Online marketer makes costly legal mistake

By | Internet Lawyer | No Comments
Internet attorney material connections disclosure

Are you disclosing material connections?

Here’s a recent case that your Internet attorney is probably talking about. There’s a company that sells how-to-play-the-guitar DVDs online that goofed up and got nailed by the U.S. Federal Trade Commission (FTC).

Because of the mistake, the business will fork over $250,000 to settle the charges the FTC brought against it.

Here’s what happened…

To boost credibility, the company used “consumer” testimonials and positive “independent” reviews that promoted the products online.

Unfortunately, the endorsements weren’t by consumers or independent. Instead, the positive endorsements were by affiliates who got paid commissions when sales occurred. According to the FTC, the company’s affiliates wrote “endorsements in articles, blog posts, and other online editorial material…”

Since December 1, 2009, the FTC has made it very clear that material connections, such as affiliate status, must be disclosed when promoting online. If you have any questions about material connections and disclosures, be sure to discuss them with your Internet attorney.

What’s the lesson?

You can’t pretend to be impartial when you’re actually getting paid commissions on the products and services you promote. Deception just begs for the FTC or your state attorney general to launch an investigation or even file a lawsuit.

Material connections extend beyond affiliate status. For example, if you’re promoting something because of your friendship with the seller, that needs to be disclosed too.

The goal is to give consumers all relevant facts so they can make an informed decision whether or not to purchase what’s being piked.

To your online success!

-Mike the Internet Attorney

Web Lawyer: Gaming your testimonials and reviews

By | Website Lawyer | No Comments

As a Web lawyer, I run into gurus who still make wild claims online in their sales copy, testimonials, and reviews because they haven’t been nailed yet by the Federal Trade Commission (FTC). The key word in this sentence is “yet.”

The FTC is cracking down against Internet claims based on the guidelines that went into effect last December.

Here’s an example of what not to do…

A public relations company was hired to post positive reviews of their client’s games. The PR business’s employees would write fake reviews of the software developer’s games in the iTunes store and then give the software 4 or 5 stars.

When the FTC got wind of this, they went after both the company as a corporation and the company’s owner as an individual. In other words, the PR business’s owner got put on the hook too for the testimonials without the corporate shield offering protection.

What went wrong?

Under the FTC guidelines, you’re supposed to fully disclose the material connections between the testimonial provider and product/service being promoted. Because this didn’t happen in this case, people reading the PR business’s positive reviews of the games could falsely assume the reviews were independent and unbiased.

If there’s a material connection that can taint a review or testimonial (such as being an affiliate for the product or service), that information must be disclosed so that readers can make an informed decision before buying. Your web lawyer can help you use choose the right words.

To your online success!

-Mike the Web Lawyer

Web Lawyer: Quickbooks Affiliate Disclosure – FTC Compliance or Advertising?

By | Website Lawyer | No Comments

web-lawyer-quickbooks-affiliateCompliance with the new Federal Trade Commission (FTC) guidelines (effective December 1, 2009) is a scramble for both Internet entrepreneurs and large online companies. For Internet marketers who sell multiple products, using my experience as a Web lawyer, I’ve created affiliate compensation disclosures that can be used regardless of what is being sold. These documents are part of  Website Legal Forms Generator v. 2.0.

However, it appears that bigger companies are taking a proactive stance by requiring affiliates to place special banners specifically targeted to their products on the affiliate sites. Intuit’s QuickBooks Affiliate program now requires the banner shown to the left. Here are the instructions that came with it.

Please be aware of the recent FTC guidelines about product endorsements. Affiliates, bloggers, tweeters, and endorsers are now required to disclose their relationship with Intuit. Please let your audience know that you are an affiliate of Intuit. Please make these changes ASAP. We will be auditing landing pages next week. For more information, you can visit the FTC website: http://ftc.gov/multimedia/video/business/endorsement-guides.shtm

ACTION ITEM:

We have an “Authorized QuickBooks Affiliate” badge for you to post on your site. The badge should be placed somewhere prominent on your site to inform your audience.

Although as a Web lawyer and consumer advocate, I applaud the intent, these instructions are too vague. First, QuickBooks leaves it to your discretion where to place the banner. If you’re blogging, does this mean that you’re supposed to put it in every post that mentions QuickBooks? That would be reasonable.

My concern is that the intent of the banner is to encourage affiliates to put the banner in the sidebar, i.e. less about compliance and more about taking up valuable space with the QuickBooks banner. If every affiliate program operator requires a special banner to be placed in a sidebar regardless of post content, there won’t be enough room to fit all of the “badges.”

Quickbooks should allow a generic Affiliate Compensation Disclosure to suffice. There’s really no need to brand the material connection with the Quickbooks brand…except extra exposure for Quickbooks by using the badge as an advertisement. Note that nothing in the Federal Trade Commission guidelines requires the disclosure to state the name of the product or even the material connection details. As your Web lawyer can explain to you in detail, the guidelines require disclosure of the connection’s existence so that the reader knows that the content may be biased/tainted rather than an independent review of the product’s merits.

To your success!

-Mike the Web lawyer