FTC tells PayPerPost to knock it off

by Mathew on December 12, 2006 · 19 comments

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.

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