FTC Aims to Uproot Deception The new social media policy makes transparency paramount.

By Aaron Kwittken

Opinions expressed by Entrepreneur contributors are their own.

The Federal Trade Commission recently revised its policy on the Use of Endorsements and Testimonials, extended now to account for social media platforms such as blogs, Facebook and Twitter. This regulatory change will now make it illegal for any individuals who are paid by a marketer to promote or endorse that marketer's products or services via any social media platform to do so without disclosing their financial relationship with that marketer.

Under these revised FTC guidelines, a marketer or company can be held liable for misleading or unsubstantiated statements in consumer-generated media--whether the statements are made by an employee, a sponsored-blogger or a celebrity. Companies are now directly responsible for preventing their sponsored endorsers from endorsing their products without disclosing their financial relationship. Check out the official FTC release for more information about this new policy.

Personally, I'm disappointed the FTC found it necessary to issue a ruling to force marketers (and by extension, their PR firms, ad agencies, digital agencies, etc.) to be transparent in their use of consumer-generated media, though I fully support these revisions and encourage all marketers to adhere to them.

Not everyone shares my sentiment. In a recent open letter to the FTC, Randall Rothenberg, president of the Interactive Advertising Bureau, vehemently opposes the FTC's actions--requesting a retraction and revisions to include input from the social media industry.

Rothenberg is right to suggest that the FTC work more closely with industry, but the IAB is missing the FTC's intent. The revised guidance is not just about disclosing freebies--it's intended to uproot deception. Some bloggers, paid to promote a product while at the same time masquerading as unbiased "media," have tremendous influence over purchasing decisions. Consumers can barely tell the difference between a company's press release and a press story as it is; how could they understand the hidden intent of online media influencers without appropriate levels of disclosure?

So what's a marketer to do, in light of the FTC's guidance?

  1. Don't let this guidance keep you on the sidelines. Social media will continue to play an integral role for brand and reputation building and management.
  2. When in doubt, disclose. If you're providing a blogger with any form of compensation (such as a free product or monetary compensation) then make sure that the blogger clearly divulges this relationship.
  3. Monitor, then monitor again. It's your responsibility to make sure that your bloggers clearly disclose their relationship with your company.
  4. Create your own social media disclosure policy. In addition to training staff on this policy (which should be part of your overall social media policy), make sure that anyone who receives compensation from you in exchange for promoting your company or product signs that form.
  5. Continue to use good judgment, as you would when dealing with traditional media.

Love 'm or hate 'm, I think everyone can agree that the FTC's guidelines are creating much needed conversation about social media among marketers.

Visit the Council of PR Firms for more information.

Wavy Line
Aaron Kwittken

Global Chairman and CEO of Kwittken

Aaron Kwittken is global chairman and CEO of Kwittken, an award-winning PR agency headquartered in New York. The firm has offices in London and Toronto and boasts a client roster of iconic brands along with a staff of multi-specialists. Kwittken makes regular guest appearances on CNBC, FOX Business Network and Bloomberg TV to provide insights on matters involving reputation and brand management.

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