Welcome to Internet Law Radio brought to by Traverse Internet Law, internet lawyers specializing in Internet Law, On-line Legal Issues, Web Law and E-commerce issues worldwide. Now here’s your host, Damien Allen.
Damien Allen: Good morning and welcome to Internet Law Radio. My name is Damien Allen, and joining me today on the phone is Brian A. Hall, an attorney with Traverse Legal, PLC. Good morning and welcome to the program, Brian.
Brian A. Hall: Hey, Damien, how are you doing?
Damien Allen: I’m doing just fine, hope you’re doing well, sir.
Brian A. Hall: Most definitely.
Damien Allen: Today we’re going to be discussing an internet lawyers approach to compliance with FTC Part 255 Guidelines regarding endorsements and testimonials. Brian, what is Part 255?
Damien Allen: Does Part 255 apply to online materials such as blogs?
Brian A. Hall: Most definitely. I would say that this Part 255 is really focused on new media or blogs. If you go and review the Part 255 Guidelines, you’ll see that is there is multiple examples that the FTC provides as it pertains to each section, be it the definition section, or the section pertaining to consumer reviews or expert reviews or whatever it might be. There’s examples that they provide so that there’s greater clarification for what a company must do in order to comply with these guideline, and really a lot of those examples deal with new media, and they provide sort of a framework that at least shows what the FTC would do in analyzing statements made via the new media and the questions involved. And really when you break it down, it looks at a couple fundamental things. The first is when a statement’s made that would qualify as an advertisement or a testimonial, you need to know whether or not acting solely independently whether that would be qualified as an endorsement, and if so, who is it on behalf of. And really those are the types of questions that need to be answered before you can know if you have to comply with Part 255 and also if you are complying correctly with it if indeed you do have to comply with it.
Damien Allen: How can an Internet lawyer help entities comply with Part 255?
Brian A. Hall: That’s a great question, and I think the most important thing to recognize is that this area of law is, number one, relatively new. These guidelines were recently enacted, or at least the revised guidelines, in December of 2009. So, whereas in traditional case law and things like that – there’s a lot out there, a lot of commentary on it, and a lot of case law interpretation – there’s not as much in this area. So, an Internet lawyer can really provide some of the insight that, maybe, a traditional civil attorney might not be able to do. But the most important thing is really going out and reading the statute, number one. Number two, understanding those examples and trying to analogize them to whatever client situation the attorney is looking at. And finally, it’s really just going through each of the factors and determining how that client would fall within it. What I typically do is, number one, determine whether the information provided on the website or the blog – whatever it might be – qualifies as an endorsement. That is the threshold issue, to understand if you have to comply with Part 255. Then I determine whether the endorsement is made by a consumer, an expert or some other organization, and the reason that’s important is because there’s different guidelines that pertain to a consumer endorsement versus an expert endorsement versus a third party organization endorsement. Then, number three, I really try and identify the basis for whatever statement was made. And the thing to keep mind is that an advertiser really can’t have an endorser or a third party make a testimonial, make a statement of fact that that advertiser themselves couldn’t make. So they need to have substantiation and backup data for any claim that’s made, either by themselves as an advertiser or by the third party that would be looked upon as the endorser. Ultimately, I go through that analysis so that I can advise the client the best way to present the endorsement or the advertisement or put in play the necessary disclosures that the FTC would require in order to avoid consumer deception, whatever it might be.
Damien Allen: Are there do’s and don’ts that relate to Part 255?
Brian A. Hall: Without a doubt, the FTC’s whole goal here, and I alluded to it just a minute ago, is avoiding consumer deception. So, transparency is key here. If there’s a material connection, and that’s language from Part 255, and what it means is if you provided something free or you paid somebody to provide you with a testimonial, then that needs to be known to the consumer because it could affect the truth of that testimonial, the weight given to it, etc. So, in terms of specific dos and don’ts, I think there’s more don’ts than there are dos but what I would say is, most definitely, be transparent, disclose the types of things that FTC is requiring are disclosed, such as what a consumer actually should expect when they use a product or service. No longer is the blanket statement “results not typical.” And we’ve all seen them. I’m sure you’ve seen them, Damien, on different commercials for food or dietary pills, someone will lose 100 lbs. and then at the end of the commercial you’ll see “results not typical”. Well, that no longer will carry the day. You need to actually show what IS typical. What should a consumer expect, and you need to be accurate in the statements that are made as an advertiser. And then again, like I said, disclosing those material connections or relationships that might be there. Those are probably the most important two things, the transparency and the disclosures, but also the back-end thing, having scientific evidence or other substantiation for claims made. If you say, you’re service, 95% of the time, leads to a particular result, then you need data that supports that or you might be facing a FTC investigation and possibly liability. So, when it comes to dos and don’ts, I tend to focus more on the dos but that’s not to say that there aren’t don’ts. I would definitely say to any client do not ever write or have someone else on your behalf write a testimonial or say something that would be considered a testimonial or an endorsement that contains false information, a false review or something along those lines because at the end of the day, those are really what the FTC is out there trying to prevent and they’re going to take issue with it.
Damien Allen: What risks do entities that utilize endorsements and testimonials face in light of the revised guidelines in Part 255?
Brian A. Hall: Within the Part 255 Guidelines, and actually within the statute itself, it talks about monetary penalties, and there’s been a lot of commentary about it that there’s discretion within the FTC that if they do an investigation and they find that you are violating this particular section, they can impose a monetary penalty of $10,000, for example, for each violation. There are a lot of those types of risks, the monetary side, but also I think that the important thing to look at is, once you’re involved in an FTC investigation, it’s going to take time, money, and additional resources. So, preventative medicine, so to speak, is probably the best thing that a company can do because most companies out there, especially in the online world, this new media, the bloggers, they have testimonials and endorsements on most of their sites whether they know it or not. So, whether the advertiser is the one that actually published it or not, they could still ultimately be held responsible and liable. So, understanding that the FTC, again, is cracking down on this, going after advertisers in an effort to avoid consumer deception, will really help a company move forward without having to worry as much about FTC investigations and possibly damages.
Damien Allen: Thank you very much for joining us today, Brian, and explaining some of the rules and guidelines for the FTC Part 255.
Brian A. Hall: Not a problem, Damien, it was fun.
Damien Allen: You’ve been listening to Internet Law Radio. My name is Damien Allen. Everybody have a great afternoon.
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