Sep 03, 2010

When Employees Pretend to be Customers: FTC Enforces Rules for Online Reviews

Last year, the Federal Trade Commission issued regulations about online product endorsements, including reviews, blog posts, and comments on social media pages. These regs, known as the "blogger rules," extended the FTC's existing product endorsement rules (last revised in 1980, when we were all communicating via typewriters and telephones) into cyberspace. The basic requirement is simple, and tough to argue with: If you are being paid to endorse a product, you must make that clear to consumers.

The rules are intended to make sure consumers understand the relationship between the person making the endorsement and the product, so they can make informed decisions about how much weight to give the endorser's statement. A statement by an actor or a paid spokesperson probably isn't as credible as a statement by an actual user of the product, for example. 

So how does this translate into the world of Web 2.0? Here are some examples:

  • Bloggers who are paid by a company to endorse its products must reveal that fact when they talk about the products. And, bloggers who receive free products must say so when discussing them. For example, the writer of a popular blog on cell phone applications might receive free apps from companies that hope to get a good review; in this situation, the blogger is required to disclose that an app was free when writing about it.
  • Employees and others working for a company (such as independent contractors or public relations firms) must reveal their affiliation when posting about the company's products. The FTC rules use the example of an employee who posts messages promoting his employer's products to an online message board popular with consumers of that type of product. Because the credibility others give to the employee's posts would probably be affected if they knew the identity of his employer, he must reveal it.
  • Employees and others affiliated with a company who post online reviews of the company's products must also reveal that affiliation. This includes not only positive comments on message boards and Facebook pages, but also reviews designated as such on Amazon or iTunes, for example.

The "employees posing as customers" problem was the basis of the first charges the FTC brought under the new rules, settled last week. The agency charged Reverb Communications, a PR company, with deceptive advertising for having its employees post positive reviews of its clients' games in the iTunes store, without revealing that they were being paid to do so. According to an article in the New York Times, the company agreed to take down all reviews that "appeared to have been written by ordinary people but were actually written by employees of the company," and to refrain from these practices in the future. (To read one consumer's account of trying to uncover the corporate shill in Amazon reviews for espresso makers, check out this entry in Russ Taylor's blog.)