FTC’s New Dot Com Disclosures: What Every Online Marketer Needs to Know

Many of you may already know that the United States Federal Trade Commission (FTC) requires content creators to provide disclosures where there could be hidden interests or unspoken biases related to recommendations. Well, the FTC is now re-evaluating its 12-year-old online advertising disclosure guidelines, also known as “Dot Com Disclosures.” Any decision the FTC reaches is expected to have a profound impact on the online marketing industry with respect to how required disclosures, or non-disclosures, of material relationships and connections may affect consumer trust and fair competition in business.

A Little History First

Way back in 2000 (sort of like the Cro-Magnon era of the Internet), the FTC released it’s first major report geared for online markers titled, Dot Com Disclosures – Information About Online Advertising. The report was a response to the proliferation of shopping and advertising online, where it was understood that an increased likelihood of fraud and deception would take place that, if not properly regulated, “may dampen consumer confidence in the e-marketplace.”

The purpose of the report was to set guidance for advertisers with online disclosures – to prevent an online advertisement from being misleading by requiring such disclosures to be “clear and conspicuous” to the consumer.

Why the FTC felt the need to revise their Dot Com Disclosures

Obviously, the digital landscape has undergone a seismic transformation since 2000. The FTC‘s Press Officer, Elizabeth “Betsy” Lordan, has acknowledged they need to keep up with emerging technologies and new channels of communications for online marketing and e-commerce. However, it’s important for online marketers to understand that the fundamental legal principles had back in 2000 still haven’t changed.

On May 30, 2012, the FTC hosted a one-day public workshop to consider the need for new guidance concerning advertising and privacy disclosures in today’s online and mobile environments. The workshop addressed online disclosure challenges for enterprises with consumers and the public at large, including methods for making clear and conspicuous disclosures in online media.

From May 30th to July 11th, 2012, the FTC staff accepted public feedback following that workshop, including from its online comment form. The FTC also made all records and transcripts of their workshop available on their website.

Why we Still Need Disclosure Guides

Online media and marketing is proliferating, and so is spending. More media and marketing efforts are being geared for online; and the glut of content and new technology platforms can make it increasingly likely for consumers to be misled and confused about material relationships by businesses that can affect their judgment; and in negative circumstances, become victims of deception. This is what erodes trust by consumers in the e-marketplace, which erodes fair competition in the market and ends up hurting most businesses.

The FTC’s own public information website, The Federal Register, explains how having the guides offer a degree of necessary protection for consumers and businesses alike, built around trust of the message and the messenger:

“To the extent that consumers’ willingness to trust social media depends on the ability of those media to retain their credibility as reliable sources of information, application of the general principles embodied in the Guides presumably would have a beneficial, not detrimental, effect.”

Why is it Important to Disclose Endorsements Online?

Endorsements factor into our decisions to buy products, especially by people and brands we are influenced by. When practicing marketing and commerce, the FTC mandates that all content being shared with an audience of existing and/or potential consumers “clearly and conspicuously” include a disclosure of any relationships with other parties, when a reasonable consumer would be influenced by in their engagement.

“If there’s a connection between the endorser and the marketer of the product that would affect how people evaluate the endorsement, it should be disclosed… If you disclose the relationship clearly and conspicuously on your site, readers can decide how much weight to give your endorsement.”

An “endorsement” of this kind falls under the label of being an advertisement – i.e., commercial speech. Commercial speech has fewer protections under the U.S. law than free speech, including the right of anonymity.

The FTC does not necessarily treat endorsements as being content-specific. It does not matter if the marketer says that their content was not done as an explicit testimonial or review of anything. What the FTC says matters with deciding what’s an endorsement is the message that consumers receive.

“The Guides have always defined ‘‘endorsements’’ by focusing on the message consumers take from the speech at issue. Indeed, this focus on consumer takeaway is completely consistent with the approach the Commission uses to determine whether a practice is deceptive, and thus in violation of the FTC Act.”

What online marketers still need help with about disclosures of endorsements

The FTC put out its own “FTC Facts” help document for businesses: “The FTC’s Revised Endorsement Guides: What People are Asking.” The document provided a number of familiar examples and scenarios that are helpful to online marketers to better distinguish between what the FTC considers to be commercial speech and truth in advertising, subject to their disclosure guidelines. Yet despite these efforts by the FTC, many online marketers don’t feel like they adequately know what they should be disclosing.

Continual rapid advances in the online media and marketing ecosystem have blurred the lines for marketers and the FTC alike with seeing eye-to-eye on several key areas:

• What is free speech and what is commercial speech
• What is unbiased information and what are advertisements
• Confusing labels over who is an “endorser” or “advertiser”
• What constitutes a “material relationship” that requires disclosure
• New tools and channels of communication, some with strict character and other limitations
• Increasing use of social channels to develop both paid and non-monetary marketing relationships with influential endorsers

Many online marketers today, arguably the vast majority, fail to properly disclose their material relationships in their own online media – be it published on their own hosted sites or on partnership sites. While most of these individuals and organizations operate with no intention to deceive or violate FTC law otherwise, it has caused a great deal of consternation in the industry – both for those who don’t feel they have the guidance and support that they need, and for those skeptical of information shared online and by their peers regarding these regulations.

After doing extensive research and interviews across several areas of the online marketing industry – including search, social, and video – I’ve reached this conclusion: What appears to suffer from the greatest confusion and non-compliance are 1) blogger-publisher relationships and 2) consumer-generated reviews of products. Contributing greatly to the problem is a lack of industry standards and self-regulation over disclosure guidelines, and a failure of effective communication by the FTC with online marketers in both these areas.

Blogger-publisher relationships

The FTC considers any material relationship between bloggers and advertisers as a requirement for clear and conspicuous disclosure. Publishers also fall under the category of “advertisers” when their publication engages consumers in commercial transactions as an intended result of their exposure to the bloggers’ content.

Consumer-generated reviews

The FTC considers consumer-generated reviews made possible through free products provided to them by the manufacturer as commercial speech, and subject to the same disclosure of endorsement guidelines as other advertising.

Take this example below, which comes right from the FTC business guide: The FTC treats consumers who receive products to try out and give public, positive reviews of as “endorsements” subject to FTC disclosure guidelines.

“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. If she receives a free bag of the new dog food through this program, her positive review would be considered an endorsement under the Guides.”

What Online Marketers Can (and Should) Do

The first step that all online marketers need to look at is what is within their own means to do. Here are some recommendations:

1. Self-regulate: The FTC explains that advertisers need to have reasonable programs in place to train and monitor members of their network. CMP.LY has developed an automated disclosure monitoring service that works in conjunction with its disclosure solution to provide reporting on both the inclusion and omission of required disclosures within an advertiser’s advocate or affiliate networks. (Important note: While there are some bloggers who like to use fun disclosure icons as a friendly way of being transparent with consumers, the FTC does require there to be an actual text description of their material relationships.)
2. Send the FTC your feedback: Questions about the Dot Com Disclosures and Endorsement Guidelines can always be submitted to the FTC’s email address: endorsements@ftc.gov. The FTC has promised to address the most common questions in future FAQs.
3. Send the FTC your complaints: FTC’s Press Officer Betsy Lordan says the FTC considers complaints from consumers, complaints from competitors, and the results of its own internal monitoring of various industries. To file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. You can also watch this video, How to File a Complaint, at ftc.gov/video to learn more.
4. Learn more from the FTC: Online marketers and social media enthusiasts should read the FTC’s Dot Com Disclosures and Revised Endorsement Guides – both of which speak directly to truth in advertising principles with Internet media. The FTC’s revised guides offer more than 35 examples of how they apply in practical settings for online marketing The FTC also has produced to-the-point video clips discussing some of the issues on marketers’ minds.
5. Learn from the legal pros: The Practicing Law Institute (PLI) features an on-demand web program, “Hot Topics in Advertising Law 2012,” which covers FTC regulatory issues and competitor issues around these documents, along with related legal issues involving social media and online marketing. (For disclosure, I’ve received media passes in the past to cover PLI events for industry publications.)

Time for Online Marketers to Get an FTC Education

The FTC’s revised policy on Dot Com Disclosures will directly affect many online marketers’ business activities. Online marketers should treat it as an opportunity to shape future public policy and practice better self-regulation in their respective industries, and build back consumer trust that they can turn into sustainable and profitable business.

Learn More – Free Report

Today with the help of New Media Expo, I am making available for free to the public a special report, Pay Me To Trust You: An Online Marketer’s Guide to the FTC’s Revised Guides for Disclosures of Endorsements in Social Media. The report is meant to serve as an easy-to-follow, condensed overview of FTC disclosure guidelines around endorsements in online media, with an understanding of the important issues and questions online marketers have.

Contents include:

• The FTC’s guidance on disclosure methods and understanding endorsements in online media
• The FTC’s review for changes and the challenges to be faced, and;
• How online marketers may affect positive change with FTC compliance and self-regulation.

What online markers will gain from this report

This report is based on the premise that when online marketers possess an understanding of these FTC guidelines, they will benefit in the following ways:

• Greatly reduce or eliminate the legal risk by practicing better FTC compliance
• Achieve better customer relationships from a better understanding of consumer expectations for transparency and disclosure of relationships, and;
• Be empowered to act against unfair and deceptive business practices in online media by their competitors.

Read Pay Me To Trust You: An Online Marketer’s Guide to the FTC’s Revised Guides for Disclosures of Endorsements in Social Media to learn more.