Federal Trade Commission and Buzz Marketing

A type of endorsement or testimonial that can land your Internet business into hot water with the Federal Trade Commission is known as buzz marketing.

Trying to create a buzz marketing online campaign is fine. The dangerous turf involves situations where the person giving you a testimonial or endorsement is being compensated for creating the buzz.

The Federal Trade Commission began to crack down on this “word of mouth” advertising in a December 2006 FTC staff advisory opinion .

Referring to this opinion, Mary K. Engle at the Federal Trade Commission stated that “if you’re being paid, you should disclose that.”

What the FTC is essentially doing is applying the existing restrictions on paid endorsements and testimonials (such as those by celebrities and actors) to your Internet marketing campaigns.

This creates a gray area for your affiliate marketers. In particular, this issue affects websites and e-mails to lists that provide product reviews or endorsements without disclosing that the affiliate will get paid every time a consumer clicks through the affiliate link and buys the product or service.

Because these promotions are arguably biased by monetary compensation, you should inform readers that the opinions expressed are not independent and that a relationship exists between the affiliate and the vendor. Disclosure reduces your chances of getting in trouble with the Federal Trade Commission.

UPDATE: The Federal Trade Commission updated its guidelines concerning endorsements and testimonials effective December 1, 2009. Important information about these new guidelines is found in other posts on this blog.

Author Mike Young, Esq.

Mike Young has been practicing business and technology law since 1994 and is an angel investor in startups. He's been an entrepreneur since 1988. To get legal help from Attorney Young, click here now or call 214-546-4247 to schedule a phone consultation.

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