Oct 6 2009

The FTC and the Unreasonable Case of Disclosure

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I had a different post planned for today. Really. It was from Louisa Edwards and Tessa Dare on the topic of the unlikeable heroine. But yesterday news broke that the new revised Guide from the FTC on endorsements was going to go into effect on December 1, 2009.

Let me start off with saying that I believe in transparency. When I remember, I almost always state in a review whether the book was provided to me for free or whether I purchased it because I’ve always thought that a reader’s decision making process is interesting. To some extent, DA serves as reading journal for myself.

If you note, we have ads in the feed and it says that we are paid an affiliate fee. When we had an Amazon bookstore, we told you we received an affiliate fee from that. When we got the Sony Readers, we told you that as well. We believe in transparency. We believe that it is one of the most important parts of our relationship as bloggers with you as the readers and commenters.

However, I don’t believe that the new FTC guidelines actually help to further the goals of transparency but rather, instead, the new rules will be rife with abuse and misuse and uneven application.   Here’s why:

1.   Adversely affects smaller blogs. Small blogs like ours do not have editors.   We don’t get paid to review and what we do is truly a labor of love. Yes, we are starting to host ads but we cannot afford a full time editor for our reviews.   Blogs without editorial staffs will be subject to the new rules while blogs and mainstream publications, regardless of other issues and relationships, will not.   Let me state it this way: the blogs with the highest earning capacity will likely be exempt while the blogs with the lowest earning capacity will not.   I found it fascinating that Richard Cleland of the Bureau of Consumer Protection said this:

Cleland said that a disclosure was necessary when it came to an individual blogger, particularly one who is laboring for free. A paid reviewer was in the clear because money was transferred from an institution to the reviewer, and the reviewer was obligated to dispense with the product. I wondered if Cleland was aware of how many paid reviewers held onto their swag.

"I expect that when I read my local newspaper, I may expect that the reviewer got paid," said Cleland. "His job is to be paid to do reviews. Your economic model is the advertising on the side."

From Cleland’s standpoint, because the reviewer is an individual, the product becomes "compensation."

2.   Uncertainty. Looking at the interview Ed Rants had with Cleland, it’s unclear who will be held to this new standard and what will be the trigger.   Each situation is viewed on a case by case basis and dependent on the “degree of relationship between the advertiser and the blogger.”   By having buy links at the end of the blog, we are engaged in activity that would “raise the eyebrows” of the FTC.   To avoid scrutiny, Cleland suggests that we return the ARCs and, I suppose, remove the buy links.

I’m even uncertain if I buy the book post review but still hold onto the ARC whether I am in violation of the Cleland interpretation. The fact is that a) none of us keep our ARCs because we aren’t supposed to sell them. All of mine go into the recycler and b) I often buy ebook copies of paper books that I have enjoyed.

Again, the lack of clarity in the drafting is so difficult for the blogger in trying to comply.

3.   Inappropriate publisher involvement. The new Guide makes advertisers (or those that provide the product so in this case either authors or publishers) liable to the FTC for any misleading statements made by the blogger.   Thus, if a blogger says something misleading, then the advertiser (publisher/author) is responsible for misleading the consumer as well.   The Guide, in fact, says

In order to limit its potential liability, the advertiser should ensure that the advertising service provides guidance and training to its bloggers concerning the need to ensure that statements they make are truthful and substantiated. The advertiser should also monitor bloggers who are being paid to promote its products and take steps necessary to halt the continued publication of deceptive representations when they are discovered

Like I want publishers breathing down my neck while I try to write fair and honest reviews. We’ve already turned away publishers who wanted to have oversight over our reviews. And frankly, I feel like I should be giving instruction to publishers on labeling issues.

4.   Encouraging negative reviews. Sarah Weinman jokingly said that FTC guidelines would be encouraging bloggers to be snarkier and meaner.   This is because the FTC equates endorsements with positive reviews.   According to Cleland, publishers send product in the hopes of a positive review.   In the examples in the FTC guidelines, a blogger who receives product and then gives a “positive review” will be said to have given an endorsement requiring appropriate disclaimer.   Therefore, the F reviews at Dear Author will be named FTC Review (because these don’t require disclaimers).   Alternatively, if we never gave another positive review or recommendation, we would probably be okay.

5. Author endorsements. Author blurbs are some of the worst offenders of the Guide in the business. Some of the authors giving endorsements haven’t even read the book. Some will give endorsements to everyone who asks. Read this piece by Jenny Crusie on author blurbs. The FTC Guides have long covered these as inappropriate but has enforced its own rules against publishers?

6. International Effect. A commenter on Mashable noted that ‘Anti-Cyber Squatting Act’ extended to Canadian bloggers

For example the ‘Anti-Cyber Squatting Act’ has seen Canadian companies suing Canadian citizens under US law because the servers that were used (to perform domain registration in this example) resided on US soil.

But the effect could be that publishers will refuse to send books to bloggers, no matter where they are located, if the blogger isn’t complying because the possibility of publisher liability.

7. Eliminating any relationships.  § 255.5 requires disclosure of “material connections”.

When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed.

I’m not sure what this pertains to. I have attended luncheons, parties with publishers. Do I need to explain each and every piece of swag I am ever given? Could I even possibly remember every pen and mint tin I picked up? I doubt it.

It’s important to note that in various interviews around the web and in the Guide itself, the FTC contemplates that any comment, tweet, post on a facebook page, participation on a message board, must be accompanied by the relevant disclosure.

As for Twitter, the FTC isn’t letting you get a pass with the excuse that 140 characters–Twitter’s famous text limit–is simply too short. “There are ways to abbreviate a disclosure that fit within 140 characters,” Cleland said. “You may have to say a little bit of something else, but if you can’t make the disclosure, you can’t make the ad.”

8.   Violates the First Amendments. The reviews at Dear Author go far beyond a product description.   Commercial speech is speech by a manufacturer or seller designed to sell a product. It’s pure advertising. I defy anyone to say that a review, even an A one, is pure advertising.   Yes, the government can regulate commercial speech and it can regulate truthful, accurate commercial speech. I would argue, though, that Dear Author reviews are not commercial speech.

9. Potential for abuse. You might not be aware of this but there are people who not only hate Dear Author but despise me personally. There are people who enjoy posting my legal name and place of employment on the internet, I’m sure in hopes of getting me to shut up.

The FTC says that it is going to focus on advertisers and not bloggers but if the FTC   gets enough complaints, there is no doubt the blog will be investigated. The fact is that this sort of thing will actually serve to chill speech instead of encourage honest dissemination of thoughtful opinions. The end effect will be that fewer discussions of books will take place. Fewer books will be reviewed.

Book bloggers’ compensation is so tiny that it’s not likely to influence a reviewer. I mean, do you really think we are for sale for $7.99?  Relationships are much more likely to influence reviews.   There are plenty of established review sites that don’t divulge the private breakfasts, meet and greets, email exchanges and so forth that aren’t subject to these sorts of regulations. You have to rely on those reviewers to be impartial without knowing everyone who is in the inbox. This is the reason that we have always tried to disclose these relationships because we know that you all rely on us to tell you these things.

The FTC issue is not about whether transparency is good or bad. It’s about placing an uncertain burden on those who are least able to manage the compliance. This doesn’t protect the consumer because the most insidious relationships aren’t required to be disclosed. (For example, we disclosed that Janine is critique partners with Sherry Thomas and Meredith Duran. The FTC Guide would not require this).

I would like to see the FTC Guides revised to include some kind of monetary floor.   I think that there should be a warning system so that the blogger gets the opportunity to cure the defect.   The Guide should require the complainant to show links, tweets, comments, that would be considered to be violative of the new regulation.   There should be some qualification in the guide that reviews that are not commercial speech should be exempted. There should also be some time expiration so that a person doesn’t have to keep receipts or proof of payment for products after a significant period of time.   The fine should be equal to to the value of the product. (i.e., I could live with paying a $7.99 fine, not an $11,000 fine). These are all I can think of for the moment. The problem is that the Guide is now a new Federal Regulation and short of a lawsuit, I’m not sure we’ll get more clarity.

Until the FTC regulations are more clear, I don’t feel comfortable stating my positive opinion outside of Dear Author but don’t blame me, blame the FTC.

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By Jane • Letters of Opinion • 45 • Tags: , ,