The Federal Trade Commission has reached a second settlement with a marketer over apparent violations of the Commission's rules requiring disclosure of compensated endorsements, particularly on blogs and social media, as well as other contexts in which the compensation (which may include free samples or discounts) is not "reasonably expected by the audience."
Back in April, the Commission sent a letter to Ann Taylor LOFT raising concerns about a promotion the clothing company ran for bloggers and warning the company not to undertake any similar campaigns. The Commision declined to undertake any enforcement action in that case because it was the firm's first apparent violation, only a very small number of bloggers posted content as a result of the promotion, and the company adopted a written policy in February 2010 stating that it would not issue any gifts to bloggers without first telling the bloggers that the gift must be disclosed.
Now, the Commission has reached a settlement with Reverb Communications, a public relations firm, which the FTC alleged had employees and interns post positive reviews on Apple's iTunes store for games produced by Reverb clients. According to the FTC complaint,
From approximately November 2008 through May 2009, Reverb employees, including [Reverb owner] Tracie Snitker, and company managers, posted [positive] public reviews about Reverb’s clients’ gaming applications in the iTunes store. These reviews were posted using account names that would give the readers of these reviews the impression they had been submitted by disinterested consumers.
In the Matter of Reverb Communications, Inc., No. 092 3199 (FTC 2010), complaint at 2.
While Reverb did not admit any wrongdoing, under the settlement the company agreed to remove within seven days any previously posted endorsements that misrepresent the authors as independent users or ordinary consumers, and that fail to disclose connection between Reverb and the game developers. The settlement also bars such misrepresentations in any future comments. (FTC analysis of settlement here.)
The five-member Commission unanimously gave preliminary approval to the settlement, and will take a final vote after a 30-day public comment period.
While I've questioned the disparate application of the FTC rules to new and traditional media, enforcement of the rules to remedy the apparent "astroturfing" in this case is a good use of the FTC's power to ensure that customer endorsements are just that: honest opinions of actual customers.
