FTC tells PayPerPost to knock it off

From my friend Leigh Himel, CEO of Oponia Networks, comes word that the U.S. Federal Trade Commission has put out a statement on word-of-mouth marketing practices — you know, the kind where someone gives you a phone or something and hopes that you write about it on your blog. The FTC was asked to look into it by Commercial Alert, a non-profit organization that says it tries to keep commercial culture from “subverting the higher values of family, community, environmental integrity and democracy.”

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Call this one the PayPerPost rule, after the blog payola company that pays you to write about their clients but doesn’t make you disclose your compensation (I’ve written about them here and here). As the FTC statement puts it (PDF link), the petition from Commercial Alert:

Raised concerns about a specific type of amplified word-of-mouth marketing, specifically the practice of marketers paying a consumer (the “sponsored consumer”) to distribute a message to other consumers without disclosing the nature of the sponsored consumer’s relationship with the marketer.

As the Washington Post story describes it, word-of-mouth marketing is already covered by existing legislation, but the FTC wanted to make a specific statement to the effect that not disclosing the relationship between seller and consumer advocate is misleading, and that “such marketing could be deceptive if consumers were more likely to trust the product’s endorser “based on their assumed independence from the marketer.” Which is, of course, the whole raison d’etre behind PayPerPost.

Dr. Tony at Deep Jive Interests points out that this could have a spinoff effects on affiliate marketing as well. But wait, my friend Stuart says: what about those travel reviews in the newspaper where the writer got a free trip to Cabo? They’d better hope the FTC isn’t reading. According to the statement, “staff will determine on a case-by-case basis whether law enforcement action is appropriate.” Scott Karp at Publishing 2.0 has some thoughts about it too.

19 thoughts on “FTC tells PayPerPost to knock it off

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  4. Mathew,
    Here at Dealarmy.com we are just getting into the affiliates programs. I see the posting of a link to an affiliate deal on one’s site as something very different compared to writing a blog entry endorsing a particular product or service. Do you agree?

  5. I would agree, Tom — depending on how it is done. In any case, the FTC seems to consider it to be the seller’s responsibility to disclose any relationship (i.e. the one offering the affiliate deal). But IANAL.

  6. Bad idea to bring in FTC on this kind of thing. Movies that are paid for product placement in scenes are not required to disclose this information in the credits. While I do feel strongly that PayPerPost is especially tacky and insulting to all who write and read blogs, government regulation can also get a little stinky and rude at times.

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  8. Thanks for the comment, Shawn. I don’t think there are the same trust issues with movies, but I see your point about government involvement.

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