FTC Staff Opinion on "Word of Mouth" Marketing
The Federal Trade Commission (FTC) recently issued a Staff Letter responding to the Request for Investigation concerning “buzz marketing” practices that the consumer advocacy group Commercial Alert filed with the FTC in October 2005. The Staff Letter suggests that with respect to “buzz” or “word of mouth” marketing activities that involve payment to a consumer, the relationship between marketer and consumer must be disclosed in some circumstances or the marketer runs the risk of its activities being deemed deceptive trade practices.
The Staff Letter opines on “word of mouth” marketing, which the FTC staff defines as including “broad range of activities” whereby a marketer “induces and facilitates communication” with, among and between consumers about the marketer’s products, including, among other things, activities commonly referred to as “buzz,” “guerilla” and “stealth” marketing. Or, as described by the Word of Mouth Marketing Association, it is the pursuit of “giving people a reason to talk about your products or services.” As described in Current Privacy Issues Facing Marketers by DWT’s Robert Driscoll, Commercial Alert (whose mission is to “keep the commercial culture within its proper sphere”) asserted in its Request for Investigation that the practice in “word of mouth” marketing initiatives of using “sponsored consumers,” i.e., those a marketer compensates for distributing a message to other consumers without disclosing the payment/relationship between the marketer and consumer, necessarily is deceptive. Commercial Alert also called on the FTC to issue guidelines and initiate law enforcement actions with respect to this practice.
The FTC staff concludes in the Staff Letter that, with respect to such practices, it presently is not necessary to issue guidelines, and that the FTC will determine on a case-by-case basis if law enforcement action is appropriate. However, its analysis makes clear that marketers should pay close attention to both their own practices and the evolution of regulatory initiatives in this area.
The Staff Letter focuses on whether “word of mouth” marketing practices involving “sponsored consumers” constitute deceptive acts or practices under Section 5 of the FTC Act. It cites, among other things, the statement in the FTC’s Endorsement Guides that “full disclosure” is required “when there exists a connection between the endorser and the seller of an advertised product which might materially affect the weight or credibility of the endorsement.” Applying this principle, the FTC staff concludes in the Staff Letter that failure to disclose a relationship between a marketer and a “sponsored consumer” may be deceptive if the relationship is not otherwise clear from context and the message recipient(s) would likely give more weight to the message based on that fact that it comes from a friend or otherwise appears to be an unsolicited testimonial.
The FTC also notes that although the general principles applicable to child-directed marketing activities are the same as those applicable to marketing activities directed to adults, in view of the fact that teens and children generally are considered more vulnerable to marketing messages than adults, the weight to be given to a child-directed marketing message coming from an undisclosed “sponsored consumer” would be assessed from a child’s perspective.
