How Are Paid Links and Affiliate Links Affected by the FTC’s New Endorsement Guidelines?

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Blogger vs. FTC

There’s been a lot of concern among bloggers lately about the FTC’s new Endorsement Guidelines. The updated guidelines attempt to address endorsements made online and strive to protect consumers.

On the surface, this is a great idea. This is especially true when a consumer’s health or livelihood is at stake, and when an endorsement includes fake information and hidden kick-backs. Unfortunately, the new guidelines are full of open-ended, irresolutely stated rules. Jack Shafer of Slate says the new guidelines are preposterous!

The guidelines have to be read to be believed. They are written so broadly that if you blog about a good and service in such a way that the FTC construes as an endorsement, the commission has a predicate to investigate. The only way stay on the FTC’s good side is with a “clearly and conspicuously” posted disclosure of the “sponsors” who provided you with the good or service (or money) to blog about the good or service. As I read the guidelines, the FTC could investigate you if you did disclose but it was not satisfied with the disclosure.

Endorsement and Reviews

The key elements in these guidelines are endorsements and reviews. Almost every example in the newly updated guidelines have a scenario where content is being used as an endorsement or review, and compensation is being received without disclosure to the consumer. One exception I found in the 80+ page document that didn’t include possible compensation for an endorsement or review was about discussion forums.

Example 8: An online message board designated for discussions of new music download technology is frequented by MP3 player enthusiasts. They exchange information about new products, utilities, and the functionality of numerous playback devices. Unbeknownst to the message board community, an employee of a leading playback device manufacturer has been posting messages on the discussion board promoting the manufacturer’s product. Knowledge of this poster’s employment likely would affect the weight or credibility of her endorsement. Therefore, the poster should clearly and conspicuously disclose her relationship to the manufacturer to members and readers of the message board.

But the FTC didn’t stop there. They also included a scenario where disclosure must be used in a form of user generated marketing (they used the term “street team), where an individual telling their friends (or anyone for that matter) must disclose that they have incentives for telling them about the product or service, even if it means they’re simply getting virtual points for a website or a free MP3 download from the musician they’re promoting (and sincerely like.)

So what happens if you don’t disclose a possible incentive when endorsing or reviewing a product or service? You could be fined $11,000 for each incident! The new FTC guidelines have effectively turned themselves into their own Internet Thought Police, but even more ridiculous is the fact that they won’t be able to actually enforce it. Like many not-well-thought-out rules, it puts more grievances on legitimate, trustworthy bloggers, and does nothing to curtail the worst offenders, most of which operate outside the jurisdiction of the FTC (outside of the U.S.)

Endorsement versus Citation

That leads me to paid links and affiliate links. The guidelines make it clear enough that endorsements and reviews are not permissible, but what happens when a link isn’t part of an endorsement or review? Affiliate marketers drop links just about anywhere they can. The same can be said about paid links. In cases where links that have been paid for (with the purpose of helping the destination website perform better in organic search engine results) or they’re affiliate links (where a blogger could potentially make money from a sale), but no endorsement or review is associated with them, a big question remains; are those links subject to the updated FTC guidelines? Before I give you my answer, I want to state very clearly, I AM NOT AN ATTORNEY and I could be wrong, very wrong.

With that being said, and much to Google’s chagrin, I don’t think paid or affiliate links are affected by the FTC’s updated guidelines. If there’s a blog entry that doesn’t contain an endorsement or review, but has a link that’s either been paid for or is an affiliate link, it’s technically a citation or reference. I think it should be up to the blogger to decide how much they want to reveal or not reveal about their paid or affiliate links.

The reality is that the online community already does an excellent job of policing themselves. Similar to Outspoken Media’s stance on affiliate links on blogs, it really comes down to community and trust. If a person doesn’t like or trust what you publish and link to, they will go away and will not come back. It’s in a blogger’s best interest to not mislead their readers. Furthermore, if a blogger does include an occasional affiliate link, and it’s done in a way that is acceptable to their readers (even without full disclosure), in no way is the consumer being harmed or misled.

While I think it’s good to have some regulation in place, especially if it protects consumers, the Internet is unique and inherently plays by different rules. In most cases, the online community already does an excellent job of influencing and even shaming bloggers that act in a way that harms consumers.

For now – at least through my interpretation – bloggers who publish paid links and affiliate links are safe (well, except from Google!). Bloggers who also publish endorsements or reviews with hidden incentives may also be out of harm’s way, especially if they’re not promoting something that may potentially harm or trick the consumer. However, with that being said, and in light of the newly updated guidelines, I wouldn’t recommend publishing an endorsement or review without a disclosure, especially if an incentive to promote exists.

Updated (October 15, 2008)

The Blog of Legal Times just published an article that quotes Mary Engle, associate director for advertising practices at the FTC’s Bureau of Consumer Protection. She was on a conference call trying to reassure bloggers that the FTC isn’t trying to play the role of Big Brother.

While the guidelines do not have the force of law, the FTC as always can still sue an advertiser for deceptive practices under the FTC Act. But she said the agency has “never brought a case against an individual consumer endorser.” Nor will the FTC levy fines for violating the guidelines.

Engle did acknowledge a substantial gray area when it comes to blogging. If a blogger received an occasional free sample and happened to write something positive, she said, “that’s not something we think would change the expectation of the audience,” and might not require disclosure. But if at some point it became a steady stream of freebies, then disclosure would be called for. “It’s not burdensome and it’s not hard,” she said.

When it comes to making law enforcement decisions, however, she said the FTC will go after the cases that are black and white. “We’re not interested in playing gotcha in the gray areas.”

Similar to what I suspected, she also clarified that they were really trying to set better guidelines to protect consumers from the worst offenders – individuals that endorse products that can adversely affect one’s health.

6 Responses to “How Are Paid Links and Affiliate Links Affected by the FTC’s New Endorsement Guidelines?”

  1. Jennifer

    You know … in some respects, I understand this – especially when it comes to product reviews on retail websites. Transparency is needed in certain cases. But I can’t help in agreeing with you – things are too broad and need further claification; links and affiliates are a huge thing for bloggers. Thanks for the re-cap! Much appreciated.

  2. Insightful post. Everytime I read about any kind of new, updated, simplified FED rule, my first inclination is too sigh and think “things are going to get ugly.”

    One should always to be honest and ethicial in all of their dealings both as a business owner and human being. This is not to say “stuff happens.” It will. Just like the time Joe Sugarman (Blu Blocker sunglasses fame) couldn’t make product shipments within the 30 day rule due to blizzard conditions in his area.

    Some of his customers complained to the FTC. The FTC levied a huge and unfair penalty against his business. At the time the FTC was under attack by Congress for their excesses.

    Joe fought back by running an ad in several national publications telling his side of the story and how he was treated unfairly by FTC.

    Eventually The House passed their FTC bill that restricted the FTC activities and gave Congress the right to veto any new FTC rule.

  3. It is quite interesting that this post is written with the US audience in mind. But I think that most people here in the UK and EU will sooner or later begin to see legislature on paid links and affiliate link guidelines too.

    • Time travel. Okay, maybe not that. Probably because it’s been moved a couple times and the original data got screwed up along the way. New insights? That’s a great question. I’m going to add this to my list of posts that we need to update. Thanks!