FTC says "word of mouth" marketing requires disclosure of sponsor's compensation

A U.S. Federal Trade. Commission (FTC) staff opinion says actors, bloggers and others who are compensated by companies to tout products -- including a situation involving marketing Sony Ericsson camera phones -- as part of "word-of-mouth" campaigns must disclose their affiliation, according to an article in The Washington Post (http://www.washingtonpost.com/wp-dyn/content/article/2006/12/11/AR2006121101389.html).

The article says Commercial Alert, "an advertising marketing and watchdog group," petitioned the FTC in October 2005 to take action against word-of-mouth marketing when consumers think they are hearing or reading honest opinions but are, in reality, getting information from people paid to promote products.

The Washington Post reports Commercial Alert mentioned an article in the Wall Street Journal about the marketing of Sony Ericsson's T68i camera phone. "The initiative, called 'Fake Tourist,' involved placing 60 actors posing as tourists at attractions in New York and Seattle to demonstrate the camera phone.

"The actors asked passersby to take their photo, which demonstrated the camera phone's capabilities, but the actors did not identify themselves as representatives for Sony Ericsson."

Being duped

I remember when this occurred and many marketers thought it was a great idea. Others were concerned that consumers were being duped.

The article says the FTC will "investigate cases where there is a relationship between the endorser of a product and the seller that is not disclosed and could affect the endorsement. The FTC staff said it would go after violators on a case-by-case basis.

"Consequences could include a cease-and-desist order, fines and civil penalties ranging from thousands of dollars to millions of dollars."

My affiliations

For the record, in all my weblogs and public presentations I've tried to be open about any consulting arrangements (past or current) and products I'm given to test. As a wireless data consultant I get a fair number of cellular phones to play with.

I've mentioned, for example, that I have been part of the Nokia bloggers program and the Sprint Ambassador program where I have received phones to use for a certain period. I get phones from other manufacturers and cellular operators as well -- as I've mentioned.

[Sent via TypePad wireless e-mail with RIM BlackBerry 8700g]

Comments

[Shawn Honnick]

I think it's a really bad idea that the FTC get involved in how companies can market or what bloggers can do.