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Internet Attorney: Testimonials, Federal Trade Commission, and Your Website

By Internet Lawyer

testimonials-results-internet-attorneyAs an Internet attorney, I’ve noted two key website testimonial issues that the new Federal Trade Commission (FTC) guidelines discuss are compensation and context. Let’s look at both issues and how to deal with them.

1. Compensation. Material connections are a big part of this issue. If the testimonial provider is receiving something of value from you (such as free products, free services, or cash), the conservative approach would be to disclose this relationship to your website readers.

Example: You solicit and receive a testimonial from someone you have given a copy of your $997 info product and free tickets to attend one of your $5K seminars. Do you think these types of freebies might influence what the testimonial provider is going to say about you, your business, and the quality of your products and services? Would the same type of testimonial be typical from those who did not receive the gifts from you?

There’s also a gray area where the testimonial provider has a relationship with you that could affect the content of the testimonial provided. Although the types of relationships will vary — discuss yours with your Internet attorney — here are a few examples.

Example: You’re paying for Internet coaching from a guru. One of the benefits of being coached is that the guru will promote your online business to his lists and provide you with testimonials that create third party credibility. This relationship is relevant to the testimonial’s content and even the fact the testimonial was given in the first place. Would the average reader want to know that the testimonial was potentially biased because you’re paying the provider for coaching?

Example: You and your friends have formed a mastermind group that promotes each others’ product launches. When one of your group has a launch, all the rest promote as affiliates and provide testimonials for that launch. Each individual member profits both as a product creator who has affiliates promoting his launch but also as an affiliate (or even super affiliate) on the launches done by other members. Would this type of relationship affect the content of the testimonials provided for your launch? Should a prospect know about this mastermind relationship because of its affect on both who provides testimonials and what is said in those testimonials?

2. Context. If your testimonial provider makes claims about results achieved with your products and services, what the testimonial doesn’t say could be considered a deceptive trade practice by the FTC because important facts were omitted from the testimonial. These are facts that are material because they were essential to the results achieved by the testimonial giver.

Example: Ima Guru provides you with a testimonial that she made $33,476 in just two days using your e-mail marketing course. However, the testimonial doesn’t disclose that Ima Guru and her two employees work around the clock for 48 hours to generate that income. The testimonial doesn’t say that Ms. Guru’s net income for those two days was just $11,948 after deducting labor, affiliate commissions, and other marketing costs. She also didn’t mention that the income was only possible because she had a pre-existing e-mail list of 40,000 subscribers to market to using your methods.

Example: You receive a testimonial from John Slim who claims that he lost 78 pounds over six months while drinking a weight loss shake that you sell. You receive before-and-after photos to use with the testimonial. However, the testimonial omits important facts. Mr. Slim’s diet the whole six months consisted of your shakes, Acai berries, and beef jerky. He also exercised a minimum of 3 hours daily with the assistance of a personal trainer. Would your prospective purchaser reading Mr. Slim’s testimonial want to know these missing facts before relying upon the testimonial as part of the buying process?

In each of the above examples, your typical purchaser will not be able to achieve similar results. The purchaser’s expectations are based on false assumptions because of material omissions. That’s the type of testimonial that can land you in trouble with the FTC.

Does this mean the death of results-based testimonials? Of course not. But how you provide them should change.

In Give Your Testimonials a Reality Check, copywriter Michel Fortin describes a great solution to this problem. Provide readers with context by converting your testimonials into case studies. With case studies, you’ll be able to disclose the material facts so that the reader can make an informed decision whether or not to purchase from you. Using the above examples, with the context provided in case studies, you can:

  • disclose what has been been given of value to your testimonial provider
  • tell the reader about the nature of your relationship with the testimonial giver
  • reveal the resources needed to achieve the earnings your testimonial provider made
  • inform your prospective purchasers what it really took to lose X pounds with your diet shakes

If you have specific legal questions, talk them over with your Internet attorney.

FTC New Compensation Disclosure Requirements

By Internet Lawyer

ftc-compensation-disclosure-special-reportThe Federal Trade Commission’s revised “Guides Concerning the Use of Endorsements and Testimonials in Advertising” is causing a stir in the Internet marketing community because most website owners and affiliate marketers simply don’t know how to interpret the guides.

Will it be the end of blogging and affiliate marketing as we know it?

What about testimonials, endorsements, earnings claims, and compensation?

What has changed?

How will these changes affect online marketing?

When did the new guidelines go into effect? December 1, 2009.

Yes, the rules of the game have changed. But if you learn the new rules, you’ll be ahead of your competition that doesn’t.

To your success!

-Mike

Update: The special report is no longer available. For more information about website protection, go here.

FTC New Rule: Bloggers Must Disclose Compensation

By Internet Lawyer

endorsement-reviewIf there’s compensation for reviews or testimonials (including money or free products), such payment must be disclosed under new Federal Trade Commission (FTC) guidelines. Equally important,

“advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect.”

Note that the FTC can hold both the endorser and the advertiser liable for false claims, unsubstantiated claims, or failing to disclose the compensation.

This is long overdue from a consumer protection standpoint. Those who use flogs, phony review websites, and cooked up testimonials are on notice that the FTC will not tolerate this nonsense in the future. It will also set the bar higher for affiliate status disclosures.

Unfortunately, it will take some expensive lawsuits and a few info product marketers going to jail before the new reality sets in. The federal government is taming the Internet Wild West. Cyber-Deadwood is becoming civilized whether it wants to or not.

Recommended Reading: FTC Publishes Final Guides Governing Endorsements, Testimonials

FTC: What is the Federal Trade Commission Doing to Internet Marketing?

By Internet Lawyer

FTC testimonialsFor good or bad, the U.S. Federal Trade Commission under the Obama administration is going to take a more pro-consumer stance than we’ve seen in years. What’s that mean to your business?

With little understanding of how social media works, the FTC will be looking at its prior success in cracking down on deceptive business practices both in franchising and multilevel (MLM)/network marketing.

Here’s where I see things headed…

1. Affiliates will be required to disclose financial compensation is involved when they promote a particular product or service in exchange for a commission. In particular, this is going to affect “review” sites, blogger “recommendations,” Facebook posts, and even Tweets that contain affiliate links. This is going to be particularly troublesome for Twitter because of the 140-character limit.

2. Anyone who receives a complimentary review copy and writes or blogs a recommendation will need to disclose the “freebie” to the reader. That means no more positive spinning buzz for a $2,000 info product as a favor to a friend who gave you a free review copy pre-launch.

3. Testimonials are going to need verification for accuracy and, if the results are atypical, there will need to be a prominent disclaimer to that effect plus a disclosure as to what are typical results. For example, if Joe Smith claims he made $10,000 the first month using your biz opp product, you better (a) verify Smith’s claim is accurate, (b) let the reader know if those results are atypical, and (c) disclose what the typical purchaser really earns.

4. If there are expert endorsements, there will likely be a requirement that the endorsement is backed by generally accepted scientific proof (not some wild theory from Dr. Ima Quack who earned her doctorate from the correspondence school New Age University of Alternative Reality Living while institutionalized as a psychiatric patient). Bogus testimonials aren’t going to cut it, particular when your offer relates to earning money or health issues.

5. In lawsuits and actions by state attorneys general, all of the above will be taken into account when making charges of fraudulent and deceptive trade practices against Internet marketers. That’s in addition to what the FTC and FDA will do at the federal level.