FTC Drops Investigation of Advertiser Who Gave Gifts to Bloggers

By Eric Goldman

Although the FTC’s revised Endorsements and Testimonials Guidelines were inscrutable overall, a few things were, in fact, clear from the FTC’s announcements:

1) The FTC believes shill blogging is out of control

2) They blame advertisers for showering bloggers with gifts

3) They intend to invest some resources in investigating advertisers doing the showering

4) Advertisers who want to avoid the FTC have to (A) require bloggers to make adequate disclosures, and (B) do ex post policing of bloggers.

Our first tangible evidence supporting these lessons comes from a letter issued by Mary Engle at the FTC to AnnTaylor a couple of days ago. The FTC opened an investigation into AnnTaylor based on a January 26 party thrown by its LOFT division to preview LOFT’s Summer 2010 collection, which apparently included gifts for bloggers in attendance. This is consistent with the FTC’s repeated assurances (most recently reiterated in this insightful interview with Engle’s boss David Vladeck) that the FTC will be pursuing advertisers and not individual bloggers. The FTC dropped the investigation citing the following factors:

* there was only 1 party

* only a few bloggers posted, and some of those disclosed the gifts. In a footnote, the FTC notes that LOFT had a sign at the event reminding bloggers to disclose the gifts if they posted.

* LOFT had a written policy (adopted after the event) that it wouldn’t give gifts to bloggers without requiring the bloggers to disclose. The FTC continues ominously:

The FTC staff expects that LOFT will both honor that written policy and take reasonable steps to monitor bloggers’ compliance with the obligation to disclose gifts they receive from LOFT.

LOFT should have the feeling that it is being watched.

As I’ve previously blogged, I think the FTC is totally off-base with their scrutiny of blogs and not other media. Therefore, investigations like these are over-inclusive or under-inclusive–either the FTC should be going after print and broadcast reporters for undisclosed free gifts, or the FTC is wasting its time with chickenscratch events like the LOFT party that didn’t inspire a lot of blogger enthusiasm. But the letter makes me wonder how many FTC blog-related investigations are pending. I would be shocked if this were the only one.

In my previous blog post, I made the following recommendations that still seem right even after the new information in Engle’s letter:

* Advertisers need to (1) require disclosure from any bloggers they support, and (2) monitor all sponsored posts for accuracy and disclosure. I think it’s bad form to offer consideration and then hope/encourage the blogger not to disclose. But efficacy of sponsored posts may be lower with visible disclosure than without (consumers overdiscount content labeled as “ads”). For some types of consumer goods, good products go viral, in which case marketing dollars are better spent on making product improvements than creating shill reviews.

* Under no circumstances is it appropriate for marketers to create fake reviews (positive for you or negative about a competitor). See the Lifestyle Lift settlement with the NYAG. Fake reviews/astroturfing seems like the most logical area for increased FTC enforcement. And if you don’t think the long arm of the law will reach you, don’t forget that competitors love to publicly “out” each other.

* Bloggers need to disclose any conflicts in the post itself; general disclosures elsewhere on the site may not suffice. However, it’s unclear how to make the appropriate disclosures in Twitter or a Facebook status report. Some folks think CMP.ly may be an answer. I believe the FTC would take the position that if you can’t fit the necessary disclosures in Twitter, then don’t post to Twitter.

* Bloggers should think twice about joining pay-to-play services. There is a high legal ambiguity about the practice’s legitimacy.

More thoughts on the LOFT investigation from AdLaw by Request.