Also, full disclosure does increase credibility. Knowing the source is paid to promote a product does not invalidate their comments. The comments stand or fall on their own merits, regardless. But to hide renumeration and get caught is the kiss of death.

I have often argued that the internet has created an emerging “full-disclosure society.” With the ability to use Google and other search tools, hiding identity and conflicts of interest have become increasingly hard to do. And getting caught, as I said above, is worse than disclosure.

Thank you for the thoughtful reply and amended blog post. It is my understanding that what the FTC may enforce is not the Staff Opinion, but rather the existing legislation to which the Letter refers. Specifically, if a marketer pays a consumer to endorse a product or service, that compensation must be disclose, or else the marketer runs the risk of being penalized for violating FTC Law.

What puzzles me is the idea that some marketers persist in believing that duping customers is a productive business practice. Putting ethics and legality aside for a brief moment, why would any marketer think that duping would-be customers is a good way to build loyalty? Such tactics should not only bring legal action against the marketer, but the person orchestrating such programs should also be charged with gross incompetence.

But returning to your original post, I think fascinating food for thought is how First Amendment rights are affected by this Letter. I suppose, if asked, I would urge cause marketers or political promoters to adhere to the same disclosure guidelines as private sector marketers. Not only is it the ethical way to go, but researchers out of Northeastern University have found that when disclosure occurs, the recipient of the “buzz” is about 70% more likely to tell another person about the subject than if disclosure did not occur.

Joe

Thank you for your detailed comments and corrections. I have made the revisions to the facts you indicated, namely changing my reference to an FTC ruling to a Staff Opinion, and a correction regarding the nature of BzzAgent volunteers.

While the FTC action was a Staff Opinion, not a Rule change, the Post article characterized it as something marketers “must” do. My question, John, is how enforceable is a Staff Opinion. Are they saying “must” as a Christmas wish? Or does the Opinion indicate how the FTC will enforce the behavior within some range of discretion?

Alan

My name is Joe Chernov, and I am the director of communications for BzzAgent. I read your blog post and I admire the thoughtfulness of your application of the recent FTC comments on disclosure to advocacy and political campaigns. I do believe, however, that your post contains several material inaccuracies, which I will now bring to your attention.

The first instance of misinformation is the very foundation of your blog. The FTC did not, as you state, issue a “ruling” on disclosure. No new legislation was passed. The Commission simply made public a Staff Opinion Letter, addressed to watchdog group Commercial Alert. Further, the letter indicates that pre-existing guidance (falling under “material connection” guidelines) already addresses the disclosure issue cited in Commercial Alert’s petition. The Commission indicates in the letter that they are not going to publish new guidelines, nor are they going to investigate the word-of-mouth industry.

The second instance of misinformation applies to your reference to BzzAgent. The FTC Letter will not “clearly affect … BzzAgent” (though I do appreciate your characterization of my employer as an “industry giant). The Letter discusses pecuniary compensation for product endorsement. BzzAgent’s model meets neither component of that two-pronged test. We neither pay cash to our volunteers nor do we require any campaign participant endorse a product. Yet despite the fact that BzzAgent operates outside of the focus of this letter, we remain the only company that not only requires volunteers to disclose brand affiliation, we remain (to the best of my knowledge), the only company that proactively expels volunteers who violate this term of service.

An FTC spokesperson presented on Tuesday at the Word of Mouth Marketing Symposium in Washington, DC. The presenter was asked by an observer if product rewards are considered a form of compensation. The spokesperson stated there is “a difference between being paid cash and being given an incentive.” This comment further distances the BzzAgent business model from the spirit of the petition and the FTC’s response.

I very much hope you consider the facts I have detailed above, and moreover, I very much hope you consider publishing a revised version of your blog post. Written as is, it is not only erroneous, but also potentially damaging to a company that is not only adhering to FTC law, but going well beyond the scope of what has been legislated.

Respectfully,
Joe Chernov
Director of Communications
BzzAgent Inc.