WoM: Word of Mouth Marketing & FTC Advertising Law
1. Learn more about WOMMA and how
we can help you improve your word
of mouth marketing program at
www.womma.org.
(c) 2006 Word of Mouth Marketing Association.
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2. Word of Mouth
Marketing & FTC
Advertising Law
Mary K. Engle
Associate Director for
Advertising Practices
Federal Trade Commission
3. Overview
• Disclaimer: The views I express are my
own, and not necessarily those of the
FTC or any individual Commissioner
• FTC jurisdiction & ad law basics
• FTC law applied to word of mouth
marketing
• Commercial Alert complaint
• FTC Act deception analysis
• Word of mouth and children
Slide 3
4. FTC Basics
• Law enforcement agency with broad
consumer protection and antitrust
authority over most industries
• Consumer protection responsibility
under Section 5 of the FTC Act,
prohibiting “unfair or deceptive acts or
practices” in commerce
• Includes false or misleading advertising claims
• Includes sales and promotional activities
Slide 4
5. FTC Advertising Law
• Ads must be truthful and substantiated
• Ads are deceptive if they are likely to
mislead consumers to their detriment
• Express or implied claims can mislead
• Ads are evaluated as a whole
• Ads are interpreted from standpoint of
reasonable consumer
• Ad may have more than one reasonable
interpretation
Slide 5
6. Word of Mouth Product Claims
• Marketers who employ consumers to
buzz about their products must comply
with the FTC Act
• Word of mouth marketers are
responsible for their agents’ claims
• As with any ad, if word of mouth
marketer makes deceptive claims
through an agent (e.g., says product can
do something it can’t), FTC can bring an
action under Section 5 of FTC Act
Slide 6
7. Commercial Alert Petition to FTC
• Consumer advocacy group, Commercial
Alert, filed petition with FTC
• States that it’s deceptive for marketers
to pay consumers to buzz about a
product without disclosing they’re being
paid
• Seeks investigation of “buzz marketing”
practices
• Asks FTC to issue guidelines and bring
cases
Slide 7
8. Response to Commercial Alert
• FTC staff declined Commercial Alert’s
request to issue guidelines specific to
word of mouth marketing
• Case-by-case investigation and
enforcement under Section 5 is
adequate to address any deceptive
practices
• Response letter offers guidance based
on existing FTC Guides
Slide 8
9. Response to Commercial Alert
• Response letter states that FTC’s
Endorsement & Testimonial Guides
apply to word of mouth marketing
• An endorsement is any advertising
message that consumers believe
represents the opinions, beliefs,
experience, etc. of a person other than
the sponsoring advertiser
• Paid word of mouth advocacy fits this
definition
Slide 9
10. FTC’s Endorsement Guides
• Endorsement Guides require disclosure
of a connection between a seller and an
endorser that might materially affect the
weight or credibility of the endorsement
• A material connection is one that isn’t
reasonably expected by the audience
• Examples of such connections include:
• Seller is paying endorser
• Endorser is related to seller
• Endorser is business associate of seller
Slide 10
11. Application of FTC’s Endorsement Guides to
Word of Mouth Marketing
• Consumers wouldn’t normally expect
that another consumer has been paid to
talk to them about a product
• Consumers may reasonably give more
weight to another’s views -- based on
assumption that speaker is independent
from the seller -- than they would if they
knew the speaker was being paid
Slide 11
12. Financial Ties Should Be Disclosed
• So: Under the FTC Endorsement
Guides, financial tie between seller and
paid agent should be disclosed
• Examples:
• Cell phone company pays college students to buzz
about sound quality of speaker phone
• Appliance company pays homemakers to buzz
about how well its dishwasher cleans without pre-
rinsing dishes
Slide 12
13. What If Agents Aren’t Paid?
• If word of mouth marketer doesn’t pay
its agents, is disclosure necessary?
• Depends on whether consumers would
give more weight/credibility to
endorsement even absent payment
• WOMMA’s ethical principles call for
disclosure regardless of payment
• Good practices and sound ethical principles can go
beyond the demands of the law
Slide 13
14. Word of Mouth Marketing and Kids
• Commercial Alert also complained
about word of mouth marketing by
children
• Same disclosure principle applies to
word of mouth marketers using teens:
paid relationships should be disclosed
• Whether teen consumers would expect a
relationship b/t marketer and agent is considered
from ordinary child’s standpoint
• There may be situations where kids would find a
connection material where adults would not
Slide 14
15. Word of Mouth Marketing and Kids
• Commercial Alert complained about
kids participating in word of mouth
advocacy w/o their parents’ knowledge
• If soliciting children under age 13
online, marketers must comply with
Children’s Online Privacy Protection Act
• Must get parents’ consent to collect personal info
• Outside of COPPA, FTC doesn’t enforce
any other law that would require
parental approval
Slide 15
16. Summary
• Word of mouth marketers who pay their
agents to talk about their products should
require agents to disclose their relationship
• With apologies to Andrew Lloyd Webber:
“What’s the buzz? Tell me what’s happening…
What’s the buzz? Tell me what’s happening…
What’s the buzz? Tell me what’s happening…”
-- The Apostles, in Jesus Christ Superstar
Slide 16