Some of the fallout from the updated FTC regulations concern how the FTC will monitor and track violators. Violators being people using social media to endorse a product or service without disclosing any material connection they have to the product/service they are touting.

Will the FTC come after individual bloggers for not disclosing they have been influenced with free product to post something about a product/service? That’s a question many bloggers have.

According to Anthony DiResta, WOMMA’s general counsel, the FTC will not be monitoring online activity all day every day to ensure compliance. That’s not how the FTC works.

In the WOMMA webinar from Oct. 8 discussing the new FTC guidelines, Anthony explained how the FTC will track and monitor compliance.

According to Anthony, the FTC will listen to complaints filed by consumer groups, trade associations, attorney general offices, the Better Business Bureau, and individual consumers about potential abuse of endorsements in social media channels. If a submitted complaint interests the FTC, an investigation may begin and some form of punishment may be handed out if violations are found.

So no … the FTC will not play the role of big brother and track every blogger’s every move. The FTC will, however, pay attention to suspicious activity if they receive credible complaints about potential abuse.

Much has been written and much will continue to be written about the implications of the revised FTC guidelines on endorsements and testimonials in advertising. For WOMMA, we’ve been tracking these matters since the inception of WOMMA. Ethics in marketing has always mattered to WOMMA.

Our Ethics Code is 100% compliant with the new FTC regulations. In fact, the FTC cited WOMMA standards throughout their guidelines document (.pdf) so you can trust the information we’ve been sharing how to design word of mouth and social media marketing programs to be ethically sound.

On Thursday, October 8 WOMMA hosted a webinar discussing the updated regulations from the FTC on endorsements and testimonials used in advertising as it relates to social media marketing programs. Paul Rand, WOMMA’s president elect and CEO of the Zocalo Group discussed how these new regulations will impact marketers with WOMMA’s legal counsel Anthony DiResta from the Manatt Phelps & Phillips law firm.

You can view an archived unedited 60-minute version of the webinar on SlideShare. An edited version (10:30 minutes) can also be viewed.

During the second part of the webinar, Paul Rand asked Anthony DiResta to give a legal perspective to important questions concerning how businesses and bloggers should practically address these new FTC guidelines.

I’ve edited this Q&A discussion from the webinar into a short presentation. Click on the play button below to listen and learn. Questions asked and answered in this presentation include:

Given the revised FTC Guidelines requiring disclosure, Ian Paul from PCWorld shares practical advice for how we can credibly participate in online social media.

“If you receive gifts, money or any other type of compensation from a product manufacturer or service provider you have to disclose it.”

“If you are going to tweet about how awesome your employer is, make sure everybody knows you work there.”

READ MORE from Ian Paul.

WOMMA will continue to be all over the just-announced new guidelines from the FTC on endorsements and testimonials. We’ll be giving members and non-members practical guidance on what the revised guidelines mean and how to ensure marketers can develop/implement word of mouth marketing programs to completely abide by the FTC guidelines.

The press release from the FTC toplines the revisions made to the guidelines. Important snippets marketers must be aware of include:

“… the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service.”

“… the revised Guides … clearly state that both advertisers and endorsers may be liable for false or unsubstantiated claims made in an endorsement – or for failure to disclose material connections between the advertiser and endorsers.”

“The revised Guides also make it clear that celebrities have a duty to disclose their relationships with advertisers when making endorsements outside the context of traditional ads, such as on talk shows or in social media.”

If you have been following the discussions WOMMA has had and the advice WOMMA has given, the issue of clear disclosure isn’t new. WOMMA addressed the disclosure issue in a recent webinar. (Archived versions here: short version (11-min) ; full-version (60-min).)

The bottom line is when there is a material connection between a blogger and a brand that might affect the credibility of the endorsement, such a connection must be fully disclosed. This protects both consumers and advertisers because it assures consumers that product testimonials are truthful and trustworthy, and it offers marketers and advertisers a viable way to reach consumers with credible information.

Expect more guidance from WOMMA this week and throughout the coming weeks and months about how the revised FTC guidelines will impact your word of mouth and social media marketing programs.

BACKSTORY
This fall, the Federal Trade Commission (FTC) will release updated guidelines on endorsements used in advertising and marketing. Current guidelines were last updated long before the Internet became an irreplaceable communication/networking channel and before marketers understood the irrefutable power of word-of-mouth marketing.

The FTC works to protect consumers from being influenced by unethical, untruthful, and unscrupulous business practices. Updated guidelines will address the need for endorsers, reviewers, and businesses to be 100% transparent and disclose when material compensation (in-kind gifts, special access privileges) and outright compensation (cash) changes hands.

On September 14, 2009, WOMMA hosted a webinar on ETHICS & ENDORSEMENTS: What is Adequate Disclosure. The diverse panel included marketers, entrepreneurs, a professor, a marketing analyst, and a lawyer.

TAKEAWAYS
The resounding sentiment was marketers and bloggers need to design word-of-mouth marketing programs to state early (and often) when material compensation changes hands.

It is a non-negotiable … businesses must solve for being obvious and upfront when a brand offers in-kind gifts, special access privileges, and cash as part of a marketing program designed to spark word-of-mouth.

Solutions discussed by the panelists centered around being clear and conspicuous when disclosing material relationships between a brand and a consumer. Practical implications talked about on the webinar included: “disclosure badges” on websites, prominently placed “terms of engagement” practices, specially designated “product review” blogs, and uniquely tagging of tweets (such as [#ad]).

WATCH. LISTEN. LEARN.
You can watch, listen, and learn more by watching this highly edited version of the webinar. This 11-minute version shares key takeaways spoken by the panelists.

LEARN MORE. DO MORE.
The complete 60-minute webinar can be accessed here: http://bit.ly/DisclosureWebinar

You are invited to dig deeper into this important matter by reading and contributing to WOMMA’s Living Ethics Blog.

U.S. News and World Report asks, “Should blogger sponsorship deals be regulated?” Robert Weissman from Commerical Alert argues for regulated disclosure. Paul Rand, president-elect of WOMMA, presents the case for voluntary disclosure. [article PDF]

We’ve addressed aspects of this critical issue here and WOMMA recently tightened its stance about brands and bloggers disclosing material relationships by amending its code of ethics to read: “We stand against marketing practices whereby the marketer or its representatives provide goods, services or compensation to the consumer to make recommendations, reviews or endorsements without full, meaningful, and prominent disclosure.” [SOURCE]

It is interesting to note, Robert and Paul agree more than they disagree about the need and importance of disclosure with endorsements/recommendations. Where they disagree is on the matter of regulation. The crux of their positions are below:

“… the reason word of mouth is so effective is that it is understood to be authentic. You tell friends about the great new coffee shop around the corner, and they are keen to try it because they trust the authenticity of your endorsement.”

“Disclosure is about the most mild consumer protection there is, and sponsorship disclosure imposes no more than a trivial burden on bloggers. It’s hard to see how the argument against disclosure is anything other than an argument for deceiving consumers.” — ROBERT WEISSMAN

“We’ve seen time and time again that word of mouth works best when it is 100precent credible. Credibility cuts both ways as bloggers, endorsers, and companies must disclose relationships with one another.

“The online world is changing rapidly. Rules are evolving, and ethical practices are still being defined. However, our intolerance for being lied to, hoodwinked, or manipulated remains consistent. Laws may be needed if self-policing stops or proves inadequate. But for now, let’s stick with the common-sense approach that is helping sort out this new world.” — PAUL RAND

In his response, Paul Rand mentions an assurance tool WOMMA has developed to help marketers and bloggers ensure they are both practicing full, meaningful, and prominent disclosure. Check the design and delivery of your next marketing program to see if it is setup for proper disclosure by following these important steps.

Marketers must:
(1) Be clear and distinct in asking bloggers to disclose their relationships with brands and products and any compensation they receive for participating in marketing initiatives.

(2) Encourage and expect bloggers to express their honest and genuine opinions.

(3) Carefully analyze marketing programs to be sure they accurately reflect the company’s business philosophy and uphold its integrity.

Bloggers must:
(1) Always disclose if you have been asked by a marketer to be part of a consumer outreach program.

(2) Be accurate and truthful in communicating your identity.

(3) Always provide your honest and genuine opinions.

Mommy Bloggers have been on the frontlines of the ethical battles involving disclosure and compensation as detailed in this Ad Age article and sidebar video.

We live in a world where people trust the opinions of people like themselves more than they trust marketing messages from corporations. Which means mothers will trust what another mother says more than they will trust what a company says in a commercial. As a result, brands like Pepsi, Kodak, General Motors, Wal-Mart, and many more are reaching out to mothers who blog because their opinions have considerable sway.

“Mommy Bloggers” have come under scrutiny for accepting freebies in return for writing a positive blog post. It’s a classic case of a few bad apples spoiling the whole bunch.

Susan Getgood, Liz Gumbinner, Kristen Chase, and Julie Marsh became fed up with all the negative perceptions and decided to address the issue head-on. They’ve started a volunteer, grassroots, self-policing program called BLOG WITH INTEGRITY.

To participate, bloggers sign the pledge and promise to clearly disclose their interests, treat others with respect, and take responsibility for their words/actions. Once the pledge is signed, bloggers can post a BLOG WITH INTEGRITY badge alerting readers to their ethical stance.

It’s a great beginning. However, I can’t help but think the pledge needs more bite. It needs more guidance on what exactly is unacceptable disclosure.

WOMMA has been giving bloggers and marketers such guidance about proper disclosure and acceptable behavior since 2005. The most updated WOMMA ETHICS CODE (.pdf) details the following fundamental do’s and don’ts:

• We require marketers to disclose their relationships with consumers in relation to word of mouth initiatives.
• We require marketers to effectively monitor disclosure of consumers involved in their word of mouth initiatives.
• We stand against marketing practices whereby the consumer is paid cash by the manufacturer, supplier or one of their representatives to make recommendations, reviews or endorsements.
• We require consumers involved in a word of mouth initiative to disclose the material aspects of their commercial relationship with a marketer, including the specific type of any remuneration received.
• We require consumers involved in a word of mouth initiative to disclose the source of product samples or incentives received from a marketer.
• We comply with FTC regulations that state: “When there exists a connection between the endorser and the seller of the advertised product which 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 applaud the BLOG WITH INTEGRITY initiative. Love the grassroots nature. And love the passion behind the program. I just believe it could use a little more bite to better clarify acceptable behaviors such as WOMMA provides.

As the leading voice for ethical and effective word-of-mouth marketing, WOMMA has always taken a strong stance against SHILLING. Paying cash to people to talk about, blog about, tweet about a product without disclosing they are being paid to do such is SHILLING. And WOMMA stands against this unethical practice.

The first WOMMA Ethics Code was established in 2005. Since then, it has become a standard guide for companies of all sizes to use to help them design and deliver more ethical (and effective) WOM programs.

The WOMMA Ethics Code has evolved since 2005 through an annual review process. In the last formal review, WOMMA included this language: “We stand against marketing practices whereby the consumer is paid cash by the manufacturer, supplier or one of their representatives to make recommendations, reviews or endorsements.”

Three WOMMA members have requested this language in the ethics code be revisited.

Through the practice of Sponsored Conversations, we are seeing more brands and agencies compensating bloggers with cash, in-kind gifts, and special access privileges in exchange for writing a post about the product/service a business provided them.

Sponsored Conversations are a cost-effective marketing activity and thus, its likely more businesses will be doing more Sponsored Conversations with bloggers.

But is it ethical? Does full disclosure from a blogger telling us they’ve been compensated in exchange for posting their opinion make Sponsored Conversations an acceptable marketing practice? Should WOMMA alter its ethics code to support marketing activity where a consumer is paid cash to make recommendations, reviews or endorsements?

WOMMA wants to hear your opinion because your opinion will help WOMMA make a stronger ethics code that is reflective of how honest marketers should behave.

Consider adding your voice to this issue on the WOMMA Living Ethics blog. The conversation is already lively.

Josh Bernoff adds more to the discussion of “Sponsored Conversations” in this worthy-read Ad Age piece.

He readily admits it’s a controversial topic for brands to compensate bloggers for sharing their honest opinions about a company’s products/services. Josh stresses both the brand and the blogger must be upfront about the relationship and that the blogger must be honest in any opinion published on their blog.

At the heart of the “Sponsored Conversations” discussion is the fact that people trust people like themselves. The Edelman Trust Barometer has been measuring the credibility of spokespeople for years and in those years, the “trust” people place with other people they can relate to has increased.

Bloggers, for the most part, are people like us. They aren’t necessarily trained experts or schooled journalists. They are people more like us; passionate about gadgets, movies, music, and everything else that makes life interesting.

However, the 2009 Edelman Trust Barometer reveals the credibility of nearly every spokesperson is down around the world, including the credibility people place with people they can relate to.

Sure, bigger issues like the economic downturn and continued mistrust in government affected the 2009 survey results. But the decline in trust is worrisome for marketers wanting to tap into the credibility of everyday people as word of mouth advocates, especially with “Sponsored Conversations.”

My fear, as a marketer, is some of us will fall into the trap of “what gets measured gets manufactured.” We’ve measured that real opinions from real people are more meaningful than anything churned out by a company’s marketing department. The temptation for marketers to manufacture conversations with people in the real world and the online world is great. Maybe too great for some marketers to abstain from doing and from manipulating.

In his Ad Age article, Josh rightly warns marketers about not manipulating blogger-driven conversations, “Make sure any and all bloggers you work with make it VERY clear to their audience that your brand is involved in the development of the content. If you fail to do this you will put yourself at risk for not only a bad PR mess but legal trouble as well.”

One of the more important sessions at last week’s WOMM-U conference was on Ethics, Endorsements, and Your Next WOMM Program. Paul Rand, WOMMA’s Ethics Chair, and Anthony DiResta, former regional Federal Trade Commission (FTC) Director, discussed impending changes to FTC guidelines on testimonials in advertising.

Specifically, the FTC is seeking to ensure Advertisers and Bloggers are 100% transparent and always disclose when a blog post is being sponsored. “Sponsored Conversations” is the term being used to describe a situation where a business compensates a blogger in exchange for writing a post about a product/service a business provides. Lots of businesses are doing this and because it is a cost-effective marketing activity, it’s likely more businesses will be doing “Sponsored Conversations” with bloggers.

Additionally, the FTC is proposing to make Advertisers liable for the actions of their sponsored Bloggers and make the Bloggers personally liable for their actions.

Why? Well, the FTC is in the business of protecting consumers from unscrupulous business practices. The commission believes consumers must be protected from being influenced by bloggers who fail to be transparent and disclose they have been compensated by an advertiser. The worry, of course, is compensated bloggers may not give their honest opinion about the products/services they’ve been compensated to write about.

This issue gets muddier when it comes to defining compensation. Clearly, cash is compensation. But in-kind gifts and special access privileges are harder to define as compensation and payment. For example, is giving a blogger a book to review considered compensation? How about giving a blogger access to test drive a new car, is that compensation? Outside of cash, defining payment gets cloudy.

While there is much that is unclear with “Sponsored Conversations,” WOMMA has been very clear about its stance on Ethics and Endorsements as it relates to businesses and bloggers.

The WOMMA Ethics Code clearly asks businesses and bloggers to disclose their relationships and to disclose if the blogger received product samples or other incentives from a business.

The WOMMA Ethics Code also asks for honesty in all aspects of Word-of-Mouth marketing from truthfully disclosing relationships between a business and a blogger/customer and truthfully sharing authentic opinions with others about a product/service in online and offline conversations.

Designing and executing Word-of-Mouth marketing programs that follow the WOMMA Ethics Code of always disclosing relationships and always sharing authentic opinions is one way to avoid scrutiny and controversy.

Another way to avoid scrutiny and controversy when executing Word-of-Mouth marketing programs is to reconsider paying outright cash to entice bloggers and customers to either write something or say something about your business. (Just as in life, when money gets involved, issues seem to follow.)

Of course, the absolute least controversial method for businesses to get bloggers to blog and people to talk is to design products/services that are inherently worth talking about. (Yeah, yeah … easier said than done.)

It’ll be interesting to see where the FTC nets out on this important matter because lots of questions need to be answered. What ramifications are likely for Advertisers and Bloggers who run afoul of updated FTC guidelines? How will businesses and marketing agencies respond to the new guidelines as bloggers continue to gain more sway in helping to shape public opinion?

Let’s talk. The comments are open. The opinions will be varied. I’m sure you have something to share. Have at it.