Lawyers rely upon case law and statements from regulatory agencies to advise clients on what they need to do to prevent from having their name in the case books setting the precedent. Without precedent, a lot of us are just doing our best job of reading statutes and regulations. That’s why there was so much buzz about the Federal Trade Commission’s first action related to the FTC blogger endorsement rules against Ann Taylor’s Loft. I discussed that case here when it came out.
One of my biggest issues with that action was that it seemed like the FTC was applying different rules to online versus traditional media. Just because the coverage about the event where freebies where provided was covered online, there was an action. Did the traditional press get any freebies? I can tell you from my own days as a poor starving journalist, you serve me food, I will likely come cover your game. Half of my meals came from the University of Iowa covering games I would have covered anyway.
Now, the FTC has taken their second action and this one seems more like what the FTC should be focused on. This time a PR firm was having their employees post reviews or comments on iTunes saying glowing things about the PR firms’ clients.
In In re Reverb Communications, FTC No. 092-3199 (Aug. 26, 2010) (Settlement), the FTC obviously said this was a no-no. According to the complaint, the PR firm employees used innocuous usernames promoting the items and would receive a percentage of sales without any disclosure of this relationship.
Pursuant to the settlement, Reverb has to stop doing this, remove any paid endorsements already out there, keep documents for five years to prove compliance and deliver the settlement to all their employees.
The interesting part is that Reverb did this before the new guidelines were issued by the FTC. You have to remember the guidelines are not new law. Rather, they are an interpretation of existing law as it applies to online behavior to put businesses on notice.
Also of note is the fact the FTC did not go after the PR firm’s clients like they considered in the Ann Taylor case. There is no discussion in the press release or the settlement as to whether the PR firm’s clients knew of the conduct. If so, it seems like they could be held accountable too. In updated guidelines, the FTC made it clear it was coming after the advertisers and not necessarily the bloggers. If you have a PR/marketing firm, you need to make sure they are not doing fake reviews.