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New Rules on Endorsements and Testimonials - 1/5/2010 -

Here's what association publishers need to know about staying in compliance with the revised FTC guidelines on the use of endorsements and testimonials in "new media.”

By Gary D. Hailey, Esq. and Mikhia E. Hawkins, Esq.

THE FEDERAL TRADE COMMISSION (FTC) RECENTLY ANNOUNCED that it has approved final revisions to its Guides Concerning the Use of Endorsements and Testimonials in Advertising (the "Guides”), which address endorsements and testimonials by consumers, experts, organizations, and celebrities in advertising. The revisions, which went into effect on December 1, 2009, include examples involving "new media” channels to illustrate what messages constitute endorsements through "word-of-mouth” channels and user-generated content platforms such as blogs, online discussion boards, and social networking websites.

"New Media” Endorsements and Testimonials

If an endorser with whom an association has a "material connection” makes a favorable statement about the organization or its products or services in traditional advertising or through a "new media” channel, the relationship must be disclosed. The Guides state that "when there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement such connection must be fully disclosed.” A material connection includes, for example, the provision of compensation or free products or services to the endorser.

In determining whether disclosure of a relationship between an endorser and an association is warranted, the central issues are:

  • Whether knowledge of the relationship would affect the weight or credibility of the endorsement; and
  • Whether the audience would reasonably expect that the relationship exists.

Consider the following example:

An online message board is designated for discussionsbypeople getting started insales and marketing jobs in a particular industry.They exchange information about networking opportunities,business-getting techniques, etc.Unbeknownst to the message board community, an employee of an industry association has been posting messages on the discussion board promoting association membership and attendance at networking events sponsored by the association.

Readers of the online message board would likely not expect that the person posting messages about the association is an employee of the association, and knowledge of the employment relationship likely would affect the weight or credibility of the employee's comments on the message board.Therefore, the employee should clearly disclosethe employment relationship to readers of the message board. Associations should consider including such a requirement in its social networking policy (applicable to the association's employees, as well as its officer, directors and other volunteer leaders).

Likewise, material connections should be disclosed when the association is the endorser, as illustrated by the following example:

An association maintains a blog that features regular entries from a meeting planner who posts about sightseeing opportunities, suggested restaurants, etc., in the cities where the association's upcoming meetings will be held. Her entries also mention special promotions (e.g., airline, hotel, or rental car discounts) offered by the companies which participate in the association's endorsed affinity programs. Readers of the blog would likely not reasonably expect this relationship between the endorsed companies and the association. Thus, the blog should communicate the fact that there is a relationship between the association and the affinity partner. For example, the blogger can simply say, "This month, the association's rental car partner, company X, is offering our members a special discount on weekend rentals” or "Because X is the official hotel of our association, you can get a free room upgrade when you make your reservation by calling this special number.”

Celebrity endorsements through certain "new media” outlets may particularly warrant material connection disclosures. If, for example, a celebrity makes a casual comment extolling a particular association product through Twitter, the celebrity's Twitter followers may not expect that the association is remunerating the celebrity. Accordingly, a material connection disclosure may be required.

Who's Liable for Deceptive Endorsements?

The FTC recognizes that associations and other organizations do not have complete control over the content of endorsements made through word-of-mouth and user-generated content media, such as blogs, "street teams,” and social networking sites. Nonetheless, an association may be liable for deceptive statements (including endorsements that are not accompanied by material connection disclosures) made through such media channels if the association initiated the process that led to the endorsements – by, for example, providing free products to bloggers or individuals enrolled in the association's word-of-mouth marketing programs.

An association's policies and procedures relating to "new media” endorsers would be considered in the agency's decision as to whether law enforcement action is warranted. These procedures include regular monitoring of endorsers and measures to be taken in the event endorsers fail to comply with the procedures. Consequently, many associations are adopting written policies governing employee and volunteer leader participation in online social networking websites. At the very least, associations should ensure that such policies are broad enough to cover all of the proscriptions contained in the Guides.

Gary Hailey is a partner and Mikhia Hawkinsis an associate in Venable's Advertising and Marketing practice group.


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