by Edward Champion

Interview with the FTC’s Richard Cleland

This morning, the Federal Trade Commission announced that its Guides Concerning the Use of Endorsements and Testimonials would be revised in relation to bloggers. The new guidelines (PDF) specified that bloggers making any representation of a product must disclose the material connections they (the presumed endorsers) share with the advertisers. What this means is that, under the new guidelines, a blogger’s positive review of a product may qualify as an “endorsement” and that keeping a product after a review may qualify as “compensation.”

These guidelines, which will be effective as of December 1, 2009, require all bloggers to disclose any tangible connections. But as someone who reviews books for both print and online, I was struck by the inherent double standard. And I wasn’t the only one. As Michael Cader remarked in this morning’s Publishers Marketplace:

The main point of essence for book publishers (and book bloggers) is the determination that “bloggers may be subject to different disclosure requirements than reviewers in traditional media.” They state that “if a blogger’s statement on his personal blog or elsewhere (e.g., the site of an online retailer of electronic products) qualifies as an ‘endorsement,'” due to either a relationship with the “advertiser” or the receipt of free merchandise in the seeking of a review, that connection must be disclosed.

ftcIn an attempt to better understand the what and the why of the FTC’s position, I contacted Richard Cleland of the Bureau of Consumer Protection by telephone, who was kind enough to devote thirty minutes of his time in a civil but heated conversation. (At one point, when I tried to get him to explicate further on the double standard, he declared, “You’re obviously astute enough to understand what I mean.”)

Cleland informed me that the FTC’s main criteria is the degree of relationship between the advertiser and the blogger.

“The primary situation is where there’s a link to the sponsoring seller and the blogger,” said Cleland. And if a blogger repeatedly reviewed similar products (say, books or smartphones), then the FTC would raise an eyebrow if the blogger either held onto the product or there was any link to an advertisement.

What was the best way to dispense with products (including books)?

“You can return it,” said Cleland. “You review it and return it. I’m not sure that type of situation would be compensation.”

If, however, you held onto the unit, then Cleland insisted that it could serve as “compensation.” You could after all sell the product on the streets.

But what about a situation like a film blogger going to a press screening? Or a theater blogger seeing a preview? After all, the blogger doesn’t actually hold onto a material good.

“The movie is not retainable,” answered Cleland. “Obviously it’s of some value. But I guess that my only answer is the extent that it is viewed as compensation as an individual who got to see a movie.”

But what’s the difference between an individual employed at a newspaper assigned to cover a beat and an individual blogger covering a beat of her own volition?

“We are distinguishing between who receives the compensation and who does the review,” said Cleland. “In the case where the newspaper receives the book and it allows the reviewer to review it, it’s still the property of the newspaper. Most of the newspapers have very strict rules about that and on what happens to those products.”

In the case of books, Cleland saw no problem with a blogger receiving a book, provided there wasn’t a linked advertisement to buy the book and that the blogger did not keep the book after he had finished reviewing it. Keeping the book would, from Cleland’s standpoint, count as “compensation” and require a disclosure.

But couldn’t the same thing be said of a newspaper critic?

Cleland insisted that when a publisher sends a book to a blogger, there is the expectation of a good review. I informed him that this was not always the case and observed that some bloggers often receive 20 to 50 books a week. In such cases, the publisher hopes for a review, good or bad. Cleland didn’t see it that way.

“If a blogger received enough books,” said Cleland, “he could open up a used bookstore.”

Cleland said that a disclosure was necessary when it came to an individual blogger, particularly one who is laboring for free. A paid reviewer was in the clear because money was transferred from an institution to the reviewer, and the reviewer was obligated to dispense with the product. I wondered if Cleland was aware of how many paid reviewers held onto their swag.

“I expect that when I read my local newspaper, I may expect that the reviewer got paid,” said Cleland. “His job is to be paid to do reviews. Your economic model is the advertising on the side.”

From Cleland’s standpoint, because the reviewer is an individual, the product becomes “compensation.”

“If there’s an expectation that you’re going to write a positive review,” said Cleland, “then there should be a disclosure.”

But why shouldn’t a newspaper have to disclose about the many free books that it receives? According to Cleland, it was because a newspaper, as an institution, retains the ownership of a book. The newspaper then decides to assign the book to somebody on staff and therefore maintains the “ownership” of the book until the reviewer dispenses with it.

I presented many hypothetical scenarios in an effort to determine where Cleland stood. He didn’t see any particular problem with a book review appearing on a blog, but only if there wasn’t a corresponding Amazon Affiliates link or an advertisement for the book.

In cases where a publisher is advertising one book and the blogger is reviewing another book by the same publisher, Cleland replied, “I don’t know. I would reserve judgment on that. My initial reaction to it is that it doesn’t seem like a relationship.”

Wasn’t there a significant difference between a publisher sending a book for review and a publisher sending a book with a $50 check attached to it? Not according to Cleland. A book falls under “compensation” if it comes associated with an Amazon link or there is an advertisement for the book, or if the reviewer holds onto the book.

“You simply don’t agree, which is your right,” responded Cleland.

Disagreement was one thing. But if I failed to disclose, would I be fined by the FTC? Not exactly.

Cleland did concede that the FTC was still in the process of working out the kinks as it began to implement the guidelines.

“These are very complex situations that are going to have to looked at on a case-by-case basis to determine whether or not there is a sufficient nexus, a sufficient compensation between the seller and the blogger, and so what we have done is to provide some guidance in this area. And some examples in this area where there’s an endorsement.”

Cleland elaborated: “I think that as we get more specific examples, ultimately we hope to put out some business guidance on specific examples. From an enforcement standpoint, there are hundreds of thousands of bloggers. Our goal is to the extent that we can educate on these issues. Looking at individual bloggers is not going to be an effective enforcement model.”

Cleland indicated that he would be looking primarily at the advertisers to determine how the relationships exist.

[UPDATE: One unanswered concern that has emerged in the reactions to this interview is the degree of disclosure that the FTC would require with these guidelines. Would the FTC be happy with a blanket policy or would it require a separate disclosure for each individual post? I must stress again that Cleland informed me that enforcement wouldn’t make sense if individual bloggers were targeted. The FTC intends to direct its energies to advertisers. Nevertheless, I’ve emailed Cleland to determine precisely where he stands on disclosure. And when I hear back from him, I will update this post accordingly.]

[UPDATE 2: Cleland hasn’t returned my email. But his response in this article in relation to Twitter (“There are ways to abbreviate a disclosure that fit within 140 characters”) suggest that bloggers will be required to disclose per post/tweet.]

[UPDATE 3: A commenter has suggested: Why not return or forward all the review copies that you receive directly to Mr. Cleland?]

[UPDATE 4: In an October 8, 2009 interview with Fast Company, Cleland has backpedaled somewhat, claiming that the $11,000 fine is not true and indicating that the FTC will be “focusing on the advertisers.” The problem is that page 61 of the proposed guidelines clearly states, “Endorsers also may be liable for statements made in the course of their endorsements.” And endorsers, as we have established in this interview, include bloggers. However, Cleland is right to point out that the guidelines do not point to a specific liability figure and that it would take a blogger openly defying a Cease & Desist Order to enact penalties. The Associated Press was the first to report the $11,000 fine per violation. Did somebody at the AP misreport the penalty information? Or was it misinterpreted?

Some investigation into FTC precedents would suggest that the AP reported these concerns correctly. Here are some precedents for the up to $11,000 fine per violation: non-compliance of wedding gown label disclosure, non-compliance of contact lens sellers, and an update to the federal register. On Monday, the FTC precedents establish heavy penalties for non-compliance, the the guidelines themselves specify penalties as endorsers, and Cleland insists that bloggers who review products are “endorsers.” On Wednesday, Cleland now claims that bloggers won’t be hit by penalties. The FTC needs to be extremely specific about this on paper, if it expects to allay these concerns. (Thanks to Sarah Weinman for reporting assistance on this update.)]

182 Comments

  2. So if I review a book that a publisher sent me, but then hold a giveaway on my blog for it rather than keeping it….does that put me in the clear? Is that like giving it to a library? Or does that somehow equate to “selling” the book, even when I’m not making any money from it (or the review)? (And in fact, am paying out money on postage to send it to the winner?)

  8. The FTC does not make “laws” – The FTC makes “guidelines” and then shakes down companies that they feel do not follow the guidelines. The shaking down works well, particularly because its very expensive and time consuming to fight the FTC in court.

    Notice this section of their endorsement press release:
    “The Guides are administrative interpretations of the law intended to help advertisers comply with the Federal Trade Commission Act; they are not binding law themselves. In any law enforcement action challenging the allegedly deceptive use of testimonials or endorsements, the Commission would have the burden of proving that the challenged conduct violates the FTC Act.”

    To summarize, they can shake you down and threaten to take you to court and you can settle then or you can fight them in court and get the court to actually interpret the law and thus see if the FTC “guidelines” fall within the law.

    From my research most of the time when the FTC actually goes to an actual court (as opposed to badgering companies to settle), they rarely win. Usually their “guidelines” stand unopposed and they use the might of their bureaucracy to shake money out of companies who don’t have time/resources/energy to fight them.

  9. If anyone is interested, here is R Cleland’s bio: (interesting that it doesn’t appear that he has ever worked in private sector)

    Richard Cleland joined the Federal Trade Commission’s Division of Advertising Practices in 1991. In 1996, he was appointed assistant to the director of the Bureau of Consumer Protection and, in 1998, named assistant director of the Division of Service Industry Practices. He currently serves as assistant director of the Division of Advertising Practices. Cleland’s primary area of expertise is the advertising and marketing of health-related products and services. He also supervises many of FTC’s health fraud and weight-loss product and service law enforcement initiatives, and supervised the Commission’s review of the Endorsement and Testimonial Guides. Prior to joining FTC, Cleland served as special assistant attorney general and director of the Division of Consumer Protection in the Iowa Attorney General’s Office.

  15. Thanks for the article. What’s next? Web sites? And does a book cover on a personal blog, or web site (especially if you have two or three books out in a year, talk about all three, and where to buy them with links) mean your are endorsing yourself, your publishers, your reviewers? Since you receive money for the books you sell is that considered sufficient compensation? (These people, and how typical, don’t know a thing about books, digital or print, reveiwers, the industry period!)

  19. Hey, fair is fair, though. If “traditional print media” is going to get a bye on this, then they need to stick to dead trees and ink. No more internet presence for them! If they’re posting online, after all, they’re “bloggers”, just like us.

  25. What FTC does not realize is that that bloggers who reviewed products positively regardless whether they are good or not, lose credibility and shoot themselves with their worthless reviews.

    They might earn some revenue for the short term but not for the long term.

    Consumers would simply not rely on them after following their recommendations.

    Beside consumers are not that stupid. They do not check one single review and decide to make a purchase. Often time they would check several to get a more objective picture.

    The readers are free to buy the product through their links or not. They can choose to buy them somewhere else, if they could get them cheaper.

    FTC should rather direct their concern to advertisement on TV or publication by doctors or experts who endorse products directly, making unfounded claims. They are the ones who deceive people using their authority and expertise.

    A review is simply the personal opinion of someone regarding something. We can choose either to believe it or not. We can also choose whether to buy it or not through their link. No one forces us.

    FTC does not need to babysit us.

  30. […] Beth Kephart: Do Book Bloggers Make a Difference? Filed under: Financial news — Tags: book, cultural exchange, difference, federal trade commission, litany, material connection, picture book, Privilege, question, review — Admin @ 1:50 pm The question is asked, and too-often precariously answered, Do book bloggers make a difference? Can they beckon new readers to a book? Do they have the force of persuasion? To the litany of the old questions has now been added the complication of this new: How will book bloggers operate in the wake new Federal Trade Commission guidelines, effective December 1, 2009, that are designed to require them to disclose not just their material connection to the “advertiser” that provided the ARC or book in question (the publisher, for instance), but to return that product to its original source once the review has been posted. (For a full reporting on the issue, visit this site.) […]

  40. Just wanted to add with respect to the $11,000 penalty, that is the current amount for a Section 5 violation for deceptive practices under the FTC Act. If the FTC establishes a Section 5 FTC Act violation for deceptive practices, then the violation would be $11,000. The law says $10,000 but there is a provision for upward adjustments, and it was adjusted in 1996 up to $11,000.

  41. I remember when CANSPAM was still an open discussion and I know how much different the terrain is now that it is law, and not for the better mind you.

    I think an interesting point that occurred to me in all of this is a potent question. Will the FTC apply these same rules to the U.S. Government itself. Let’s see, we can’t make claims based on unsubstantiated evidence, we can’t make claims unless they are typical results. OK, so Obama claims we have a Swine Flu epidemic, yet more people die every year from the seasonal flu. He says we should be vaccinated but there is quite a lot of evidence suggesting flu shots don’t work and worse they can deliver unexpected health complications or even death.

    To be fair, we had Bush saying Iraq had weapons of mass destruction. Both Bush and Obama said that the TARP funds would bailout our economy.

    So in light of these endorsement/claim statutes we are all supposed to live by, where is the accountability of the government to set the example of compliance?

    I didn’t even mention Social Security, Medicaid, Medicare etc. All promised to cure problems and failed miserably, all were quoted at a much lower price than they actually ended up costing. Get my point?

  42. Oh please give me this guys address I will send it all over the web so that everytime a music cd is reviewed it gets sent to him COD (cash on delivery). After all if we can’t keep the swag then why should we pay to send it back. Let him pay for his receipt of our deliveries and then send it to the companies.

    As it stands where does disclosure fit in my review of a great live event that I am invited to. My readers had better know that I pay cover sometimes and sometimes don’t. The guides say disclosure is only needed if the reader can’t make that distinction. Well let me say if the reader doesn’t know that we sometimes get free swag then they need to go back to 2nd grade.

    However I now have to wonder if I get a business license for my blogging wherever. Then set my salary at $1/mo I am now being paid and no longer have to state the free swag. Sounds about right to me so what is the FTC really trying to do kill social media in order to save the newspapers???????

    I can tell you from the music industry’s attempt to kill P2P. It does not work the record industry is still dying a little more every day. Of course on the plus side the music industry is doing better every year in over all revenue.

  44. […] This is a classic case of that with which the road to hell is paved. The FTC is attempting to translate conventions used in TV and print into a very different medium. There are so many edge cases to consider. What about a 14 year old blogger raving about a skateboard her daddy brought home from the company where he works? What about a book reviewer who reviews a book he was given to review (as reviewers invariably are)? What about just mentioning that you are drinking a Coke when your brother-in-law works for the Coca-Cola company? What about tweets–do you have to include your disclosure in the 140 word limit (the FTC commissioner apparently thinks that might be possible). […]

  51. […] As many of you know, Tyndale has its own blogger review program like many publishing houses. Through the Tyndale Blog Network, bloggers can sign up and request specific books for review. We send a FREE copy of the book in exchange for a review posted on the member’s blog and a consumer site (like Amazon.com, BarnesandNoble.com, ChristianBook.com, etc.). This week, the FTC announced new rules for bloggers that, if violated, could add up to $11k in fines. Effective December 1, bloggers receiving any kind of compensation (including free product) will have to disclose that information clearly on their blog when posting a review of the product. For more information on these FTC rules, visit these links:http://www.edrants.com/interview-with-the-ftcs-richard-cleland/http://adage.com/digital/article?article_id=139457 […]

  54. “Cleland said that a disclosure was necessary when it came to an individual blogger, particularly one who is laboring for free.”

    Pardon me? Under what model does the FEDERAL TRADE COMMISSION have ANY JURISDICTION AT ALL over such a person? Is he saying that the model here is “regulate the corporation loosely, regulate the individual citizen strictly?” Where does Cleland get off thinking he has the constitutional authority to regulate the individual citizen AT ALL?

  55. My blog is a personal one, and as such should never need to ‘disclose’ anything. However, there might come a time that I would be sent some scrapbooking materials and asked to use them then tell them what I think. Clearly they would like a positive review. But, given freedom of speech, I can be positive or negative. So what happens if I give a positive review, but don’t report it? Will they come confiscate the scrapbook pages, cards or even my Great aunt Fanny’s journal? All of which I might have used their product’s on?
    Obviously this hasn’t been clearly explained. But worse yet it hasn’t been clearly thought out in the first place. I think that if you create rules, you should know what you intend to do with them first, then decide how to implement them BEFORE you enact them. Don’t you think this would be a lot easier?

  56. As mentioned above, how do they expect to enforce this? I can understand about wanting to protect the public from being misled but is this any different than a politician voting a certain way on a bill because a lobbiest lined his pocket? People know 90% of what they read on the Internet isn’t true, all this is doing is harming casual bloggers…

  57. Hey, fair is fair, though. If “traditional print media” is going to get a bye on this, then they need to stick to dead trees and ink. No more internet presence for them! If they’re posting online, after all, they’re “bloggers”, just like us.

  58. I totally agree with the writer that sometimes some laws just confuse people by having inherent standard. As citizens we just need to try our best to comply with the law, and that is ok.

  59. Interesting interview. I think it goes in the right direction – especially concerning the fake review blogs. However, I don’t believe that much has changed since the introduction of the bill, I still see them everywhere!

  77. Interesting Interview, I totally agree with the writer that sometimes some laws just confuse people by having inherent standard. As citizens we just need to try our best to comply with the law, and I think it goes in the right direction.

  82. Interesting Interview, As citizens we just need to try our best to comply with the law, and I think it goes in the right direction.
    Thanks For Sharing it.

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