FTC New Rules and Regulations

If you are doing any business on-line, odds are you will be affected by these regulations, and you need to be aware of their impact on your business.

The following categories will be affected:

• Bloggers
• Affiliates
• On-line Advertisers
• Internet Merchants

What about NON-U.S. Companies marketing to US Consumers?:

• They are affected as well.
• The affiliates for NON-U.S. products must follow the same rules.
• Any endorsements, or testimonials for foreign products must follow FTC rules.

• Rule 1:Generally Expected Performance "Clear and conspicuous disclosure of the generally expected performance is required whenever the testimonial is not generally representative of what consumers can expect."
• Rule 2: Consumer endorsements "An advertisement containing an endorsement relating the experience of one or more consumers on central attribute of the product or service that will likely be interpreted as representing the endorser's experience is representative of what consumers will generally achieve with the advertised product or service in actual, conditions of use."
• Rule 3: If the advertiser does not have substantiation that the endorser's experience is representative of what consumers will generally achieve, the advertisement should clearly and conspicuously disclose the generally expected performance in the depicted circumstances.

We are definitely in an gray area here:

• The goal is to keep marketers honest, but it is not that simple, as we all have different ideas of what constitutes the whole truth in various situations and in some marketing situations.
• Generally Expected Performance has a different meaning; now just a post of a disclaimer saying that the successful customer's results "were not typical" is not enough.
• It is clear that a testimonial or endorsement must come from a person who bought the product or service and used it and tell his experience.
• It is also clear that an advertiser must possess and rely on adequate substantiation for that representation for whatever he discloses as "generally expected." This goes beyond just telling the truth to being transparent in your advertising.
• I think that "Generally Expected Performance" actually is through investing in market research after the sale, which can cost money, sometimes a lot of money.

It really is gray, isn't it? Hopefully, in a lot of cases we will do just testimonials, not endorsements of products or services. But if we advertise a membership site, this will be a service endorsement, not a testimonial!

Did you see how easy the interpretation can put us in a gray area?

In addition to generally expected performance disclosure requirements, transparency becomes the key, as new guidelines also require people who are "sponsored" by the marketer and are endorsing the marketer's products to disclose the nature of the relationship.
Who are those people?:

• Experts in the niche
• Bloggers
• Consumers of physical products
• Celebrities

• Rule: You have to be transparent about your relationship with people providing endorsements or testimonials.
• "Advertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers. Endorsers also may be liable for statements made in the course of their endorsements."

This rule is going to have a major impact on the affiliate marketing industry.

• If you have affiliates, FTC could subject you to liability if THEY don't follow the rules.
• If you ARE an affiliate, expert, or in general a person defined as being a "sponsored" endorsement or testimonial, you could face liability if you do not disclose the nature of your sponsored relationship, or if you say something deceptive in your endorsement, review, or testimonial.

As a marketer working with affiliates, you need to take some steps:

• You need to communicate with all your existing affiliates that you expect them to be in full compliance with the new FTC Rules.
• The Affiliates should also be informed that you reserve the right to drop them as affiliates and/or withhold payment if you feel, at your complete discretion, that they are NOT in compliance with the new rules.
• These requirements should be spelled out in a new affiliate marketing agreement which includes having the affiliate indemnify you as the marketer if something they do or say results in any FTC or other legal action.
• You should ask your affiliates to sign new affiliate agreements and complete applications.

This is the gray spot right here:
The new rules force you as a marketer to do everything you can to show the FTC that you are a conscientious marketer doing everything you can possibly do to stay within the guidelines, as FTC can penalize you from some wrongdoing of your affiliates.

Personally, I don't like this, and it makes me think the FTC is more after your money vs. after the noble cause of helping. I also think that we will create a huge bureaucracy or spend a lot of money on lawyers to show us the way.

In summary: Affiliates, Reviewers, Testimonials, and Endorsers

If there is a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement, then you must "fully" disclose the nature of the connection.

You can use this link to create a disclosure tailored for your needs:
Disclosure Policy

This is the list:


• Audit your testimonial-based advertising for compliance with the rules.


• Make any adjustments to your existing advertising to bring it into compliance.


• Define "generally expected performance" for your products.


• Require affiliates to complete an application.


• Revise affiliate marketing agreements.


• Disclose any connections you have with the sponsors of products you endorse.


• Do yourself a favor: do a Google search to make sure your name is not being associated with any products or services that might expose you to liability.


• If you find any sites, take active steps to get your name/testimonial removed if the use does not comply with the new Guidelines.

This is a place you can read the new Guidelines for yourself:
http://www.ftc.gov/opa/2009/10/endortest.shtm

How gray is gray?
It is scary. I'll probably need a solid month to comply with the Guidelines!

First, if you are a marketer who makes $100-$200 per month from affiliate programs, take it easy.

If you make thousands of dollars per month from affiliate programs, start to pay attention as soon as you can.

Yes, there is help; some companies acted proactively and created an environment which can help you.

I cannot endorse them as I am using their products and services, but you can go in Google and type:
allurl: +FTC New Rules
You get over 200 references.

I promise I'll come back and update this lens as soon as possible and provide as much info as I can.

We need to know how FTC will apply the new rules. Please read the next modules!


Also, take a look at some example of disclaimers I published at Professional Squids Ning, Advance Affiliate marketing Group.

The information is coming from an interview with a FTC representative.
I'll summarize:

• What is essential
• What we don't know up till now
• How the FTC will enforce this huge task

I am opinionated. You know this, but this is not me speaking. What you get in the green boxes is info coming from the FTC, with me speaking is outside of the green boxes. A disclaimer is not necessary as I am not an affiliate for this info. FTC information is publicn and they want to be as public as possible to keep people informed. This is what I am doing; I try my best to keep you informed!

You probably noticed that I delete the Video. Yes, because the video did not comply with the rules, I'll explain later.
I'll use a different pattern to be sure that this module is easy recognized.

Affiliates Responsibilities - Disclosure!

The reader must know that there is a connection between the endorser (affiliate) and seller (author or company)
The affiliate must post:
1) "Disclosure: Compensated Affiliate" or
2) "Compensates Affiliate" or just
3) "Affiliate" as we all know that Affiliates get commissions

You must be careful as the difference between the editorial content and advertising in cyberspace is NOT ALWAYS CLEAR.

Disclosure is encouraged. What FTC is really trying to do is give consumers the tools to make decisions on their own.
Having the disclosure information, a consumer can evaluate the credibility of the representation.

Consumers Testimonials!

This is an area which can be abused as the results can vary. (One can say, "take this pile for 2 weeks and you'll lose 20 pounds." It is not a lie, but another person lost only 10 pounds. This is not a lie either).

The consumer must know the General Expectation of the product.
The owner of the product must tell what General Expectation Results would be.

1) "Results not typical" is no longer a safe harbor.
2) The single safe harbor NOW is to disclose what the general results are and depicted circumstances if any.
3) Sometime you cannot make a performance claim. If you create a "How To..." digital product, only you use the product so far until you publish. You don't know how the product is going to be used, how is going to perform. In this situation, you must rely on "satisfaction testimonials" at least until you get some kind of statistical results.
You don't have them at the launch of the product; this is an example of depicted circumstance. But you still have to disclose what the generally expected results are in depicted circumstance.

Overall Disclosure! Who should be told, what, and when.

The disclosure requirement also applies to a person who does not receive a commission but instead receives a free product or other indirect benefits!

Hard to generalize, IT DEPENDS! Let's analyze a couple of scenarios.

Let's say you receive a free Digital Product, and you create a free review in your blog.
A disclosure is necessary only if you anticipate a flow of merchandise.

What if you receive a free DP and you create a free review in your blog, but you also put your affiliate link for that product?
YES, you need a disclaimer because you have a vested interest in the sale of that product.

What if you bought a product, you wrote a review of the product, the owner saw your review, liked it. The owner invites you to a reception or a party that they are having. You DO NOT need a disclosure because you don't get any benefits, and you wrote the review with no expectation of future benefits.
If this is repeating with other produces of the same owner, YES you need a disclosure.

What FTC will do about Rules Violations!

The FTC does not have authority under the FTC Act to impose civil or monetary penalties as well, but they can get a court order, and a court will decide your penalties if that is the case.

What the FTC will do is:
1) Send you a letter or
2) Open an investigation directly (only for big violations)

If you get a letter, the first thing to do is call the FTC, find out what is wrong, and correct the error. This will close the case against you.
If you don't comply and correct the problem, or the error was so severe that FTC sent you to a court, you'd better try not to get that far.
The FTC is sure that 90% of violations will be solve with a call, but you are the one to call them with the claim number from the letter.

What about The First Amendment?!

We know that the First Amendment applies in the commercial speech context.

If somebody's statement or commercial activity is misleading a consumer, the First Amendment stops.
We definitely don't have the First Amendment to mislead commercial context.

I deleted the video, as they state that FTC will fine you $11,000 for any violation. It is not true; the FTC does not have the authority to do this.

Well, what I did was simple; I just added to each affiliate DP, software, membership site etc., a short statement:
• I am an Affiliate. (T.his means I am paid.)
• I stated that I am a proud owner, or I have used the product for a number of years (so I bought the package) and so on.
• For my products, I have a disclaimer in all my pages (sale page, download page, etc)
  

This is it for time being.

Do you want to see how they look. Just open one of the following links:

http://squidooeventlog.com/

http://michaelacernescu.com/

http://michey.crabbysbeach.com/blogs/

http://affiliatemarketing.crabbysbeach.com/blogs/

Well, I have to tell you that there is a little hysteria around FTC, and we'll see in time how it is working.

This is what I read today in the Boston Globe:

"Beginning today, bloggers, Twitterers and others who write online reviews or endorse products using new media must disclose it when they receive free merchandise or payment for writing about an item. The guidelines update the F.T.C.'s 1980 guide addressing the use of testimonials in advertising, remapping marketing rules for the digital realm, where it's hard to know if the exclamatory musings of fashion hounds and best-disposable-diaper posts by suburban moms are inspired by a great product or a free product."

What? You'll excuse me, but in Twitter we need to have a disclosure, in 140 characters? This is ridiculous, and I doubt it is true!

And the entire article started with a mockery:

"So we're going to write about the Federal Trade Commission, which never gave us anything, other than a bunch of new requirements for bloggers, which does not seem to be much of a gift. "

Sorry, I am laughing!