The Federal Trade Commission (FTC) has compiled revisions to its regulations on endorsements that will apply to the online community. These guidelines are due to be adopted late this summer.
The guidelines will impact all types of advertising, including Internet ads. They will particularly relate to the way testimonials and endorsements are made in websites, blogs and even blog comments and forums.
If review copies of a product are given out free or reduced price and result in a favorable review, the fact that free copies were given out will have to be revealed. If reviewers are paid or given free merchandise, trips or gift cards as a result of the review effort, this will also have to be revealed.
If a blog or website owner can’t prove the validity of a testimonial—for example, they don’t have the screen shot of the money that actually came into a commenter’s account as a result of using the product, and then it is the responsibility of the website owner to put in a disclaimer. This means every blog comment will have to be monitored and verified, an almost impossible task for many active bloggers.
In the past, disclaimers of efficacy could just be as simple as “may not represent typical results.” That generic statement will no longer be sufficient. Apparently, the FTC discovered that such statements have not actually persuaded viewers that their results may be different than the ones being reported.
Under new guidelines, the advertiser or product owner will need to produce evidence of what a typical user will experience. For example, in a pre-test of a product before the main launch, if a product was used by 1000 testers and a survey taken of users found that 10 percent made more than $2000 within 60 days, 60 percent made between $25 and $2000 within 60 days, 20 percent did not make over $25 in 60 days, and 10 percent did not respond to the survey—then these specifics must be reported.
New products will have to prove efficacy in ways never required before. Claims by both solicited and unsolicited users will need to be verified, or will require a disclaimer of what typical results actually are.
Celebrities and expert authorities may still be used to endorse products, and they may be paid. Apparently, the guidelines still allow advertisers to assume that readers know that celebrities receive payment for their endorsements. However, the celebrity/expert must legitimately have used the product in order to endorse it, and if they discontinue use, any ads bearing their name must be altered. Won’t it be difficult to monitor whether an expert is still using a product, unless they voluntarily request to be taken off an endorsement page because they no longer use the product?
Online advertisers who pay bloggers to comment upon their products may cause their online marketing efforts to be flagged by vigilant FTC monitors. The FTC will expect to see acknowledgement that testers and commenters are being compensated for their effort. They will expect to see specific results-based disclaimers, not just “may not be typical results” notices attached to positive reviews and comments claiming product efficacy.
Marketers who outsource content and SEO services should make sure their contractors are well aware of the new guidelines and do not make false, unsubstantiated claims. Both advertisers and reviewers may be subject to fines, time-consuming investigations, and shut down websites if the FTC comes calling.
Mainstream niche websites can expect to be monitored along with the more typically vulnerable sites in the weight loss and make money online niches.
My advice:
–Read the guidelines and begin to gather the typical results data that will be needed to prove any claims that are made for the efficacy of your products. If you are an affiliate marketer, make sure that typical results are prominently displayed on the product website, and do not make efficacy claims that you cannot substantiate.
–Monitor the work of all your virtual assistants and freelancers so they understand the expanded FTC coverage as well. Being on a foreign shore or using foreign outsourcing will not protect a product from a claim of false and misleading advertising as long as the product is sold in the United States.
Buzz being what it is, it will be impossible for any advertiser to monitor all instances of public comments made about their products and services. How will a product creator be able to control the random comment of a blogger or a tweet on the use of a given product on a website that they do not personally control? Perhaps a new outsourced task will be to monitor the “buzz” surrounding a product and to make sure that if unproven claims are made, that they are countered by a statement of average results by the owner of the product, or that they are removed. Hopefully, the FTC will not take this new online monitoring mission to such an extent that products that go “viral” will have to pop in to prove or correct every comment made in the blogosphere. Does the FTC really have enough monitors to check on all that buzz?
What is clear, however, is that advertisers, whether they are product owners or their affiliates, will need to be more diligent than ever not to make efficacy claims that cannot be substantiated, and to declare whenever compensation of any kind is given in exchange for trying, reviewing or commenting on a product.
The FTC guidelines seem unwieldy and expensive to monitor for most online marketers. It will put a damper on start-ups and new product creation because, in effect, the efficacy may be unknown until many people have tried a new product. Product guarantees and warranties are given for just that reason so that people who are dissatisfied with results have the option to return the product and get their money back.
Results are also so dependent on the actual effort given the use of most products. For a typical information product, unless you take it out of the shrink wrap, you won’t get any results. Does lack of use prove that the product has no efficacy?
It seems as if, no matter how much attention to step by step, dead simple detail an online program gives (at least in the make money online market) the program winds up matching the 80-20 rule. The 80 percent who apply no effort get no results; while the 20 percent who apply varying degrees of effort get varying degrees of results. Even one of the best trainers online, Ed Dale, of the 30 Day Challenge, made this comment about analyzing the results of past 30 Day Challengers, arguably the most successful of all beginner online courses. (Oops, did I just make a claim? Sorry Ed; I may be forcing you to validate the comment in the new order of things!)
Now, I don’t think that the FTC is requiring the kind of rigorous pre-approval testing that is required of pharmaceuticals by the FDA. Hoops of this magnitude would raise the cost of everyday products and increase the time to market dramatically without substantial public benefit. Now, especially, when so many are out of work and on limited incomes, is not the time to substantially increase the length of time it takes to bring American products to market, nor to stifle start-ups on a budget. Hopefully, in implementing tighter efficacy requirements the FTC will zero in its enforcement on the most egregious examples, as it has within the weight loss and mortgage industries.
The typical start-up on a shoestring will need time and a few customers in order to prove typical results. In the meantime, the owner of a new product or service may only have their own results to show for proof of results, which may or may not be typical. They may need to set up a pre-sale demonstration to prove typical results. That will take time and may require incentives. The advantage to the general public is fewer new products will be thrown out there untested with claims that cannot be proven. The disadvantage is, many products that could be of great benefit to a wide variety of users may languish for lack of finances to properly test and market a completely new product or service. Or, those products may come from marketers off-shore and not be available to the U.S. market legally.
We certainly hope that the FTC will not take the new regulations to the extent of requiring such a lengthy testing process that American companies lose their advantage in speed to market or cost-savings. If our every day products are subjected to expensive and time-consuming testing like drugs are now, then we will merely drive invention off-shore, and force people desperate for the newest products to get them outside of the U.S. Is the reward in consumer safety and well-assured product reliability worth making the watchdog control tighter for a whole raft of products? What will this do for the cost of our products and the speed with which we can bring them to market, compared to our counterparts in, say, China?
So, as Internet marketers, we await the FTC guidelines on endorsements with some trepidation and concern. We acknowledge that the consumer deserves to know that the statements being made are true and that where products have been tested for efficacy the results are out in the open.
Now is not the time, however, to burden American ingenuity and the introduction of new products with complicated requirements that put roadblocks in the way of getting products and services to market quickly. Product guarantees are there to protect consumers from mistakes in purchasing unknown and relatively new to the market products. For most consumer product areas, do we really need more watchdogs?![]()
Liz Nichols
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