FTC targets bloggers, celebrities
Government says bloggers must disclose payments from ad companies and celebrities will be held to account for promotions.
NEW YORK (CNNMoney.com) -- The Federal Trade Commission is going after bloggers, celebrities and tall tales in the first revision of its rules for endorsements and product reviews in nearly 30 years.
The new guidelines, which go into effect Dec. 1, are designed to adapt to a new world in which blogs and social media Web sites such as Facebook and Twitter have quickly become go-to destinations for consumers to get an opinion about a product. The last FTC rules revision was in 1980.
An existing FTC rule that states product reviewers must reveal any connection they have with advertisers was extended to bloggers. Companies will often distribute free products to bloggers for their review, and sometimes advertisers offer payment for endorsements. The FTC said that endorsements on blogs appear to be "word of mouth," but that is not always the case -- sometimes companies create their own blogs that can give the aura of objectivity.
The new rules also clarify that celebrity endorsers of products must reveal their relationships with advertisers when making endorsements if they are pushing a product on a blog, social network or television talk show.
"The test here is, if the relationship were known between the blogger and the advertiser, would that affect the credibility of the endorsement?" FTC assistant director of advertising practices Richard Cleland told CNN. "That question has to be determined on a case by case basis. What we have produced is a general guidance that says in certain cases receiving a free product is not any different than being paid directly for an endorsement."
The FTC also targeted testimonials in ads that convey atypical results for a product. For instance, many weight loss supplement ads will show people who have used the product and have lost large amounts of weight, with a disclaimer at the bottom that reads "results not typical." Under the new rules, the company must disclose the results that consumers should usually expect.
The existing rules carry a fine as high as $11,000 if product endorsers and reviewers don't comply.
"This is great for consumers," said Zeus Kerravala, an analyst with Yankee Group. "There's some doubt about blogs now, because you don't really know whether they're unbiased or not."
Kerravala said this could be the beginning of a larger attempt for the government to regulate the Internet. Though he doesn't believe it will be as tightly regulated as the off-line world, some tougher rules may be coming down the pike.
"We've gotten to a point where blog rumors could move stocks," said Kerravala. "There have to be some stricter regulations of the Internet. It's long overdue."
But enforcement could prove difficult. Cleland said the FTC won't be hiring new personnel to monitor blogs, creating a "game of whack-a-mole" for regulators, given the numbers involved. As a result, the FTC said it is more likely to go after advertisers rather than bloggers to ensure ad companies are giving product reviewers proper instructions about disclosure compliance.