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Posts Tagged ‘FTC Guide’

On March 15, 2011, the FTC reported that it entered into the first settlement agreement under the new FTC Guidelines prohibiting fake reviews. Essentially, the Guidelines provide that when someone posts a positive review of a service or product and that person is either connected to the seller receives some sort of compensation for the positive review, the “material connection” between the reviewer and the seller of the product or service must be disclosed. In this case, Legacy Learning, a company which provides guitar lessons on DVDs, had an affiliate review program which compensated bloggers and other online publishers for posting positive reviews about its program. The company agreed to pay a $250,000 penalty for its actions.

I wonder if the FTC is monitoring amazon.com. I was just reading recently about an author who was artificially inflating his sales ratings by buying his own book and posting fake positive reviews. Not only is this morally reprehensible, but it also violates the “new” FTC Guidelines which went into effect in December 2009. I wonder how many businesses engage in this conduct – posting fake reviews on sites like angieslist.com and urbanspoon.com?

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The FTC updated its Guide Concerning the Use of Endorsements and Testimonials in Advertising effective December 1, 2009, which concerns testimonials and endorsements on websites and blogs. Going forward, if you (or a user on your blog or website) represent results from the use of a product or service as typical when that is not the case, you will need to also disclose the results that most consumers can expect. This is different from the previous FTC Guide which allowed advertisers to use extremely positive results in a testimonial as long as they included the disclaimer such as “these results are not typical.” In addition, the revised Guide also requires that the relationship between a supplier of the product or services and the endorser to be disclosed. For example, if a blogger recommends a product on their blog that they received for free or were paid to discuss on their blog, the blogger is required to disclose this information in the blog. Similarly, if an employee recommends a product or service on a discussion board or blog, the employee is required to disclose that he or she is employed by the manufacturer or supplier of the service. The revised Guide seems to indicate that both endorsers and advertisers could be liable under the FTC Act for statements they make in an endorsement. This would include false or unsubstantiated statements and the failure to disclose a material connection between the advertiser and endorser. With respect to making statements about your or someone else’s products or services, honesty and full disclosure are the best policies. 

[This is an excerpt from my book coming out this year titled: The Legal Internet Guide for Small Businesses and Bloggers, which is an easy-to-understand question-and-answer legal guide for those blogging and doing business on the internet.]

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