Is Your Marketing Illegal?


Attorney David Castor, an attorney firm specializing in startups and SaaS businesses, emailed me over the weekend with the news that the FTC has settled with its first victim of new disclosure laws.

As part of the proposed settlement (PDF), PR firm Reverb Communications and owner Tracie Snitker must remove any iTunes reviews that were written by Reverb employees posing as ordinary customers and who failed to disclose a relationship between Reverb and its game developer clients. The agreement also bars Reverb and Snitker from posting further reviews on iTunes that pretend to be from independent consumers or that neglect to disclose any connection between the company and its clients, according to the FTC.

handcuffedThis is pretty scary stuff. In two decades, I'm not sure that I've worked with or for a marketing or PR firm that DID NOT go out of its way to promote its clients goods and services. I continue to promote my clients whenever and wherever I can – not because I wish to deceive the public, but because I believe in what they've accomplished. I try to disclose my actions each time – but I'm sure that I miss the mark plenty.

This could change everything. As your company wishes to deploy comment strategies, linking strategies, promotions, etc… it appears all of it could be a criminal act if it's accomplished within the United States and doesn't disclose a connection between the company and clients.

  • Will Nascar drivers have to announce their sponsors in every interview because they're wearing a hat or drinking a soda? Will they have to put a disclosure below each bumper sticker?
  • Will Political Action Committees (PACs) have to announce on every comment on every site that they're part of an organization with a paid relationship with the politician? How about when they send thousands of members to go answer polls online?
  • If I mention a client in a presentation or speech as an example that's not related to our relationship, do I now need to disclose they are a client?
  • What about fans and follower counts? I don't have a means of disclosing how many people follow me or how many people I follow because they're clients or I'm a client. Isn't that number swaying public opinion and used for marketing?
  • I just wrote a blogging book where I utilized many of my clients and vendors (including Alerding Castor) as examples in the book. Am I going to get fined because I didn't disclose that we may have, or once had, a business relationship?
  • Will product evangelists at conferences need to wear a badge or hat that states that they're going to talk about their clients, products or services?
  • Sometimes I target companies and write about them, or introduce myself for the opportunity of building a business relationship in the future. Do I now need to disclose when I'm buying them a coffee or shaking their hand that I am doing it because I'm hoping to get their business?
  • Will celebrity voice-overs and appearances in commercials now need to end with them telling you that they are a paid endorser of the product or service?

I understand that the law is attempting to thwart deceitful practices, but the problem is that my entire online persona, my twitter account, my Facebook statuses, my websites, and my writing are ALL based on relationships I've had with businesses. My company's income is based on how well my clients are marketed. I am a paid advocate for them – twenty-four hours a day and seven days a week. I'm not trying to deceive anyone… but I am trying to increase authority, awareness, and evangelize on behalf of my clients. Who else am I going to talk about?!

You might as well put the cuffs on me now and throw away the key.

Or I could move to Canada and keep doing what I'm doing. There's the loophole folks… move your deceitful practices offshore.


  1. 1

    It seems to me than in every nook and cranny, the federal government is, while trying admirably to level the playing field, pushing too far into stifling business. I mean what’s next, making advertising illegal in general?

    Perhaps they should focus more on companies that are built from the ground up to swindle people–like credit counseling services. Oh, did I just say that out loud? LOL

  2. 2

    It’s ironic you say that, Preston! The FTC just released over 200 pages on new rules governing credit services. It may not be too bad a thing, since it will push a majority of those businesses out of business. We have a client who’s on the positive side of the industry and it’s frustrating that they have to compete with those swindlers.

    Of course, the ultimate irony is that the credit card companies continue to rip-off consumers left and right… but the Feds go after some of the companies trying to fix it!

    I agree with you wholeheartedly, though. This one isn’t just going to stifle business, it’s going to send more business overseas and out of reach of the FTC!

  3. 3

    Um, not sure how all those examples are valid comparisons. This is pretending to say things you are paid to without knowledge of the end user that you are being paid to say that thing and it is not your actual opinion on the matter. And really this is about places where people stand to benefit by lying. Most legit companies that has an employee review or say something on a product will disclose the fact instead of trying to pretend to be a 13 yr old boy who loved a game or a mother who loved a book on amazon. I think honesty of the person who posts it is really what it comes down to in making the distinction.

    Nascar – I’m pretty sure we all know that the sponsors paid to be there so their is no need to explain the obvious. Now what would be fun is making the cars sponsored by drug companies to have to pull a trailer listing all the side effects on a billboard for all to see. 🙂

    PACs – This is another serious issue that equally needs to be addressed but will never sadly.

    Clients in presentations – I think most people do and should, not sure why you wouldn’t though in most cases if you are using as an example you want people to know of the success you had to they hire you too. Maybe I’m missing an obivous example where someone would benefit from this (other then just straight sales pitches.)

    Being a fan or a follower is basically worthless so I doubt that really means anything. I mean do you really know who is following me. Or are you talking about using your counts to advertise how good you are when they are basically worthless numbers?

    On the book one, I don’t have a copy (sorry) so I’m not sure how you talked about it in the book, but the article seems to let it know there is a relationship there. Could it have been more clear that they were a previous/current client of yours, sure but i don’t think anyone would look at them as an unbiased outsider reviewing the book as they mention they contributed to it. Now, would I hope you mention somewhere that you had worked with them on the site if you were using them as an example in the book, yes. But that’s more to give cred to what you are saying worked with them (again don’t know exactly how used so cant’ say if I would feel what you did might be taken as wrong.)

    I had to split this into 2 comments 🙂

  4. 4

    Product evangelists – YES! if you get money from the people you are talking about you better be clear about it. If MS had a bunch of people put in talks at conferences about MS products, pretending to be loyal users doing it of their own love of the product and paying them to do that there would be a huge outcry against it. Though I am one to go overboard on any way I lean on that stuff as whenever I talk about WP I make sure to state that I’m a big time zealot for the product and I’ve never been paid to say anything about it (though I have made money customizing things for people.)

    Buying coffee – Again I think this goes back to the given. It’s much harder for someone to believe you have nothing to sell them when you do that.

    Commercials – They already do this with their “paid testimonial’ when a real person is talking. Again I think its’ a given that they are that no one is questioning that.

    I think in the end it all comes down to the honesty of what is being said and the intention of said actions. In most situations when being advertised to we know it and when things are done that might blur that line people have to spell it out (like putting paid advertisement on newspaper ads that look like articles or infomercials.) It’s when people want to fake who they are or the relationship they have. I don’t think honest advertising practices have anything to worry abuot as there are still many unethical and dirty ones to take down first.

  5. 5

    You make a lot of assumptions @ripsup, and your final paragraph supports my entire argument. “It all comes down to honesty… and intent.” I don’t disagree with you in the least. So… please explain how the FTC will decipher whether or not I am being honest and what my intent is.

  6. 6

    Well the FTC would first most likely only be looking into it if there is a complaint. If you are pretending to be someone else or hiding that you have some sort of financial benefit from saying positive (or negative on competitors products) then that should be addressed. In the article it says

    “Reverb got itself into hot water with the government by allegedly giving the impression that the reviews came from independent consumers and failing to reveal that it was hired to promote those games and that it took in a percentage of any sales.”

    I do agree with your final paragraph that you are being honest (atleast from what I know of you) so they wouldn’t find issue in that. But, if you were pimping ChaCha all day saying that you are some independent person when you were getting paid that would be an issue. All other advertising mediums have had this same issue and found ways to state this in a way that a consumer could be informed of the issue. This isn’t new and I think the same rules apply as before and why I took issue with the examples.

    Side Note : I prefer the UK’s rules on advertising that are much stricter then ours and wish we would adopt something similar.

  7. 7

    There will always be dishonest vendors and, thanks to social, the word will get out on these guys. Whatever happened to ‘buyer beware’, though? Don’t we have any personal responsibility anymore? One of my concerns on this will be that more ‘honest’ jobs will move offshore as marketers and PR agencies are forced to close their doors for fear of violating the FTC’s rulings (which are actually guidelines, not law). It’s big brother and I can’t stand it.

    PS: Go ChaCha! 😉

  8. 8

    Well, before I begin my comment, let me say that I have no official commercial relationship with Douglas Karr, his various companies and commercial entities, nor do I have any direct interest in making money from participating in his blog and the subsequent commentary that may or may not reflect my or his true feelings. Furthermore, any business interest that accrues from making this comment is strictly due to non-commercial efforts at self-induced promotional advocacy, which may or may not have any bearing on anything relevant.

    Nice post, Doug.

  9. 9

    I’m as concerned about slippery slopes as the next guy, Douglas. But as you point out at the end, the practice in question was plainly deceitful. It wasn’t a matter of disclosure, it was a matter of fraudulently “posing as ordinary customers”. There was a big spoonful of intent here.

  10. 10

    Understood, Ian. But the FTC regulations don’t speak to deceit – they only speak to disclosure.

  11. 11

    I remember when this thing broke and I thought it was pretty obvious on the deceit side of things at that time, so went and looked it up.

    The cnet article really doesn’t go into exactly what they did and is kind of taking both sides at what they say (probably because of the settlement.) I think once you see what the other article has it becomes a bit more obvious what was going on and that it was a lot more clear cut.

  12. 12
  13. 13

    @ripsup Wow… so… even worse. The assumption is that if you do NOT disclose = you ARE deceiving. =-X

  14. 14

    No it’s

    “No Disclose” + “false representation made” = deceiving

    Wait unless you are “SexyHotCheerTeen17” that I was just chatting with on AIM and that’s what you are worried about getting in trouble for. I thought it was weird when the topic all of a sudden switched to ChaCha. 🙂

  15. 15

    I put at * next to what I have an affiliate relationship with and the is linked back to my disclosure page. Done

  16. 16

    Unfortunately, that won’t work Dave. I already tried to get that method approved with David and he said I couldn’t simply state it on my TOS… it needed to be inline with every mention.

  17. 17

    Douglass, Thanks for the post, its a very interesting topic. I’d say that practice is akin to putting fake testimonials on your packaging. As far as your list of concerns go, this feels like they’re setting an example, similar to what the government has done with Napster and businesses with a million songs on a shared server in the past. It seems like you may be taking the examples a bit extreme, is this for illustrative purposes? I’d guess that just not doing anything that deceives customers into buying a product and you’re probably in the clear.

What do you think?

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