Internet Law - Advertising and Consumer Protection - FTC Extends Endorsement and Testimonial Guides to Cover Bloggers

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INTERNET LAW--ADVERTISING AND CONSUMER PROTECTION--FTC EXTENDS ENDORSEMENT AND TESTIMONIAL GUIDES TO COVER BLOGGERS.-74 Fed. Reg. 53,124 (Oct. 15, 2009) (to be codified at 16 C.F.R. pt. 255).

Recently, the Federal Trade Commission (FTC) revised their Endorsement and Testimonial Guides (Guides) to cover "consumer-generated media" such as blogs and other internet media forms. (1) In the interest of providing consumers with full disclosure, the Guides require bloggers to disclose any "material connection[s]" they have with producers of any products that they "endorse" on their blogs. (2) A "material connection" includes not only monetary compensation, but also any free good received by the blogger--even if that good was provided unsolicited, with no conditions attached, for the purpose of allowing the blogger to review the product. (3) Yet a constitutional analysis of unpaid blogger endorsements shows that such endorsements are not commercial speech--which receives reduced constitutional protection--but rather noncommercial speech entitled to full First Amendment protection. Not only do the Guides burden bloggers' protected speech, they also create an unfair double standard by exempting legacy media (4) from the Guides' disclosure re-quirements. Therefore, the Guides should be ruled unconstitutional as applied to bloggers.

The Guides, first published in 1975, (5) are an official interpretation of section 5 of the Federal Trade Commission Act (6) (FTCA), which states: "Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful." (7) The Guides apply section 5, which forms the basis of the FTC's authority to regulate advertising, specifically to "the use of endorsements and testimonials in advertising." (8) The FTC defines "endorsement" to mean "any advertising message ... that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser." (9) While the Guides are "advisory in nature," (10) they may form the basis for an enforcement action under the FTC Act, (11) and noncompliance may result in a civil penalty of up to $10,000 per violation. (12) Before the 2009 revision, the Guides had last been updated in 1980 (13)--before the advent of consumer-generated media--and regulated celebrity and consumer endorsements appearing in traditional print and television advertisements. (14)

In January 2007, as part of its ongoing regulatory review process, the FTC sought comment on "the overall costs, benefits, and regulatory and economic impact of the Guides." (15) Although it did seek comment on the impact of "email and the Internet," (16) the FTC's core concern seems to have been the use of consumer testimonials in traditional advertisements for dietary supplements. (17) Still, a few commenters asked the FTC to consider whether the Guides should be revised to address online media. (18) In November 2008, the FTC issued a proposed expansion of the Guides to cover consumer-generated media. (19) Several commenters objected to this expansion. (20)

Notwithstanding those objections, the FTC's final statement of the new rules, issued in October 2009, states: "Advertisers are subject to liability ... for failing to disclose material connections between themselves and their endorsers. Endorsers also may be liable for statements made in the course of their endorsements." (21) The Guides go on to explain: "When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement ... such connection must be fully disclosed." (22) Extensive examples make clear that bloggers, as well as companies providing free products, will be subject to the Guides. (23) Example 7 is particularly instructive, as it shows how a blogger whose only material connection to a company is the receipt of a free product must disclose that connection:

   Example 7: A college student who has earned a reputation as a video
   game expert maintains a personal weblog. …