.  This is why supporters of the FTC’s actions say the FTC’s move is a good decision.  Since bloggers influence the purchasing decisions of consumers, regulations should exist to prevent deceptive advertising practices in this channel.

In recent years some big name companies have run afoul in the murky world of pay-per-post marketing.  Last year Google was lambasted for paying Japanese bloggers to talk up their new key words feature.  Bloggers would install the new feature on their site and talk about how great it was and how easy the new feature made it to stay up-to-date on the latest and greatest, and Google cut them a check.  The only hint that this was a paid endorsement (aka advertisement) was this line entered at the bottom of the posts, “I am taking part in the Cyberbuzz campaign”.

Microsoft had similar troubles with the launch of Windows Vista.  When Vista was about ready to launch, Microsoft hired PR company Edelman to generate buzz through tech bloggers.  Edelman gave a group of bloggers brand new Acer Ferrai laptops valued between $1899 and $2299. Again, this is pretty normal practice and there should not be a problem with it.   However, there is a problem when consumers don’t know this a paid endorsement.  A Northern California software consultant put it this way, “I went to a few of the “gifted” bloggers Web sites. Only one, Laughing Squid, made it clear MSFt provided the Ferrari.”

In both cases, once they found out, the online community was pretty outraged.  Customers aren’t stupid, and when they find out companies are trying to trick them with fake reviews, they don’t like it.  Furthermore, consumers should not have to find out when they’re being tricked and force companies like Microsoft and Google to apologize.  By forcing disclosure in such marketing campaigns, the FTC regulations make the entire process much more open and transparent.

When I spoke with my blogger friend Sam about it, he said that the FTC regulations would have a bigger impact on small-time bloggers rather than big name ones.  Most bloggers don’t make any real money off their blogs.  The free promo gifts they receive are a nice token of appreciation for the time and effort they put into their blogs.  He also said that some bloggers might be over reacting, “I got the sense that bloggers were going with a ‘the sky is falling’ attitude because of all the talk of regulating these promo gifts.”  He also reiterated the point that blogging is about build a certain closeness and trust with your readers.  As he said, “I realized that blogging isn’t about sharing some kind of new information that can’t be found anywhere else on the internet [sic].  It really is about sharing yourself and opinions with other people.” And that’s the point of the FTC regulations, to help maintain that level of trust by creating a more open environment.

However there are those who come down staunchly opposed to the regulation.  Not long after the FTC announced its decision, the Duke University Press came out against the new rules.  They make the following point, “We, and many book review bloggers, believe these guidelines will have a chilling effect on the online book reviewing community”.  Their point is that, the threat of fines might be enough to stop bloggers from accepting free books.  I don’t buy it, but it’s a decent argument.

Others who object take a more Big Brotherish stance against the FTC’s rules.  They say that if you let the government regulate what bloggers say (or in this case don’t say), who knows what they’ll regulate next.  Marketing Pilgrim’s Frank Reed put it like this, “I have to think that if the government is given an inch that they will take full advantage of expanded influence and power well beyond a mile”.  To his credit, he isn’t a conspiracy theorist, but just feels that this is an issue that should be left for the free market to work out.  But this is a pretty small requirement that the FTC is asking for.  Bloggers only need to insert one line saying they got this product for free.  Me thinks those who share that opinion doeth object too much.

In summary, I believe that since consumer decisions are being influenced by bloggers whose opinions they trust, consumers have the right to know if a blogger is being influenced by a corporate interest.  Disclosure of the fact that a blogger received a free product or was paid by a company allows consumers to make better decisions.  Furthermore, it makes it easier to trust the opinion of the blogger.  If my favorite blogger opens a product review by telling me he received a free copy of the latest and greatest gadget, the issue is out on the table.  It’s up to me to decide whether or not I think the review is biased or genuine.