Will the FTC's Guidelines Blow Up Tech Publications?

Author: John Honovich, Published on Oct 04, 2009

The US FTC's new advertiser guidelines could radically change the nature of tech publications through a significant increase in regulation of published content.

Despite the media's emphasis of these guidelines on bloggers, their impact is clearly far broader - including researchers, analysts and industry experts. To explain this, we examine the final revisions to these guidelines in detail (read the FTC Guidelines for yourself, starting at page 55).

Tech Publications are Funded by Manufacturers Seeking Promotion

The reality is that most technology publications are funded by manufacturers who seek promotion of their products. If you have any doubt about this, simply review any of their media kits (see example 1, example 2 and example 3).

Beyond that, as we have seen with Frost & Sullivan awards and whitepapers, it is common for analysts/researchers to charge manufacturers undisclosed amounts for those items. Similarly, experts can have undisclosed lucrative consulting arrangements with manufacturers.

Examining Details of the FTC Guidelines

These guidelines are broad. The title says as much, "Guides Concerning the Use of Endorsements and Testimonials in Advertising."

Any publication that meets these guidelines would be required to make "clear and conspicuous disclosures" of their financial relationship. The guidelines, however are unclear about what that entails.

Endorsements Covers Almost Anything

The FTC has a very extensive definition of endorsements: "any advertising message ... [that] consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser." [from 255.0(b)] As such, even if someone simply cuts and pastes a manufacturer's press release, this would be considered an endorsement - far broader than just product reviews or tests.

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Almost Anyone Who Knows Anything is an Expert

This guidelines affect anyone who is reasonably considered an expert, not just bloggers: The FTC defines an expert as "an individual, group, or institution possessing, as a result of experience, study, or training, knowledge of a particular subject, which knowledge is superior to what ordinary individuals generally acquire." [from 255.0(e)] Lots of tech people will fall under this definition including trade magazine editors.

Almost Any Financial Transaction is Covered

The FTC wants disclosure for almost any material connection between a manufacturer and a publisher. Specifically, "When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed." [from 255.2]

The Potential Impact

Based on the language in the guidelines, this has the potential to impact most of the things written in technology.

Certainly, things that are directly paid for, like Frost whitepapers and awards and Axis IP test will be included.

What will be interesting to see if advertising/sponsorships for a publisher's other services are included. For instance, SIW recently published a review of Cisco's strategy. This year, Cisco has sponsored 3 SIW webinars which list for $15,000 USD each. From my reading of the guidelines, it's not clear whether or not that must be disclosed.

If publications can accept sponsorships from manufacturers for other services and not have to disclose them, the regulations will be essentially worthless. Publishers will simply do the reviews for free and buy the products themselves while still profiting from manufacture sponsorship of newsletters, display ads, etc.

The Risks in Enforcing

The big challenge will be whether and how the FTC plans to enforce this. I do not know what resources the FTC has available to enforce this but there easily could be tens of thousands of cases immediately. Plus, it may require forensic accounting to truly ascertain the material connections between companies.

What remains to be seen is how broad and how forceful the FTC is willing and able to go. If they enforce it stringently, it could have a massive and valuable impact in pushing publishers to provide more honest and unbiased information.

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