Back in October, 2009, I posted about the new endorsement / testimonial rules set out by the Federal Trad Commission (blog.alerdingcastor.com/blog/alerding-castor/0/0/ftc-makes-changes-to-blog-law). There has been some development since that time, but mostly everyone is still watching and waiting. The FTC did threaten to pursue Ann Taylor back in April, but otherwise, it has been relatively silent.
That is, however, until now. On August 26, 2010, the FTC reached a settlement with Reverb Communications regarding positive reviews that it left on iTunes for its clients' apps (FTC No. 092-3199). This is an instance where the FTC investigated and pursued an online review source that failed to disclose its material relationship with the party it reviewed.
Reverb Communication reached a settlement with the FTC in which it agreed to remove all product review or endorsement that is currently viewable by the public. There is also a five (5) year evidence maintenance component, including producing all complaints. Finally, there is a requirement that Reverb and its owner deliver copies of the settlement order to all of its current and future employees, agents, and representatives.
I don't really know whether this can be classified as software litigation, privacy litigation, or any other hot-button issue, but as a technology legal counsel, I find this order and settlement to be extremely important. With this very public order, the FTC is making a shot across the bow of all businesses that engage in on-line review of products as part of their business plan. The public nature of the Reverb order is, to me, more telling than any of the language contained therein. Thus, if you blog and '/ or make endorsements as part of your business plan, you need to have your eyes on the lookout for areas where your material connection can be questioned. If those areas, exist, you are exposed to the sanctions and reach of 16 CF.R. 255.0. BE AWARE!
One thing to remember is that the reviews posted by Reverb were not excessive or detailed, and could well have been completely true. "Amazing new game"; "ONE of the BEST"; "Really Cool Game", etc. Obviously, these were not voluminous diatribes expounding the virtues of their client. I almost wonder if the FTC would have scrutinized them as much if they had been more detailed, i.e. if it were more obvious they were paid, would the FTC care as much.
Another point to ponder is that the Reverb order does not go after any of the clients of the company who paid for these endorsements. But, the FTC has considered doing just that in the past. Thus, clients of businesses that are paid for building product and branding support need to be aware of these risks. You may wish to consult with your technology legal counsel to include language in your agreements that protect you against the ramifications of an FTC probe into your marketer. Or if you are a marketer, you may want to consider adding language to your agreements that detail what you will do or won't do with regard to this issue.
Here is a scenario that I can easily see playing out. Marketing Company X enters into an agreement with Client Y for, among other things, on-line marketing and endorsement. Marketing Company X doesn't comply with the FTC guidelines and gets an inquiry. Client Y also gets swept into the inquiry and the "scandal". Client Y then sues Marketing Company X for damages in lost profit, costs, and injury to reputation that it incurs as a result of the improper reviewing. And, I'm not sure that 47 USC 230 would give the Marketing Company X much protection. Thus, if you are Marketing Company X, I suggest that you make sure that such possibilities are clearly addressed in your upfront agreement.
The bottom line is that these laws are not new, but orders like the Reverb order are indicative of a new push by the government to regulate the Internet, and a wake-up call to the fact that the U.S. Government is watching the 'net. If you make your living through the online presence and word-of-mouth, you need to be aware and plan accordingly. Change your actions now to protect yourself down the road.
That is, however, until now. On August 26, 2010, the FTC reached a settlement with Reverb Communications regarding positive reviews that it left on iTunes for its clients' apps (FTC No. 092-3199). This is an instance where the FTC investigated and pursued an online review source that failed to disclose its material relationship with the party it reviewed.
Reverb Communication reached a settlement with the FTC in which it agreed to remove all product review or endorsement that is currently viewable by the public. There is also a five (5) year evidence maintenance component, including producing all complaints. Finally, there is a requirement that Reverb and its owner deliver copies of the settlement order to all of its current and future employees, agents, and representatives.
I don't really know whether this can be classified as software litigation, privacy litigation, or any other hot-button issue, but as a technology legal counsel, I find this order and settlement to be extremely important. With this very public order, the FTC is making a shot across the bow of all businesses that engage in on-line review of products as part of their business plan. The public nature of the Reverb order is, to me, more telling than any of the language contained therein. Thus, if you blog and '/ or make endorsements as part of your business plan, you need to have your eyes on the lookout for areas where your material connection can be questioned. If those areas, exist, you are exposed to the sanctions and reach of 16 CF.R. 255.0. BE AWARE!
One thing to remember is that the reviews posted by Reverb were not excessive or detailed, and could well have been completely true. "Amazing new game"; "ONE of the BEST"; "Really Cool Game", etc. Obviously, these were not voluminous diatribes expounding the virtues of their client. I almost wonder if the FTC would have scrutinized them as much if they had been more detailed, i.e. if it were more obvious they were paid, would the FTC care as much.
Another point to ponder is that the Reverb order does not go after any of the clients of the company who paid for these endorsements. But, the FTC has considered doing just that in the past. Thus, clients of businesses that are paid for building product and branding support need to be aware of these risks. You may wish to consult with your technology legal counsel to include language in your agreements that protect you against the ramifications of an FTC probe into your marketer. Or if you are a marketer, you may want to consider adding language to your agreements that detail what you will do or won't do with regard to this issue.
Here is a scenario that I can easily see playing out. Marketing Company X enters into an agreement with Client Y for, among other things, on-line marketing and endorsement. Marketing Company X doesn't comply with the FTC guidelines and gets an inquiry. Client Y also gets swept into the inquiry and the "scandal". Client Y then sues Marketing Company X for damages in lost profit, costs, and injury to reputation that it incurs as a result of the improper reviewing. And, I'm not sure that 47 USC 230 would give the Marketing Company X much protection. Thus, if you are Marketing Company X, I suggest that you make sure that such possibilities are clearly addressed in your upfront agreement.
The bottom line is that these laws are not new, but orders like the Reverb order are indicative of a new push by the government to regulate the Internet, and a wake-up call to the fact that the U.S. Government is watching the 'net. If you make your living through the online presence and word-of-mouth, you need to be aware and plan accordingly. Change your actions now to protect yourself down the road.
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