Yesterday, the Federal Trade Commission released its revised Guides Concerning the Use of Endorsements and Testimonials in Advertising. The Guides are more than 80 pages long, so we’re still analyzing the changes. However, there is no question that our extensive advocacy efforts have had an effect on the final iteration of the Guides. The commentary included with the changes explains that advertisements using consumer testimonials should be evaluated by the net impression of the advertisement. A footnote in the revised Guides also suggests that in some cases a disclaimer could be sufficient. A more comprehensive legal document will be circulated shortly, but it is clear from a preliminary review that our efforts have not been made in vain. The 35 advocacy meetings on the Hill, 40 constituent meetings at the Fly-In, the testimony before the Senate, two sets of detailed comments and our suggested language were all helpful in presenting our case to the FTC.
However, the new Guides certainly do present some challenges, both to traditional TV marketers and those in social media. ERA is already planning educational opportunities that will provide suggestions for compliance with these changes. We hope the FTC will seize the opportunity to improve the marketplace by presenting to these changes to ERA members at one of our conferences.
Members who attended the Fly-In, supported the Leadership Reception, participated in the Government Affairs Committee, helped to author and review our comments to the FTC, and of course, testified before the Senate, were all instrumental in mitigating some of the more harmful changes. We thank you.
It has been an exciting week in the world of net neutrality. This week, Julius Genachowski, the Chairman of the FCC, announced the Commission’s intention to enter into a formal rulemaking process to codify the four principles of net neutrality currently in use and to add two more principles. The additional principles include a statement that consumers must be able to access the lawful content of their choice, subject to reasonable network management. Essentially, ISPs cannot block traffic to say, NBC Video, just because they have a partnership with Hulu. However, they still may prioritize all video content over all file sharing in order to manage the use of the network. In addition, networks must be transparent about what they are doing to manage traffic. This would give small business and direct response marketers more information about how consumers are experiencing online offerings like video advertising. Specifically, if you are providing an application for wireless devices or making videos available on sites like YouTube, you will know if some of the network providers are slowing certain services during peak hours. You will then be able to adjust your content delivery accordingly.
Late last week Representatives Markey (D-MA) and Eshoo (D-CA) introduced a bill that would keep the Internet open by preventing Internet service providers (ISPs) from imposing “a charge on any Internet content, service, or application provider to enable any lawful Internet content, application, or service to be offered, provided, or used. In other words, they cannot charge you (as a content provider) more than the cost of service for your lawful content and any lawful applications you make available.
The bill also prevents ISPs from providing or selling any content, application, or service provider any offering that prioritizes traffic over that of other such providers. This addresses concerns that ISPs will sell premium access to some companies, which would have the end result of degrading everyone’s content. This is important to any company that is using video online, but is not interested in paying more than they currently do to ensure the quality of the video is not reduced. It’s not easy to be moved by advertising when the video is pixilated or freezes every three seconds.
Similar bills were introduced in the last two Congresses. However, the larger Democratic majority and President Obama’s stated priority of keeping the Internet open may mean there will be some movement on this bill. However, the House will be in a District Work Period (aka recess) until after Labor Day.
In the meantime, you can watch this video.
For more information on ERA’s government affairs efforts, click here.
Tomorrow, the Consumer Protection Subcommittee of the Senate Commerce Committee will hold a hearing entitled “Advertising Trends and Consumer Protection.†The hearing will consider several issues in advertising, including the use of the word “free†and Endorsements and Testimonials. This is part of a broader reevaluation of the FTC’s powers and funding. An explanation of tomorrow’s hearing is really not complete without an explanation of last week’s hearing. Last week, from the first opening statement to adjournment, the hearing focused on testimony from consumer groups and emphasized that consumers are targeted by scams and needed additional protection from the FTC (P.S.- You can watch this hearing and kind of see me in the background on C-SPAN here). On a panel of four, a lone dissenter, Tim Muris, former FTC chairman, claimed that the FTC did not need a major expansion in order to effectively protect consumers.
In contrast, this week we have two ERA members testifying and one representative from the National Advertising Review Council (NARC), which administers the ERSP program (ERA’s independent self-regulatory program). We look forward to hearing some dynamic testimony from Guthy-Renker’s Greg Renker and Product Partners’ Jon Congdon. We worked hard to make sure our industry was represented and that this hearing would be more balanced than the last. We’re certain that Renker and Congdon will provide effective counterpoint claims that the FTC needs more authority on the testimonials issue. They can show that our industry is enthusiastic about creating an environment that protects consumers. They are our customers for Pete’s sake! They will also show how effective principled self-regulation is in promoting honest business practices.
For more information or to watch tomorrow’s hearing live or immediately upon completion, click here. (The video may not post until the conclusion of the hearing)
Follow me on Twitter for my live updates from the hearing: Tomi_ERA
If you are thinking about buying something online, one of your first steps in evaluating the product might be to see what kind of reviews the product has received. But what if the reviewer was paid to give a favorable review? This is a practice that clearly has some troubling implications. That’s why the FTC recently addressed this practice in the Guides Concerning the Use of Endorsements and Testimonials in Advertising (yes, this is the same proposal that would require evidence of typicality for some testimonials).
But, consider this: You want your product to appear on reviews because you believe it will help increase the visibility of the product or brand. You send a free sample to a well-known blogger and you explicitly tell them they should be neutral in their review and should disclose that they received the product for free. Under the FTC’s proposed changes you may have liability. If on the same day you also send your product to a product reviewer for a publication without any agreement requiring disclosure, and they do not disclose that they received the product for free, you do not have liability!
Product reviews online come in many forms. In some contexts consumers will expect that the product was given to the reviewer as a free sample. If a college student reviews a new game console every week, would anyone really think that he or she is spending thousands of dollars a month to share friendly advice? This is a complicated issue deserving careful analysis; the FTC must consider the nuances of product reviews before adding new regulations for bloggers.
Get involved! You can learn more and do something about these proposed changes here.
For more information on ERA’s government affairs efforts, click here.
As you probably know, the FTC is planning to eliminate the safe harbor for testimonials with disclaimers. If you are concerned about these changes, make sure you sign up to receive updates from us on this issue. We will send occasional updates that will keep you up to speed. This is part of the grassroots effort we will be launching shortly and these updates will make sure you know about opportunities to get involved. Please make sure you don’t miss out - fill out the form here.
The FTC recently released revisions to its self-regulatory principles for online behavioral advertising. But, how might these changes affect your business? In these particular principles, the FTC is focused on “third-party†advertising, rather than contextual or “first-party†advertising. Basically, a website using behavioral advertising only for one website and not aggregating data across multiple sites will not be directly subject to these principles, although they are still subject to other applicable privacy laws. Similarly, advertising based on a specific web query or click will not be subject to the principles unless that data is stored and applied to future actions.
The FTC’s principles focus on increasing transparency and consumer control, reasonable security and limited data retention, affirmative express consent for material retroactive changes to privacy promises, and affirmative express consent or prohibition of the use of sensitive data.
• Increasing Transparency: The principles require a disclosure to consumers that data is being collected and give a meaningful opt-out opportunity. The FTC voiced the desire for strong self-regulation even where data is not personally identifiable if that data “could reasonably be associated†with a particular consumer or device. The FTC also encourages disclosure in places other than the privacy policy. This might include a disclosure on or near an advertisement. They also encourage the use of empirical data to test whether the consumer understands the disclosure.
• Data Security and Retention: The protections should be based on the sensitivity of the data and the nature of a company’s business operations, the types of risks a company faces, and the reasonable protections available to a company. The FTC added that companies should retain data only as long as necessary to fulfill a legitimate business or law enforcement need.
• Material Retroactive Changes: Consent must only be obtained if the change is both material and retroactive. This makes data collected under the old privacy policy subject the old standards and new data subject to new standards, unless affirmative consent is obtained.
• Sensitive Data: The FTC continues to promote “opt-in†standards that require affirmative consent from consumers.
Ultimately this is an attempt to encourage and direct industry self-regulation, but it does not have an independent enforcement mechanism.
Late last week, the Federal Trade Commission (FTC) granted a request for a 60-day extension filed by ERA and other prominent advertising associations. Our request focused on the significance of the changes for direct marketers and for “new media.†These changes could dramatically affect both industries, so it is essential any changes are made with caution. The period for comment will now last until March 2, 2009. The previous deadline was January 30th. The vote for the extension was unanimous. This extension is only the first step in our advocacy efforts. Moving forward we will lead a coalition of trade associations to seek a solution that is beneficial for our member companies and for consumers. If you would like to learn more about this issue, please click here. Do not hesitate to contact me if you have any further questions.
Tomi Turner is ERA’s legislative manager. She can be reached at (703) 908-1022 or via e-mail at tturner@retailing.org.
Currently, the FTC is proposing changes to its guidance on consumer testimonials. These changes will directly affect you and the way you do business. There are several reasons why honest marketers, particularly in the direct response world, should be worried.
If these changes are approved, the FTC will no longer allow for the general use of a “results not typical†claim. Marketers may instead offer clinical evidence of the typical performance of the product, or in some cases, offer an extreme level of detail about how the product was used—but generally, they may face liability without the more stringent type of disclosure. Here marketers will be asked to remove claims that are factually accurate and adequately documented.
As you know, in most cases, it will be extremely difficult or even impossible to provide the evidence the FTC is looking for. It is likely that companies will lack the resources to do a comprehensive study, so the consumer will be left with absolutely no idea of whether the product works at all. This gives them little incentive to try the products put forth by honest advertisers who wish to comply with the fullest extent of the law. Or worse, because the FTC does not propose very stringent standards for the type of clinical evidence needed, dishonest marketers will be rewarded. For example, today Mary says she has lost 20 pounds by following an exercise regime and the consumer is clearly reminded that most people will not have the same results she had. Tomorrow, if these guides are approved, less honest marketers will risk running afoul of the FTC’s guidance and say “the median weight loss for women under 30 who remained in the program for more than one year was 15 lbs.†when, in fact, a more accurate description of the product’s performance would be “the mean weight loss for program participants was 2 lbs.†The exact same product could appear to produce vastly different results by altering the study design.
The FTC also plans on amending rules that apply to talent and aspiring actors who do testimonials in the hope of gaining exposure. These alterations would impose liability on “experts†or celebrities for certain types of claims. It would also add to the disclosure requirements. Additionally, the changes could impose liability on bloggers and other new forms of advertising. The full proposal can be read here.
ERA is involved in presenting a forceful response to this proposal. We will be submitting comments to the FTC and continuing our advocacy on the Hill. Please don’t hesitate to contact me if you have any questions or would like to learn more about this issue.
Tomi Turner is ERA’s legislative manager. She can be reach at (703) 908-1022, or via e-mail at tturner@retailing.org.
So, you may have read or heard about The Wall Street Journal’s article implying that Google no longer favors net neutrality. You might have also seen the reaction from the Open Internet Coalition, a group we belong to, explaining that Google actually does fully support net neutrality and that edge caching is not a violation of net neutrality. But, you might not realize that even if your headquarters aren’t in Silicon Valley, the difference between network prioritization and edge caching is important to your bottom line.
At ERA, we are strenuously opposed to the prioritization of traffic for commercial purposes (aka, the non-neutral net) because it will have highly negative consequences for our membership and for consumers. Say you primarily run infomercials and take many of your orders in call centers, but you also use a website for order taking. Or maybe you have a few products and you sell them online. Keep in mind at least 60 percent of ERA members generate a significant amount of their revenue from online sales. If we allow Internet Service Providers (ISPs) to prioritize certain types of content by literally sending the information more quickly, you will either need to pay for this service or the quality of your website will be degraded. That is, it will take users a long time to view the information you put online, they will likely get frustrated and go to another website that is in the ISP’s prioritized group.
The reason your website’s quality will be reduced is related to inefficiencies that occur from prioritization, as well as the fact that your traffic will have to wait for top-tier traffic to go first. But if you run a successful business, why should you worry? Shouldn’t you pay more and get a super-fast website that blows your competition out of the water? Well, even if you are a Fortune 500, there are 499 companies out there that will give you a run for your money. And in the end, the speed offered in the top-tier won’t be the Autobahn of the information super-highway that you were promised. It will still be a relatively slow end-user experience. That is partly because prioritizing traffic is one way that ISPs avoid investing in more capacity, which would keep the Internet fast for everyone. That would mean you wouldn’t need to pay more to stay competitive. It would also be good news for new companies that might be entering the market for the first time.
On the other hand, edge caching, the practice the WSJ article focuses on, does not degrade the quality of online traffic for everyone else. Edge caching allows companies to store information in a way that is closer to the end user. This improves the experience of the person watching a video or using a particular service provided by Google (or any of the many other companies that use this practice), but it does not cause any of the inefficiencies or raise any of the anticompetitive issues that result from prioritization. Most importantly, it does not degrade your content. Please let us know if you have any further questions.
So, there have been some changes in Washington since my last post. In addition to all the post-election excitement—and believe me, the buzz is palpable—there is a good deal of speculation about what will happen in the next administration. There is no doubt the next administration will assign a higher priority to technology and consumer protection issues than the last, but what will that mean for your business?
For those interested in expanding Internet access, the FCC has approved the unlicensed use of “white spaces†for new technologies, including those that are aimed at expanding broadband access. The two current FCC commissioners speculated to be contenders for chairmanship voted for the measure. Expansion of Internet access in various forms will definitely be a part of an Obama administration. On the other hand, there are many other pressing issues the new Democratic majority will be interested in pressing forward, and this could mean comprehensive legislation might be difficult to pass. Legislation would not be necessary to enforce net neutrality, unless Comcast wins its appeal, claiming that the FCC did not have the authority enforce net-neutrality regulations.
Consumer protection laws might also become a major issue in the next administration. The Consumer Product Safety Commission has been criticized as being too close to the industry; so some changes may occur there. Even though this issue was visited in recent legislation, there might be pressure from the White House to step up enforcement. During his time in the Senate, President-Elect Obama voted for the Consumer Product Saftey Commission overhaul, and even introduced an amendment that would require a somewhat burdensome reporting system for items manufactured overseas. In the Senate, he encouraged the FTC to enforce rules against telemarketing scams directed toward seniors.
Hard economic times might lead to a strong push for federal legislation that would help states collect sales and use taxes from companies that sell to states where they have no physical presence, or nexus. This might be attractive on its own or as part of a package that would mandate states to engage in spending on any number of programs. This would definitely increase the costs of many products marketed directly to consumers.
Before the transition even begins, there will also be more changes in Internet technology. In a few weeks, the FCC will consider broad changes to the Universal Service reform policies that will affect prices for telephone and broadband service prices. We’ll be sure to keep you posted. As always, please send your legislative concerns our way to ensure your voice is heard on Capitol Hill.
In 2003, Congress passed several amendments to the Fair Credit Reporting Act. These amendments were put in place to address problems with identity theft and require some companies to develop a written program for identifying suspicious activity. These changes apply to credit reporting agencies and all other businesses that extend credit and have “covered accounts.†Extending credit can include any transaction where a good or service is paid for after it is received. Covered accounts can include accounts with multiple payments or transactions, as well as some types of accounts that are particularly vulnerable to identity theft. These new rules are in effect as of November 1st, although enforcement by the FTC will be delayed until May of 2009.
If you’re not sure your business is in full compliance with these rules, it is important to review your red-flag policies now. If you think your business might be included but you have not yet developed guidelines, you can review the FTC’s recommendations here. If you are unsure of how to comply with the rules, I recommend you seek the advice of counsel, but you can also utilize free resources at ftc.gov, or e-mail questions to redflags@fcc.gov. If you haven’t yet complied, you may still have time to amend your policies before enforcement actions begin. Of course, complying fully as soon as possible will help protect the customers you serve!
Tomi Turner works in ERA’s government affairs department.
Yesterday, the Federal Trade Commission released its revised Guides Concerning the Use of Endorsements and Testimonials in Advertising. The Guides are more than 80 pages long, so we’re still analyzing the changes. However, there is no question that our extensive advocacy efforts have had an effect on the final iteration of the Guides. The commentary included with the changes explains that advertisements using consumer testimonials should be evaluated by the net impression of the advertisement. A footnote in the revised Guides also suggests that in some cases a disclaimer could be sufficient. A more comprehensive legal document will be circulated shortly, but it is clear from a preliminary review that our efforts have not been made in vain. The 35 advocacy meetings on the Hill, 40 constituent meetings at the Fly-In, the testimony before the Senate, two sets of detailed comments and our suggested language were all helpful in presenting our case to the FTC.
It has been an exciting week in the world of net neutrality. This week, Julius Genachowski, the Chairman of the FCC, announced the Commission’s intention to enter into a formal rulemaking process to 
Late last week Representatives Markey (D-MA) and Eshoo (D-CA) introduced a bill that would keep the Internet open by preventing 
Tomorrow, the Consumer Protection Subcommittee of the Senate Commerce Committee will hold a hearing entitled “Advertising Trends and Consumer Protection.†The hearing will consider several issues in advertising, including the use of the word “free†and Endorsements and Testimonials. This is part of a broader reevaluation of the FTC’s powers and funding. An explanation of tomorrow’s hearing is really not complete without an explanation of last week’s hearing. Last week, from the first opening statement to adjournment, the hearing focused on testimony from consumer groups and emphasized that consumers are targeted by scams and needed additional protection from the FTC (P.S.- You can watch this hearing and kind of see me in the background on C-SPAN 
If you are thinking about buying something online, one of your first steps in evaluating the product might be to see what kind of reviews the product has received. But what if the reviewer was paid to give a favorable review? This is a practice that clearly has some troubling implications. That’s why the FTC recently addressed this practice in the Guides Concerning the Use of Endorsements and Testimonials in Advertising (yes, this is the same proposal that would require evidence of typicality for some testimonials).
As you probably know, the FTC is planning to eliminate the safe harbor for testimonials with disclaimers. If you are concerned about these changes, make sure you sign up to receive updates from us on this issue. We will send occasional updates that will keep you up to speed. This is part of the grassroots effort we will be launching shortly and these updates will make sure you know about opportunities to get involved. Please make sure you don’t miss out - 
The FTC recently released revisions to its self-regulatory principles for online behavioral advertising. But, how might these changes affect your business? In these particular principles, the FTC is focused on “third-party†advertising, rather than contextual or “first-party†advertising. Basically, a website using behavioral advertising only for one website and not aggregating data across multiple sites will not be directly subject to these principles, although they are still subject to other applicable privacy laws. Similarly, advertising based on a specific web query or click will not be subject to the principles unless that data is stored and applied to future actions. 
Late last week, the Federal Trade Commission (FTC) granted a request for a 60-day extension filed by ERA and other prominent advertising associations. Our request focused on the significance of the changes for direct marketers and for “new media.†These changes could dramatically affect both industries, so it is essential any changes are made with caution. The period for comment will now last until March 2, 2009. The previous deadline was January 30th. The vote for the extension was unanimous. This extension is only the first step in our advocacy efforts. Moving forward we will lead a coalition of trade associations to seek a solution that is beneficial for our member companies and for consumers. If you would like to learn more about this issue, please 
Currently, the FTC is proposing changes to its guidance on consumer testimonials. These changes will directly affect you and the way you do business. There are several reasons why honest marketers, particularly in the direct response world, should be worried.
So, you may have read or heard about The Wall Street Journal’s article implying that Google no longer favors net neutrality. You might have also seen the reaction from the 
So, there have been some changes in Washington since my last post. In addition to all the post-election excitement—and believe me, the buzz is palpable—there is a good deal of speculation about what will happen in the next administration. There is no doubt the next administration will assign a higher priority to technology and consumer protection issues than the last, but what will that mean for your business?
In 2003, Congress passed several amendments to the Fair Credit Reporting Act. These amendments were put in place to address problems with identity theft and require some companies to develop a written program for identifying suspicious activity. These changes apply to credit reporting agencies and all other businesses that extend credit and have “covered accounts.†Extending credit can include any transaction where a good or service is paid for after it is received. Covered accounts can include accounts with multiple payments or transactions, as well as some types of accounts that are particularly vulnerable to identity theft. These new rules are in effect as of November 1st, although enforcement by the FTC will be delayed until May of 2009.
