October 21, 2009
Advertising, Blogs, Endorsements, FTC, Marketing
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FTC Disclosure Rules for Bloggers Part 1: What is an Endorsement?

The Federal Trade Commission published controversial new guidelines for endorsements and testimonial advertisements posted on blogs on October 5, 2009.  These standards, which are contained in Part 16, Section 255 of the Code of Federal Regulations (16 CFR § 255), go into effect on December 1, 2009. In a nutshell, the new guidelines require any blogger who reviews products to disclose any connection between them and the source of the product under certain circumstances. This is a rather interesting topic, with broad implications for people who write online. Thus, it seems appropriate to dig into the mechanics of the rules. 

This first post develops a basic analysis for figuring out how the law works, and examines what constitutes an “endorsement” under the new guidelines. The best way to understand the guidelines is to use a step-by-step analysis. First, does the blog post qualify as an “endorsement?” If the post is not an “endorsement,” the FTC rules do not come into play. However, if the post is an “endorsement,” the blogger (an “endorser”) must disclosure of the connection to the advertiser (a “sponsor”). If a review on a blog is an endorsement, but the the author chooses not to disclose, there are consequences (maybe) as the rules are enforceable under Section 5 of the FTC Act (5 U.S.C. §45). 

What is an endorsement? 

The first step is to identify whether a post is an endorsing a product. A product is “any product, service, company or industry.” 16 CFR § 255.0(c).  An endorsement is:

“any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) which message consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser. The party whose opinions, beliefs, findings, or experience the message appears to reflect will be called the endorser and may be an individual, group or institution.” 16 CFR § 255.0(b).

The highlighted section identifies intent of the guidelines: to ensure sure consumers know when there is a underlying relationship between the blogger that reviews a product and advertiser. The FTC has added hypotheticals to 16 CFR § 255.0 to show how the standard applies to bloggers. The following hypo is not an endorsement: 
A consumer who regularly purchases a particular brand of dog food decides one day to purchase a new, more expensive brand made by the same manufacturer. She writes in her personal blog that the change in diet has made her dog’s fur noticeably softer and shinier, and that in her opinion, the new food definitely is worth the extra money.
This hypo is also not an endorsement: 

Assume that rather than purchase the dog food with her own money, the consumer gets it for free because the store routinely tracks her purchases and its computer has generated a coupon for a free trial bag of this new brand.

This hypo is an endorsement:

Assume now that the consumer joins a network marketing program under which she periodically receives various products about which she can write reviews if she wants to do so. The consumer receives a free bag of the new dog food through this program, and writes a positive review.

In hypos 1 and 2, the blogger either bought the product or acquired it from a source besides the advertiser. Hypo 3 shows an ongoing relationship between the endorser (blogger) and the sponsor (advertiser), and an economic gain by the blogger based on the continued receipt of products. This combination is an example of an endorsement. In the Guides Concerning the Use of Endorsements and Testimonials in Advertising, the FTC drives home the importance of the relationship between advertiser and blogger is in defining an endorsement:

The Commission does not believe that all uses of new consumer-generated media to discuss product attributes or consumer experiences should be deemed “endorsements” within the meaning of the Guides. Rather, in analyzing statements made via these new media, the fundamental question is whether, viewed objectively, the relationship between the advertiser and the speaker is such that the speaker’s statement can be considered “sponsored” by the advertiser and therefore an “advertising message.”

As mentioned earlier, if a review qualifies as an endorsement, the blogger must disclose his or her connection to the advertiser. If the review is not an endorsement, the FTC rules do not apply. Disclosure will be discussed in Part 2.