Pay for Praise

New FTC guidelines address paid endorsements.
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Writer and Author, Specializing in Business and Finance
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This story appears in the June 2010 issue of Entrepreneur. Subscribe »

If blogging is part of your business model, if your business sends free samples to bloggers or if you hire endorsers or spokespeople, then you need to know about Federal Trade Commission guidelines surrounding paid endorsements. The guidelines, which went into effect in December, carry fines of as much as $11,000 per infraction.

"[The guidelines] involve disclosing information about relationships with advertisers or endorsers that would have a material impact about how a prospective consumer would view the message," says David M. Adler of Adler & Franczyk, a Chicago technology and corporate law firm. "It could be a blog entry, a Twitter post, a video, a TV commercial."

Business bloggers need to state in their reviews whether they received the product for free. In addition, Adler says, endorsers and spokespeople compensated with money, products, services or in other ways need to disclose that relationship.

Groups such as the Electronic Frontier Foundation are concerned about the guidelines, however. Tim Jones, the organization's activism and technology manager, says, "Any situation where it looks like bloggers are not being granted the same legal protections and privileges as traditional journalists has got to raise a red flag and is cause for concern."

With fines in the five figures per infractions that will be judged on a "case-by-case" basis, according to FTC documents, Adler recommends consulting an attorney to help set guidelines. It's also a good idea to contact industry associations such as the Word of Mouth Marketing Association, Public Relations Society of America and Internet Advertising Bureau, each of which have published guidelines and best practices for disclosure, blogging, social media and other areas.

Jones says: "My advice to small businesses or to individual bloggers is to disclose. If you have anything that seems like a conflict of interest, then it is just a good idea to let people know what that is so that your audience can make their own decisions."

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