Tag Archives: blogger

Bloggers and Advertisers Beware: FTC Rules on Sponsored Endorsements Create Major Risks for “Word of Mouth” Advertising

Bloggers and Advertisers Beware: FTC Rules on Sponsored Endorsements Create Major Risks for "Word of Mouth" AdvertisingNew FTC Rules on Bloggers: According to the Word of Mouth Marketing Association (WOMMA), word of mouth advertising is “the most honest form of marketing, building upon people’s natural desire to share their experiences with family, friends, and colleagues.” But here comes the rub. When marketers pay for “word of mouth” messages, haven’t the messages ceased to be the result of “people’s natural desire to share” — and instead become the result of people’s natural desire to make money?

This certainly is the view of the FTC, which on October 5, 2009 finalized a new revision of its rules governing the use of testimonials and endorsements in advertising (to be codified at 16 C.F.R. §255). These revisions make it clear that the FTC intends to extend the reach of its advertising regulation and enforcement to bloggers who make sponsored endorsements of products and services.

The rules affect both advertisers and bloggers who cooperate on sponsored endorsements. For example, the new rules state that the FTC intends to hold both advertisers and bloggers liable for false and misleading statements made by either party in the course of an endorsement. This means that an advertiser who provides free products to a blogger can be liable if the blogger makes false statements about the products in her blog. And the blogger can be liable if she repeats false statements from the advertiser. Both parties can also be liable if the blogger fails to disclose her connection with the advertiser.

Word of mouth advertising in the age of Web 2.0

Word of mouth advertising was once naively thought to refer to a spontaneous and uncompensated testimonial communicated from one consumer who was excited about a product he had just tried to another customer. Word of mouth marketing has long been thought to be more effective than print advertising because the message comes from a peer that the customer trusts. When a customer hears a peer rave about a product, she assumes that the endorser is speaking out of his genuine experience with the product.

Now that we have moved into the world of Web 2.0, which has put the megaphone of the Internet into the hands of consumers, word of mouth has morphed into planned, compensated advertising that is piped through consumers via social media, such as blogs. This once spontaneous activity now has its own trade association — WOMMA — which boasts over 400 marketers as members.

WOMMA’s website lists about a dozen different types of word of mouth marketing campaigns, by which an advertiser can “harness, amplify, and improve” on this “pre-existing phenomenon.” Some of these methods include old-fashioned P.R., such as using high-profile entertainment events or news to create “buzz.” Others include creating social networks or affinity groups of users that have a special interest in a product.

However, several categories involve providing products or compensation to “influential” consumers, who “volunteer” to tell others about the product. In “product seeding,” the marketer provides samples of product to “influential” individuals, such as bloggers or persons with large social networks, who then write posts about the product on their sites. In “evangelist” and “influencer” marketing, the marketing “cultivates evangelists, advocates, or volunteers who are encouraged to take a leadership role in actively spreading the word on [the marketer’s] behalf” — in other words, the marketer pays the blogger to write about the product.

Social media posts covered by the FTC rules

The new FTC rules don’t constitute a new extension of the FTC regulations on deceptive advertising to blogs. The prior FTC rules already arguably covered any form of media, including social media, such as blogs. Rather, the new rules and the FTC’s statements in its Notice of Adoption simply make it clear that the FTC intends enforce these rules on new media sites, including, specifically, blogs.


Attack Blog’s Salvos against Corporation and Blogger’s Use of Copyrighted Photos in Parodies of Management Deemed Non-Actionable by California District Court

Attack Blog's Salvos against Corporation and Blogger's Use of Copyrighted Photos in Parodies of Management Deemed Non-Actionable by California District CourtMany blog sites on the Internet are devoted to complaints or criticism of the practices of businesses and their executives. For example, we recently blogged about a site that critiques the practices of beauty company Mary Kay, Inc. —www.pinklighthouse.com. Another site focuses on critiques of Starbucks’ operations —starbucksgossip.typepad.com. The authors of such blogs or websites frequently worry that their posts could subject them to ruinous liability for defamation, trademark infringement (for use of the company name), or copyright infringement (for reprinting company materials).

However, a recent decision by a District Court in the Northern District of California illustrates the protections the law affords attack blogs from such claims. In 2006, Robert Delsman, Jr., a former General Electric employee, submitted a claim for disability benefits to the firm that handled such claims for GE — Sedgwick Claims Management, Inc. Sedgwick is managed by David North (CEO) and Paul Posey (COO). Delsman grew dissatisfied with Sedgwick’s handling of his case and began to express his views about Sedgwick, North and Posey in a blog and a postcard mailing campaign called “Operation Going Postcard.”

The blog, which is currently hosted at https://www.gesupplydiscrimination.com/, accused Sedgwick of wrongfully denying benefits to claimants, violating various laws, and accused Sedgwick and its “minions” (which it termed “Sedgthugs”) of having committed “Sedgcrimes.”
Delsman also took two copyrighted photos of North and Poser and superimposed them on “WANTED” postcards, some of which he “morphed” to look like pictures of Adolph Hitler and Heinrich Himmler. The postcards contained messages next to the photos such as this: “WANTED FOR HUMAN RIGHTS VIOLATIONS. . . Have you been threatened by this man or his minions? The time for change is at hand!” On the reverse side, they read: “Have you been terrorized, threatened or lied to by Sedgwick Claims Management Services? The time to act is now! Report these despicable activities to the US Department of Justice and the Attorney General in your state. Sedgwick CMS can be stopped peacefully and purposefully if enough people act now! Get informed!”

That’s strong stuff!

Sedgwick filed suit against Delsman seeking to stop his damaging campaign. It claims included copyright infringement, for his use of the photos, and the usual panoply of defamation-related claims, including libel and interference with prospective business advantage. See Sedgwick Claims Management Services, Inc. v. Delsman, U.S.D.C. Northern District of California, Case No. C 09-1468 SBA, Order Granting Defendant’s Motion to Dismiss (July 16, 2009).

There is nothing wrong with the types of claims Sedgwick brought. I have successfully brought them myself on behalf of defamed plaintiffs. However, the circumstances have to be right. The reality is that the First Amendment protects a lot of damaging speech.