What You Need To Know About The New FTC Disclosure Rules

Last month, the Federal Trade Commission issued new rules regarding blogging and disclosures. Specifically, any blogger who reviews a free product from a marketer (or advertiser, or business owner) must disclose his or her relationship with the company.

Therefore, if I’m a blogger who reviews books, for example, and I review a book that I received free from a publisher, then I need to indicate that in my review.

This notion is known as transparency.  Transparency is simply the disclosure of relationships between parties. And it’s become an issue because of the nature of word of mouth on the Internet.

When we’re making decisions, we rely on what other people think about products or services we’re considering. Pre-Internet, we relied on family and close friends to help us make those decisions. Today, though, we’re relying on people we don’t know, who we find online.

In many cases, we make decisions not on individual reviews but on the number of reviews. If I go to a site that sells books, for example, and compare two books on similar topics, I’m likely to buy the book that has the largest number of positive reviews (that is, other things like price and convenience being comparable). And that’s what the FTC is concerned about.

If companies send free products to people to blog about, or if they pay people to write good reviews, there’s a good chance that the review will be positive. And if we make decisions based on non-objective reviews, then there is what the FTC calls a ‘material harm’…that is, a customer has spent money (that’s the material part) because of a possibly false statement.

So now, any blogger who receives an incentive (free products or payments) for a review will be treated as an endorser, rather than an objective critic. Basically, all any blogger needs to do is write on the blog if compensation was received from the company whose product is being reviewed. Then, it’s up to us as readers to decide what to do with that information.

The new rules include review sites like Amazom.com and Yelp.com, too.

The important thing to remember there is that if anyone who gets any type of compensation from your business writes a review about your business, they need to disclose it. This includes employees.

If you own a restaurant, for example, and one of your wait staff posts a great review on Yelp.com, he or she needs to indicate that they work for the restaurant.

The big question, of course, is how this will be regulated. The manpower to monitor the social media space and research any possible discrepancies will be massive, to say the least. The FTC has reported that sanctions will include warning letters and fines up to $11,000.

How should small businesses address this? If you give away products for customers to review, simply ask them to indicate that the product was a gift. If customers give great reviews to your store on their own, don’t worry about it. Even if you ask people to talk about your store, you’re in the clear, as long as nothing material has changed hands.

You should take a few moments to alert your employees to the rules, especially if they are cyber-smart and likely to talk about your business on any of the review sites like yelp.com. You might also considering yelp.com and just checking what is posted about you there to make sure your business is in the clear. Just a little extra vigilance will keep you stress free with the FTC.

– Kim