There’s nothing like positive chatter to create interest in your products.  But companies should remember that using deceptive tactics to create favorable buzz could come back to sting you.  That’s the message of the FTC’s recent settlement with a national data broker.

The case attracted attention as the FTC’s first Fair Credit Reporting Act action to address the collection of online info — including data from social networking sites — in the context of employment screening.  But an additional count in the complaint charged that the company violated the law by having employees post glowing recommendations of the company’s services on news and tech sites without disclosing their true identity.  The work of a rogue worker bee?  No, said the FTC.  According to the complaint, employees were told to write the comments.  Then managers edited what they wrote before giving them the go-ahead to upload the glowing reviews using account names provided by the company.

To settle the endorsement allegations in the lawsuit, the company has agreed it won’t misrepresent, expressly or by implication, the status of any user of a product or service — for example, that someone is an independent, ordinary endorser if that’s not the case.  The company also will clearly and prominently disclose any material connection between an endorser and the company (or any other entity advertising, selling, or promoting a product) when a connection exists.  What about bogus endorsements already posted?  The company has a week to take all reasonable steps to pull them down.

If you use social media in your marketing or on behalf of clients, the settlement should serve as a virtual sticky note to conduct a compliance check on your policies.

Propose to disclose.  According to the FTC’s Endorsement Guides, it’s the law — and it’s always been the law under the FTC Act — that consumers have a right to know when there’s a material connection between an advertiser and an endorser.  Here’s how the Guides put it:  “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.”

View from the top.  Although the FTC alleged that corporate higher-ups were directing the campaign challenged as illegal, savvy marketers understand the importance of discouraging similar deception by staffers.  The first step:  Craft a company policy in keeping with the law.  Next, make sure your employees know what the rules are and that you’ll take swift action if you uncover noncompliance.  That fingers-in-the-ears la-la-la gesture isn’t an effective legal defense if violations come to light.  To make in-house training easier, the FTC has free resources available on the new Endorsements page of the BCP Business Center.

Spread the word.  You’re in the loop on what the Endorsement Guides require, but you can’t assume others are.  If you work with ad agencies or PR firms that help manage your social media presence, emphasize the importance of living up to your high standards.  They may be experts on creating online buzz, but are they up to speed on what the law requires?

August 2012