This writer is far from being a Libertarian, and otherwise leans towards pragmatic forms of governmental regulation, regardless of the industry or the issue.
That said, the NYT points to yet another new government initiative to regulate freedom of speech that is potentially alarming. This new initiative targets of all people, bloggers.
The upshot, as interpreted by a select group of jailhouse lawyers, suggests that the FTC is aiming its cross hairs on all blogs that endorse or recommend products. According to this article, the FTC proposes to go after any blogger that fails to disclose whether they've received any type of compensation, even if limited to free samples, in exchange for mentioning any product.
Wow.
The ramifications of this new initiative would cause some to take out a calculator and try to analyze the actual cost to small and large businesses of conforming to yet another wave of government regulation in a business environment that has everyone struggling to make ends meet. The cost of complying with the proposed initiative is guestimmated to be in the tens of billions of dollars.
No doubt this is time to re-direct our children to pursuing careers in the legal industry, as this is a harbinger for that group.
Notice Those Ads on Blogs? Regulators Do, Too
BLOGGERS, be warned. Advertisers, you too.
Two of the National Advertising Review Council’s investigative units plan to announce Tuesday their first decisions involving blogs. Their recommendations call for clear disclosure when a company is sponsoring a site or paying for product reviews.
That’s nothing shocking, but it’s part of a sharper focus on the relationships between bloggers and advertisers. Attorneys general and the Federal Trade Commission, which is about to expand its endorsement guidelines to include blogs, are investigating the area, along with the self-regulatory groups.
“It’s something everyone in the consumer protection area is newly focused on,” said C. Lee Peeler, the chief executive of the National Advertising Review Council, which sets policies for the advertising industries’ self-regulatory programs. “One of the issues of advertising in new media is, is it clear that it’s paid-for advertising, or does it look like something else?”
Paid-for advertising includes paid blogging, the programs’ recommendations make clear. One of the cases concerns Urban Nutrition , a company that sells supplements like MiracleBurn, an appetite suppressant. The Electronic Retailing Self-Regulation Program, an investigative unit of the National Advertising Review Council for the e-commerce industry, examined some of that company’s marketing after a competitor filed a complaint.
Urban Nutrition was running Web sites like WeKnowDiets.com, and GoogleDiets.com, which were “formatted as independent product-review blogs,” according to the investigative unit’s statement. The investigation found problems with the sites, including that Urban Nutrition didn’t disclose it was paying bloggers for the reviews, that it portrayed the sites as independent, and that the blogs featured accolades like “Customer Choice Awards” when “the marketer’s product appears to be permanently featured as the selected product,” the organization’s statement said.
“For paid-for statements about products, the traditional principles apply,” Mr. Peeler said, and here, the principle was that advertising needs to be marked as such. “That shouldn’t be a surprise to anyone,” he said.
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The investigative unit asked Urban Nutrition to prominently disclose that it owned the Web sites and that it was sponsoring reviewers, along with adding contact information to the sites and changing some other claims. “The company is currently in the process of making all the changes recommended by E.R.S.P., as well as additional changes Urban Nutrition volunteered to make,” said Thomas Cohn, a lawyer at Venable, which represents Urban Nutrition.
The other decision concerns the marketer Herbal Groups, which makes the prostate supplement Prostalex Plus. The National Advertising Division, another unit of the review council, handled this case.
Herbal Groups had been running a “Prostate Health Blog,” which published items about prostate function with promotions for the Prostalex product. The entire blog constituted an advertisement, the N.A.D. said, and Herbal Groups took down the blog at the beginning of the N.A.D.’s inquiry.
“We came to a mutually agreeable solution,” said Scott Schalin, president of Herbal Groups, in an interview. The N.A.D. also recommended that the company stop making certain claims about the supplement in its ads, which Herbal Groups said it would do.
These self-regulatory programs are voluntary, but if companies refuse to participate or comply, the programs can refer complaints to the F.T.C. And the F.T.C. can sue those it sees as violating guidelines.
The F.T.C. is close to updating its guidelines on endorsements and testimonials for the first time since 1980. Its proposed guidelines go further than the self-regulatory bodies have, saying that bloggers must disclose not only when they are paid by a company, but also when they receive a free product.
As an example, the F.T.C. cited the fictional case of a video blogger who receives a free copy of a new video game system from its manufacturer for review. “The readers of his blog are unlikely to expect that he has received the video game system free of charge in exchange for his review of the product,” the commission wrote. As this fact would likely affect how credible consumers find the review, the blogger should disclose that he received the game free.
That’s something advertising and retailing groups have bristled at, arguing that this sort of promotion occurs all the time offline. Major industry associations including the Electronic Retailing Association, the American Association of Advertising Agencies, the Association of National Advertisers, and the Word of Mouth Marketing Association, among others, all filed comments with the commission taking issue with the proposed guidelines.
“It’s an example of the F.T.C.’s failure to understand the medium and appreciate the nuances,” said Linda A. Goldstein, a partner at the law firm Manatt, Phelps & Phillips, which represents several industry groups. “It’s not uncommon for marketers to provide the blogging community with samples of their product or service, but the company has no control over what the blogger writes.”
Besides, she said, companies regularly host free events or send samples to journalists in the hopes of attracting coverage.
“It’s analogous to a studio inviting critics to a free premiere. Taken to its logical conclusion, those critics would have to disclose in their review that they were allowed to see the movie for free,” she said.
The commission’s comment period is now closed, and it is expected to issue final guidelines soon.
Meanwhile, bloggers and advertisers are under pressure from state attorneys general. In June, Attorney General Andrew M. Cuomo of New York noted in a settlement with seven electronics retailers that in addition to illegal practices, “all of these companies obtained fake ‘consumer testimonials’ through Web sites that claim to be impartial consumer-based ‘rating’ Web sites” but were not.
In July, in what Mr. Cuomo’s office said it believed was the first such case in the nation, it settled with a cosmetic-surgery company called Lifestyle Lift, charging that company employees were posting fake positive reviews about its services on various message boards and sites, a practice known as “astroturfing.” Lifestyle Lift stopped the postings and paid $300,000 to the state.
“My office has and will continue to be on the forefront in protecting consumers against emerging fraud and deception, including ‘astroturfing,’ on the Internet,” he said in the statement
