New FTC Rules For Online Promotion

On December 1, 2009, the Federal Trade Commission (FTC), an agency of the United States government, published a new set of guidelines on testimonial advertisements and product endorsements. These guidelines affect all commerce within the United States of America, including online commerce. If your business is based in the United States or targets residents of the United States, you need to be aware of and comply with these rules.

The two major changes that affect online businesses deal with how testimonials are presented and the expansion of what constitutes a “material” relationship between two parties.

Customer testimonials are used to sell many products online, just as they are used in print, radio and television advertising. Besides upholding the principle that these testimonials be accurate and authentic — that they come from actual customers with arms-length relationships to the business promoting the product or service — it also requires businesses to clearly disclose what a typical customer can expect from purchasing or using the product or service.

For example, a weight loss program that includes testimonials from customers who lost 11 pounds in one week would have to disclose that this is not typical, that most customers would in effect lose an average of only (say) 1 to 2 pounds per week instead. Because consumers place more trust in testimonials, it’s important that they not be used to mislead consumers.

The biggest change to the FTC guidelines, however, revolves around endorsements of products and services, particularly from online bloggers. Any kind of “material connection” between an endorser (like a blogger) and an advertiser must be disclosed to the consumer. A material connection can be a cash payment, a free sample, or some other benefit to the endorser from the endorsee.

If you receive a free copy of a product or free use of a service in exchange for writing about it, you must disclose this.

If you receive a payment or commission for selling a product or service via a positive review, you must disclose this.

If you are paid to write about or mention a product or service, you must disclose this.

Again, these rules are there to protect the consumer. There are special rules that affect expert and celebrity endorsements as well.

Failure to comply with the FTC guidelines leaves your business open to litigation, which could be nuisance at best and disastrous at worst. Each violation can subject you to substantial fines.

The best defense is to be open and honest with consumers. Be sure to disclose any relationships you have with your advertisers or with the products or services you promote, and make sure any testimonials you display are accurate and typical. It’s better to be safe than sorry!

Eric Giguere writes about many topics, such as how to set up a website or how Google Suggest works. Be sure to read his other articles for more great information!

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