FCC sets $11,000 fine for bloggers who endorse products without disclosing payments or free product from vendors

The US Federal Communications Commission, charged with protecting consumer interests, has said it will fine bloggers who write reviews or endorsements without disclosing payments, gifts and kick backs from the products they endorse.

Reported in the Washington Post, Richard Cleland, assistant director for the division of advertising practices at the FTC said,

“Given that social media has become such a significant player in the advertising area, we thought it was necessary to address social media as well.”

This will be popular with consumers who turn to the Internet for unbiased reviews which was the job of Consumer Reports magazine.

However, Internet users have long suspected that many of the articles found under a search for “product A review” or “best product A” are ghost written or sponsored by the vendors themselves.

Bias can also be introduced by free products left with the reviewer after the review is written. Reviewers learn that a positive review gets them the tacit agreement to keep the item, which becomes an inducement. One good review begets more free product from the vendor.

The FCC is not banning free product. It just wants the reader to know that the reviewer in the blog kept something for nothing.

“The revised guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement,” the FTC said in a release. “Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service.” Washington Post

This will send a chill through the Internet blogging world. Most bloggers don’t make money except from the freebies; however, readers need to be able to judge for themselves if the story is fair and unbiased or tainted.

In the music business, free copies of albums are the norm. The recent hype over Beatles Remastered was driven to a great extent by exclusive and free copies of the $600 set sent to media and Internet writers.

Bloggers and other writers can expect free trips, expensive electronic gear and other inducements to ensure a five star review if their articles are widely read.

My first paid journalism job was reviewing record albums for $5 a week at the Halifax Mail Star. I got to keep the LPs and the one’s I didn’t like got sold through an ad in the paper.

Most of the CD reviews you read in magazines, newspapers and on the web are done that way. The reviewer is sent free CDs or picks from a list of releases. When the review is done, he/she keeps the good ones and peddles the rest through Cash Converters or friends. It’s a little extra income.

At least under the new rules, the reader will know the blog or writer got a freebie and can decide if the review is fair or not.

The best reviews are often on Amazon.com where the community is actively involved in writing candid evaluations of things they buy. Comments on Amazon can be brutal but one or two bad reviews can also be read along with other comments. You get a more balanced idea of how the product works.

It will be impossible to police what goes on in the 100 million plus blogs. The FCC does not have the staff to find and prosecute all the bloggers who get undisclosed gifts.

That will probably not change; however media outlets in the US will start disclosing that the reviewer did or didn’t keep the review sample. CD’s are peanuts but they can add up.

If the FFC rules include fines for the companies who provide review samples then the heat will really be on to disclose everything.

The new guidelines also affect how advertisers use studies by research institutes they help fund. Any financial ties must now be disclosed when companies cite the findings of a research organization they fund.

“We have for years tried to get the FTC to adopt fair disclosure of ties that provided financial support for studies that were submitted” to agencies like the Federal Communications Commission, said Joel Kelsey, a policy analyst at Consumers Union. “It’s fine to submit those comments, we just absolutely believe they have to disclose if there are financial ties that led to the writing of those reports.” Washington Post

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