FTC Wags Finger At Word-Of-Mouth Marketing

Companies using so-called “word of mouth marketing” must disclose who’s paying the shill’s bills, the FTC said Monday.

Word-of-mouth marketing can take the form of paid actors loudly ordering particular brands of spirits in bars or people who troll message boards and tout their master’s products, or recently, in the cases of McDonald’s, Sony and Walmart, fake blogs.

Whatever the iteration, the FTC’s staff advisory opinion found such marketing could be deceptive if consumers were more likely to trust the endorser, “based on their assumed independence from the marketer.”

“The FTC staff said it would go after violators on a case-by-case basis. Consequences could include a cease-and-desist order, fines and civil penalties ranging from thousands of dollars to millions of dollars,” wrote the Washington Post.

Here is a FTC complaint form. — BEN POPKEN

FTC Moves to Unmask Word-of-Mouth Marketing [Washington Post] (Thanks to Michael!)

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  1. Brian Chow says:

    Will this affect companies like BzzAgents, which gives away products and services to members, and encourage them to promote their products?

  2. sr105 says:

    So, what does this mean for rap music?

    Excuse me now while I drink some more krissy.

  3. Keter says:

    It will be hard to enforce, particularly in the area of customer-generated “feedback” such as you see online with growing frequency.

    I know for a fact that some of that content is generated “in house” by the organization staff, particularly to quickly build volume when starting a new online WOM campaign, but this information is hidden behind a veil of usernames (these pseudonyms also protect the privacy of legitimate customers). Without insider information and access to confidential information, it is typically impossible for an outsider to be able to tell a real customer from a member of the company’s sales staff, or from a competitor’s shill.

    Telling company insiders to pick usernames like “ABCSalesRep” won’t work because some smartypants user or shill for a competitor may pick that name to lend themselves unearned credibility or execute a nefarious strategy.

    The FTC needs to issue unambiguous disclosure requirements and methodologies suitable to each specific WOM media/mode they want to regulate before they can even pray for actual compliance.