In every student newsroom, a certain amount of free stuffwill show up.
It just does. Sometimes it’s review copies of CDs. Sometimesit’s a T-shirt advertising a new flavor of a soft drink. Sometimes it’s a freeticket to a play with an invitation to write a review.
Marketers want to get their products and services in frontof a student audience, and for some of these topics, there’s no review quite asvaluable as the review from a fellow student. (If someone on your campus paperwrote that the new flavor of Mountain Dew was able to wash away the taste ofthe cold cafeteria pizza, who else would be able to tell you that?)
But according to the Federal Trade Commission, if youreceived anything of value in exchange for writing a review, you have to tellyour readers about it. And while lots of journalists may understand that, theymay not understand that the FTC thinks your personal tweets, Facebook statusupdates, and blog posts are “testimonials.”
That’s right: if you tweet that you like something, you’rereviewing it, as far as the FTC is concerned. And if you like it because yougot a free sample, you’re supposed to disclose that.
Let’s take a look at the FTC’s rules, what they mean, andhow to follow them.
Who is this FTC, anyway?
The FTC is a federal agency designed to protect consumers.Generally speaking, the FTC’s mission is to prevent deceptiveand unfairtrade practices. It defines a practice as deceptiveif it is likely to (1) mislead consumers and (2) affect consumers’ behavior.For a practice to be unfair, it has to belikely to cause (or actually cause) an injury that is (1) substantial, (2) notoutweighed by other benefits, and (3) not reasonably avoidable.
Periodically, the FTC publishes guides that explain how theagency believes advertisers and publishers should interpret its rules. Whilenot technically binding law themselves, the guides serve as practical advice onhow not to get in trouble.
In 2000, the FTC published “Advertising and Marketing on theInternet: Rules of the Road,” a guide that applied the FTC’s existingrestrictions on marketing and endorsement to the Internet as it then existed. Among its clarifications, the FTC declared that “advertising agencies or webdesigners are responsible for reviewing the information used to substantiate adclaims. They may not simply rely on an advertiser’s assurances the claims aresubstantiated.”
Also in 2000, the FTC published a guide called “Dot ComDisclosures: Information About Online Advertising.” In this guide,the FTC directed that, when disclosures are necessary to prevent anadvertisement from being misleading, those disclosures must be “clear andconspicuous,” placed near the text to which they relate, and be prominentenough to be noticeable to consumers, among other things.
After the publication of these guides, the rules were clear:advertisements and endorsements had to be honest and include disclaimers aboutany information that might confuse or mislead consumers. But as the sociallygenerated “Web 2.0” came into existence, what became less clear was what,exactly, was an “endorsement.”
FTC rules vs. “commercialspeech” cases
As a threshold matter, it’s worth mentioning three thingsabout the FTC’s rules: one, they use a definition of commercial speech broaderthan the one used by courts; two, that means some potential applications of theFTC’s rule might violate the First Amendment; and three, the FTC has not, as ofyet, attempted to enforce the rules in any of those “close call” situations.
The FTC’s definition of commercial speech is anything youwrite when “acting on behalf of an advertiser.” But the SupremeCourt’s definition of commercial speech is much narrower. Indeed, in Bolgerv. Youngs Drug Products Corp., the Court considered advertisingpamphlets discussing contraception and wrote, “[t]he mere fact that thesepamphlets are conceded to be advertisements clearly does not compel theconclusion that they are commercial speech.” Courts have definedcommercial speech as speech that is driven by an economic motive that is partof a proposed commercial transaction.
A reviewer typically has no expectation of gain after thereview is written—he or she already has the product and has no furtherincentive to be nice about it, except the aspirational hope to receive moreproducts in the future. Furthermore, the review proposes absolutely nocommercial transaction, and the reviewer is in no position to complete such atransaction. Accordingly, under the definition used by the Supreme Court,reviews aren’t commercial speech and probably wouldn’t be subject to the FTC’sregulation.
The FTC’s enforcement actions thus far have not gone afterspeech promulgated by genuine reviewers. For example, Legacy Learning Systemspaid $250,000 and entered into a consent order with the FTC after paying online“affiliate marketers” posing as neutral reviewers for sales made through theaffiliates’ sites. Reverb Communications entered into a consentorder after paid employees posed as consumers and entered positive reviews ofgames on iTunes. These are not neutral reviewers who happen to getfree review products; they’re reviews by people incentivized to make saleshappen.
Most student publications, however, don’t want to become the“test case” if the FTC decides to flex its muscle – even if ultimately thepublication wins, years down the road. And from an ethical standpoint,disclosing that a reviewer received a product or service for the review isjournalistically the right thing to do. Just be aware that, should the FTCactually come knocking, there is some question as towhether it has the authority to police as broadly as it purports to.
FTC rules vs. ethical guidelines
Let’s put aside our legal discussion for a moment andconsider journalism ethics. While the FTC rules appear to restrict some FirstAmendment speech, they don’t quite hew to the contours of existing ethicalguidelines, either.
For example, the Society of Professional Journalists’ Codeof Ethics says that journalists should “refuse gifts, favors, fees, travel andspecial treatment… if they compromise journalistic integrity.” Italso says to resist pressure from advertisers trying to influence newscoverage, which sounds like the entire purpose of free review products.Finally, it advises to “disclose unavoidable conflicts.”
Taken together, this sounds as if the SPJ ethics codeoperates on the assumption that nominal gifts—ones of such low value that theywouldn’t really impact news coverage—may not constitute a conflict. Forexample, if Mountain Dew sends you a coupon for a free bottle of the drink,you’re unlikely to tell people you enjoyed the drink based on the hope that youmight get another coupon in the future. The FTC rules, on the other hand, saythat anything free, no matter how small, must be disclosed, if it is only givento potential reviewers (e.g., no disclosure isrequired if bottles of soda are being handed out on street corners to anyonepassing by).
The National Scholastic Press Association’s Model Code ofEthics also has a rule that appears more restrictive than the FTC’s guidelines:it states that a student journalist should “[a]ccept no gifts, favors or thingsof value that could compromise journalistic independence, journalistic ethicsor objectivity in the reporting task at hand.” It uses an exampleof a reporter covering a buffet event, explaining that the reporter should notstop reporting to eat. It also advises disclosing any real orperceived conflicts and not giving special treatment toadvertisers.
All of the ethical principles above are good advice, andworth following. But the FTC rules are the ones that purport to be interpretingfederal law with federal penalties. To the extent there is ever a conflictbetween an ethical guideline and the FTC rules, the safest thing is to followwhichever is more restrictive.
What endorsements need to bedisclosed?
Much of the confusion about the FTC rules is about decidingwhen a disclosure needs to be made.
Historically, identifying an endorsement was simple. WhenWilford Brimley came on television during a commercial break on the HistoryChannel to tell you how happy he was with his diabetes testing supplies, it wasclear to everyone involved, without any special disclosure, that Brimley gets acheck to promote the product. While FTC rules require that Brimley must besharing his honest opinions of the product, no special disclosureis required, because consumers understand that celebrities are paid to endorseproducts during television advertisements.
But let’s say Wilford has a Twitter account, and he logs inand tweets: “Checking my blood sugar with my Acme Medical testing supplies. Soeasy! #checkitoften.” While celebrities may be paid to endorse products ontelevision, it’s trickier to tell whether this is a paid endorsement or justWilford’s enthusiasm for the product.
This becomes even trickier when the endorser isn’t acelebrity. Take, for example, a person on the campus paper who typicallyreviews video games. Assume he tweets: “Star Wars: Knights of the Republic isawesome. These ARE the droids I’m looking for.” Your readers might well assumethis is a neutral review, just as the ones in the campus paper are. But nowassume that the game’s publisher sent the reviewer a free copy of theCollector’s Edition of the game, which retails for $150. Under the FTC’s rules,this would be considered an endorsement and would need to be disclosed.
This type of regulation punches through the wall newsroomsattempt to put between advertising and editorial, because it regulates basednot on an economic incentive to publish the speech, but whether readers of thecontent would view it differently if they knew the reviewer had receivedsomething of value for providing the opinion. In other words, itdoesn’t matter that your reviewer makes no money from sales of the video game,because the FTC thinks consumers would care if they knew he was playing it forfree.
Nor is there a bright line that says gifts of nominal valuedon’t have to be disclosed—in fact, one FTC guide suggests disclosing a $1-offcoupon, if the coupon is given only to people reviewing the product. If your movie reviewer writes a positive review of The Avengers,and it turns out the movie producers sent your staff four tickets to a previewscreening, that would need to be disclosed.
Social media coverage: Paid orfree?
Some advertisers may actually want to negotiate positivesocial media coverage into their advertising contracts. While the FTC rules donot prohibit such arrangements, they do create certain obstacles—though,largely, this depends on whether what your advertiser is seeking is an“endorsement” in the first place.
Under FTC rules, an “endorsement” is an advertising messagethat “consumers are likely to believe reflects the opinions, beliefs, findings,or experiences of a party other than the sponsoring advertiser,” even when thesincere belief of the endorser is identical to the advertiser’s. Technically,organizations can be parties that make endorsements, but only to the extentconsumers believe the organization has opinions, findings or experiences.
In other words, social media accounts that are not typically“personalized” by staff members are less likely to create any endorsementproblems because readers are less likely to view what a faceless organizationsays as an endorsement. If the Washington Post’s officialTwitter account tweeted, “We just had a six-piece McNuggets and they were delicious,”query whether a reasonable reader would understand this to reflect the beliefs,findings, or experiences of a corporate entity. Nevertheless, the FTC rules dorequire that this opinion “fairly reflects the collective judgment of theorganization[,]” so you’ll want to cut those McNuggets into pretty small piecesfor the taste-test.
Most advertisers are probably going to prefer the personaltouch, particularly if you have popular columnists. A local pizza place wouldprobably love to negotiate into the advertising contract that your popularsports columnist tweet, “Join me at Joe’s Pizza after the big game!” before aschool championship. That is precisely the kind of arrangement that the FTCwants you to disclose—and that tweet would have to carry, at a minimum, ahashtag that would tip off readers to the relationship. The FTC suggests#paidad, or even #ad, would work.
What if it isn’t an ad, though? Let’ssay Joe’s Pizza advertises in your newspaper. And let’s also say that, as ithappens, Joe’s Pizza is fantastic. Your sportscolumnist raves about it all day in the newsroom to the point where you’re sickof hearing about how good the pizza is. The columnist goes on his personalTwitter account and tweets: “Join me at Joe’s Pizza after the big game!”
From the FTC’s perspective, the important question iswhether your columnist received anything of value forhis tweet. But this area gets even more gray when the twitter account is the“official” newspaper account for this columnist’s communications, or if he usesthe account for both newspaper and non-newspaper tweets. While the FTC hasshown no inclination to reach into these close calls, one way to avoid problemsis to disclose the ad in the tweet itself. “Join me at Joe’s Pizza after thebig game! See their ad on page 4!”
Form of disclosure
The FTC’s most recent guidance on the form of disclosureswas in June 2010. It encapsulates the most useful advice about theform of a disclosure in a single phrase: “What matters is effectivecommunication, not legalese.” In the example of the video gametweet, it would be enough to say, “Got a free copy of Star Wars: The OldRepublic and these ARE the droids I’m looking for!”
The disclosures do have to appear either in the contentitself or in close proximity. The guide specifically says that buttons linkingto disclosures are not going to meet the FTC’s standards, because, as the guidepoints out, “[h]ow often do you click on those buttons when you visit someoneelse’s site?”
There are two basic ways you can comply with the rule:either identify the content as a paid advertising message, or disclose in thebody of the content the nature of the relationship between the author and theproduct/service being discussed. For legitimate editorial uses, it will almostalways be preferable to disclose the nature of the relationship, becausepresumably most editorial content of this nature is not going to be producedspecifically with the intent of creating a paid advertisement on behalf of thecompany.
What is equally interesting about the disclosure rule isthat it does not require disclosing the origin of theproduct. The 2010 guide discusses disclosure of products from an advertiser “orsomeone working for an advertiser,” but only requires disclosure that theproduct was free, not where it came from. But if a retail storesends you a product, is the retailer “working for the advertiser?”
For example, if the local 7-11 sends you a free package ofDouble Stuf Oreo Cakesters to try, the local 7-11 presumably works for thenational 7-11, who has a contract with a distributor, who has a contract withNabisco. It’s hard to look at that chain of events and say that your reviewer’sopinion of the new Oreos is due to any relationship with Nabisco.
What editorial staff membersneed to know
While not every question is answered by the FTC’s currentguides, there is enough information in the guides—when coupled with ethicalguidelines—to create a few points of guidance that might help inform theeditorial side of a publication in determining when and how to make disclosuresunder FTC rules:
1. Anytime a manufacturer or service provideroffers you anything of value that you accept, you must disclose what wasprovided whenever you discuss the merits of the product or service in question,in any media.
2. Disclosures must appear on the page where thediscussion occurs (or in the body of the text itself) and be prominent enoughand clear enough for an average reader to understand them.
3. Disclosures must appear any time the qualitiesof the product or service are discussed, even if the disclosure was made inearlier media when the product was originally discussed.
4. The publication may want to adopt a standardhashtag for paid advertisements or for tweets that mention advertisers. Forexample, advertisers could be identified with “#SeeTheAd.”
At the end of the day, the best advice for studentjournalists is one rooted in ethical guidelines: if it makes you uncomfortableto disclose that you got something of value before you wrote about it, onlineor offline, then you shouldn’t be taking this thing in the first place. If youthink it’d compromise your opinion in the eyes of your readers if they knew therelationship, it’s probably not ethical to write about it, even if thelikelihood of FTC penalties is remote.
Adam Goldstein is the SPLC’s Attorney Advocate.
- Federal Trade Commission, Advertising andMarketing on the Internet: Rules of the Road, December 2000, availableathttp://business.ftc.gov/documents/bus28-advertising-and-marketing-internet-rules-road.
- Id. under “General Offersand Claims: Products and Services.”
- Federal Trade Commission, Dot ComDisclosures: Information About Online Advertising, May 2000, availableathttp://business.ftc.gov/documents/bus41-dot-com-disclosures-information-about-online-advertising.
- Id. at pp. 1-2.
- Federal Trade Commission, The FTC’s RevisedEndorsement Guides: What People Are Asking, FTC: Bureau of ConsumerProt., Bus. Ctr. (June 2010), available athttp://business.ftc.gov/documents/bus71-ftcs-revised-endorsement-guideswhat-people-are-asking(hereinafter FTC’s Revised Endorsement Guides) at“Don’t these guides violate my First Amendment Rights?”.
- 463 U.S. 60, 66 (1983) (note, however, the courtultimately did find that the pamphlets were commercial speech—but not merelybecause they were sponsored).
- See generally JessicaShannon, Commercial Speech in User-Generated Media: An Analysis ofthe FTC’s Revised Guides Concerning Use of Endorsements and Testimonials inAdvertising, 60 U. Kan. L.Rev. 461, 476 (2011).
- Legacy Learning Systems, Inc.,FTC Docket No. C-4323 (Mar. 15, 2011) (consent order).
- Reverb Communications, Inc.,FTC Docket No. C-4310 (Aug. 26, 2010) (consent order).
- Society of Professional Journalists, SPJ Code of Ethics,availableat http://www.spj.org/ethicscode.asp.
- FTC’s Revised Endorsement Guides, supran. 7.
- National Scholastic Press Association, ModelCode of Ethics for High School Journalists at5.5 (2009), available athttp://studentpress.org/nspa/pdf/wheel_modelcodeofethics.pdf.
- Id. One wonders whetherthis is because the guide does not envision the concept of a nominal gift (inwhich case, there would be no need to qualify that only gifts that couldcompromise independence or objectivity should be refused) or if, for a studentjournalist, a free lunch isn’t “nominal.”
- Id. at 5.6.
- Id. at 5.10.
- See 16 C.F.R. Sec. 255,example 6.
- See 16 C.F.R. Sec. 255.5,example 2.
- See id. at example 7.
- See FTC’s RevisedEndorsement Guides. See also Shannon, supranote 9, at 475.
- FTC’s Revised Endorsement Guides, supran. 7.
- What this means for review CDs is unclear. Typicallythese are identified as remaining property of the record label; nevertheless,the regular practice is to permit the publications to retain these discs anddispose of them however the publication sees fit. A CD reviewer who takes thecopy home, presumably, is as obligated as the movie reviewer who takes a freeticket.
- 16 C.F.R. Sec. 255.0(b).
- 16 C.F.R. Sec. 255.4.
- See FTC’s RevisedEndorsement Guides, supra n. 7, at “What about a platform likeTwitter?”
- See FTC’s RevisedEndorsement Guides, supra n. 7.
- Id. under “How should Imake the disclosure?”
- Id. under “When do theGuides apply to endorsements?”
- An even more bizarre series of events would be thespeculation surrounding Snooki’s handbag change between seasons of MTV’s JerseyShore. One commenter noted that Snooki’s change from a Coach bag toa Gucci bag led to widespread Internet speculation that Coach had sent Snookitheir competitor’s bag to rid Coach’s brand of any association with her. SeeLeah W. Feinman, Celebrity Endorsements in Non-Traditional Advertising: Howthe FTC Regulations Fail to Keep up with the Kardashians, 22 Fordham Intell. Prop. Media & Ent. L.J.97, 116-17 (2011). In that case, disclosing the origin of the bag withoutdisclosing where it came from could actually mislead consumers.