FTC and Blogger Disclosure Rules

As I argue in my essay Individual Branding the web presents important and amazing new possibilities for individuals to earn money and much of that potential will flow from one’s online reputation. In short, as one blogs or shares information in another form, one becomes a trusted source and can start extract money from those activities. I argue that those acts have the seeds of the possible destruction of Benkler’s world of sharing. Today the FTC has targeted a practice that arguably could increase the reliability of social network endorsements but will also upset many people.

As CNET reports, “Independent bloggers who fail to disclose paid reviews or freebies can face up to $11,000 in fines from the Federal Trade Commission, according to revisions to the agency’s “Guides Concerning the Use of Endorsements and Testimonials in Advertising” published Monday.” The FTC has not updated the Guidelines since 1980. The press release is here. The full text of the Guides are here (pdf). It is 81 pages, and I have not read it as yet but one thing people should know is that the effective date is December 1, 2009.

From the release it appears that the guides take am expansive view of what presents a moment to disclose “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. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service.” CNET suggests that celebrities and “mommy bloggers” could be in trouble under the new rules. (Here is my prediction on the riposte to come but that I don’t think is accurate: “The FTC hates moms. In a down economy and with more and more people needing new ways to earn, the FTC actions are a direct attack on the importance of moms.” Now back to our regularly scheduled blogging.)

There are a ton of oddly connected things here. First, I just blogged about CITP and its FedThread project. That project would allow one to track this sort of moment rather quickly. Second, I was just at the Works In Progress Intellectual Property Conference at Seton Hall (which was yet again an excellent conference and for which everyone at Seton Hall deserves many thanks) where Zahr Stauffer presented a fascinating paper called Novels for Hire: Branded Entertainment, Copyright and the Law that I think will have something to say about these changes. As one blog notes, the practice of giving journalists freebies is common. Zahr’s paper shows how advertising and novels have had a rather curious interaction over the years. I think the paper will help understand the way writing and advertising have co-existed in either good or bad ways at different times with the shift to blogging fitting in as part of that history. The paper should be available soon so keep an eye out for it.

Electronics and other big ticket items seem to be where the concerns are. I look forward to finding out whether book, film, and music reviewers have to tell readers whether they received a review copy of the book. In general if one only says nice things about a review subject, one might receive more books etc. I think that non-professional blogs and other online information sources such as rating systems and FaceBook will allow people to find out whether they should buy a product (i.e., one might use a personal network to ask whether a product is good). That practice could undercut the quiet payment model.

Here is a possible way to understand this turn of events. 1) Secret endorsements die out and full disclosure of what has been given is the norm. 2) Small bloggers and big agencies are no longer able to seem credible as reviewers. 3) If people want independent reviews, they must pay magazines or other pay sources who can afford to buy the review items and avoid the taint of being given free stuff. 4) The public does not want to pay and instead reads the blog reviews with the disclosures and augments the research with social networks and user ratings which are more difficult to fake and possibly more reliable. 5) Yet again paid, professional independent news and reviews seems to be squeezed out.