Posts Tagged ‘ FTC regulations ’

Compliance in 2011 – How Costly New Media Regulations Can Impact Your Brand

In the past few years the Federal Government, State Governments, and even individual cities, have evaluated and enacted regulations that affect New Media.

I’m sure everyone reading this has developed, or at least seen a EULA – or End User License Agreement. EULAs are the fine print on websites that detail (or attempt to detail ) their data collection habits, terms, conditions and legal limitations.

Parents may all be familiar with COPPA (, which refers to regulations related to child protection.  However, if you’re not using Club Penguin, working with interactive rich media content or social gaming – this may be new to you.

COPPA typically requires a disclosure (posted like a EULA) on your site and brand intermediation, to ensure that children aren’t harmed. It typically only applies if you have a product that’s targeting a pre-tween crowd (think CPGs) through New Media.

Crafting these legal disclosures and their related compliance are probably something you’d dump on your CLO (Chief Litigation Officer) or General Counsel. They’re not something that could typically impact the way you do business or force you to alter your New Media Strategy.

Up until 2011, Brands have been pretty free with their incentivization of bloggers and vloggers. Prominent Mommy bloggers are well known for being amply compensated either financially or in product for reviews. Prominent Tweeters have seen the same rewards over the past few years, as well.

The trend dates back decades, as magazines and periodicals (e.g. Vogue,  Travel + Leisure) would typically receive gratis services, products and even trips and lodging for a neutral or favorable review. Commenters, not as much – but if you recall the PAYOLA scandals of a decade ago – the history of comments involved incentivizing teens in chat rooms and forums with free CDs for recommendations.

These latter actions got my CFO hauled in front of a Congressional Inquiry, when I was at TWEC | TWMC (the largest music retailer in the US).

The updated FTC regulations change everything.

In 2009, the FTC passed theGuides Concerning the Use of Endorsements and Testimonials in Advertising”.

Note: The link goes to a lengthy FTC PDF, so don’t click through unless you’ve got your reading glasses on.

The guidelines specifically focus on New Media “Endorsements and Testimonials”.

Translation: Any sort of product, service or monetary incentive given to a blogger or vlogger or commenter on any New Media Platform. This can include Blogs, Forums, Twitter, Facebook and a host of other popular social media sites.

Also, opposed to being just guidelines – these disclosure requirements have been developed with a fine structure that starts out at $10,000 per incidence.

While this may seem a pittance for a multi-national, the impacts for mid-tier businesses are quite serious. Add to this the factor of improperly disclosed posts that are fed through RSS and a brand could be looking at a fine of $10,000 x number of reposts.

Imagine if your brand gave away $250 gift cards to 100 bloggers who were RSS’d 50 times each. The total number of violations would be 5000 with a potential fine of $50 million.

So, where do we stand today?

Over the past two years, the FTC has been working to establish how to best benchmark and set guidelines for compliance. Once they’ve completed that process, sometime this year, the FTC will begin looking for companies that are in violation.

New players in New Media (especially Pharma companies) should pay special attention:

The FTC has even gone as far as limiting Facebook news feed posts for Healthcare companies, due to the inability of these companies to include contradiction | risk notices, that we typically see in TV commercials, within wall posts.

Paying attention to this now could pay off big time for early adopters, who will be spared a costly compliance lesson.

So what to do?

Regardless if you’re an SMB, Large Brand or Multi-national – you’ll want to evaluate your existing processes and how your New Media folks or Agency reps are handling your account.

Keys to the Kingdom:

1. Assess your Baseline. (Do you have policies and procedures in place? How do you currently manage paid or incentivized blogging, vlogging and commenting?)

2. Evaluate your Readiness for Change. (I’ve worked with numerous clients that have either revamped their internal policies or who we’ve helped craft policies from scratch.)

3.  Get Qualified Assistance. (Make sure that you hire a competent consultant to handle this who can have the policies reviewed by outside legal counsel.)

4.  Develop a Social Media Policy that includes Required Disclosures. (It’s recommended that you use someone who’s done this before)

5. KISS (Keep it simple 🙂 Tools like CMP.LY (@cmply) can easily reduce the complexity of your compliance process while providing an audit trail

6. Keep your Disclosures updated.

Lastly, if you are the Multi-national:

7. If your Brand has multi-agency or multiple blogger | vlogger relations, you may need to evaluate systems as well as processes. Larger brands have more moving parts, which often employ intranet or extranet management systems. Further, if you are using multiple systems for RSS, Syndication, content management and customer engagement – you may want to perform a compliance audit.

As a child I remember hearing “an ounce of prevention can prevent a pound of cure”. As a Brand, his is a case where that should really be taken to heart.

Key Resources:

WOMMA’s, the Word of Mouth Marketing Association, Ethics review blog (

@Izea’s Disclosure policy Generator ( (thx @tedmurphy)

@CMPLY’s Compliance Management tools (

@CMPLY’s detailed list of the 8 key FTC disclosures: (