FTC: Bloggers Must Disclose Payments for Endorsements

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Bloggers paid to endorse products must disclose those payments to readers, according to new rules published Monday by the U.S. Federal Trade Commission.

The new rules, which go into effect Dec. 1, would also apply in some cases to products donated to bloggers or Web sites for the purposes of review, such as a new smartphone or laptop, depending on the value of the product, the FTC said in an 81-page notice of the rules. The rules also cover testimonial advertisements and celebrity endorsements in both traditional and online advertisements.

In the case of a product given to a blogger for purposes of a review, the blogger then must disclose that fact, said Richard Cleland, assistant director of the FTC's Bureau of Consumer Protection. Another option would be for bloggers to simply return the product after the review is completed, he said.

The new rules shouldn't affect Web sites that review products and are supported by advertising from vendors whose products are reviewed, as long as there's no direct payment for a review, Cleland said. The new rules are targeted at direct payments or benefits for reviews, he said.

Some news reports Monday said bloggers could be fined up to US$11,000 for not disclosing paid reviews. But that's unlikely, as the FTC will focus on giving out warnings, Cleland said. The rules also apply to advertisers and how they pay for endorsements and reviews and the FTC would be more likely to take enforcement actions against advertisers than bloggers or endorsers, he said.

The FTC plans to take enforcement action only in cases that are "particularly problematic," even when dealing with advertisers, Cleland said. "In terms of bloggers, we're primarily focused on education," he said. "There are hundreds of thousands of bloggers out there. It's just not practical to deal with them on a case-by-case basis."

The fines of up to $11,000 come in when the FTC issues an order against a company or person for violating the FTC Act prohibiting unfair business practices, and the defendant continues to engage in the practice.

The FTC has been looking at the issue of bogus endorsements and paid reviews since early 2007. Some critics have questioned whether the FTC should get involved, saying self-regulation in the advertising industry will solve most problems.

The new rules are unclear, difficult to understand and could lead to fewer online reviews, said Berin Szoka, director of the Center for Internet Freedom at the Progress and Freedom Foundation (PFF), a conservative think tank.

"There's a real question here about chilling protected [free] speech," he said. "I'm a lawyer, I practiced law for years. I read through this, and I don't really know what I'm supposed to do for my think tank." PFF will sometimes review tech products on its blog, and it also receives funding from tech vendors, Szoka noted.

Product reviews are often a valuable public service, he said. "People want information about products and services," he said. "Advertising and endorsements, even sponsored endorsements, play an important role in getting that information to consumers."

The rules also hold advertisers liable for misleading statements made by endorsers and paid reviews, he said. "This is just a scale that is fundamentally different from how this has worked in the past," Szoka added.

But blogger and broadband consultant Craig Settles said the new rules are good policy. The FTC has no right to limit reviews that aren't paid for, but paid reviews fall into a different category, he said.

"Blogging has taken on increased importance among businesses and consumers, and certain bloggers develop celebrity-like status, meaning their credibility can influence product and service sales," he said. "If I pick up a check to write specifically about the company's product in any medium including blogs, that isn't free speech. At my rates, far from it. My opinions in that blog environment are part of the company's marketing message. And at that point, the laws regarding deceptive business practices ... come into play."

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