The Federal Trade Commission has given its first hint of how it intends to enforce the new endorsement guidelines that apply to bloggers, by revealing it investigated retailer AnnTaylor for a promotion run by its LOFT brand stores.

(If you are unfamiliar with the guidelines, they can be found in PDF form here. To find out why there is confusion about what they mean, read an interview with FTC spokesman Richard Cleland.)

In January, AnnTaylor invited a group of bloggers to a preview event for LOFT’s  Summer 2010 collection. The invitation stated that bloggers who wrote about the event and submitted their stories to AnnTaylor within 24 hours of the event would receive a mystery gift card worth between $50 and $500.

The blogger promotion was widely reported on in media as an obvious violation of the new FTC endorsement guidelines, and not surprisingly, drew the attention of FTC investigators. The FTC has widely been expected to find a company to use as an example to test the new guidelines on.

On April 20th, the FTC notified AnnTaylor that they have decided not to pursue enforcement action over the event for several reasons:

• A sign was displayed telling bloggers to disclose the gift cards.
• AnnTaylor adopted a new policy shortly afterward requiring notification of bloggers requiring their disclosure requirements before gifts are issued.
• The event was a flop – only a small number of bloggers wrote content, and several who did disclosed the gift cards.
• AnnTaylor only hosted one such event.

This may be good news for advertisers. It appears that the FTC may not hold advertisers accountable for a blogger’s failure to disclose as long as the blogger was notified of their need to disclose.

Another clue to the FTC’s thinking on enforcement was provided by an interview that Cleland gave in January to Jeff Bercovici of Daily Finance.  In the interview, he suggested that celebrities would be exempt from disclosures because:

The average consumer, Cleland said, might well be aware that celebrities of Paltrow’s stature often receive free clothing, trips and other swag.

The question, of course, is how this applies in a niche market like scrapbooking – does the FTC recognize the existence of “niche market” celebrities who would fall under Cleland’s interpretation? And if they do, how many people in the industry would fall into that category in their eyes?

Many in the scrapbook industry will be watching for the FTC’s future interpretation of these guidelines, due to the widespread use of editorial and designer samples in the industry, and the prevalence of online publishing of materials.

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It’s apparent from reading the responses to my commentary on the new FTC  guidelines that my position was widely misunderstood. I would like to clarify a few things for readers who may believe after reading yesterday’s post that I oppose bloggers having to disclose whether they have financial ties to a company.

1) I am not opposed at all to bloggers following a code of ethics that includes disclosing when they’ve received a review product for free. In fact, I believe all bloggers should adhere to such ethics. I work hard to adhere to a strict code of ethics in all of my own work.

2) I do not personally accept pay-per-post work.

3) I agree that it would be good to clean up the deceptive marketing practices that have become widespread on the internet.

4) I only disagree with the guidelines’ current form, not the underlying philosophy or goals of them to protect the consumer.

I said the rules needed to “go away or be revised” because in their current form the guidelines are completely non-relateable to the real world existence of professional journalists who work on the web. They are theory that isn’t actually operable in our real world. To be used they need to be fixed. If they aren’t going to be fixed, they need to be scrapped like a car with a broken transmission.

I have two essential problems with the current form of the guidelines. First,they are extremely vague and unclear, making it virtually impossible to tell under the currently issued guidance if you are doing what the FTC actually wants you to do or not. It is not as simple as “just disclose and be done” – there are actually fairly complex issues of what to disclose, where and how, and even experienced lawyers in advertising law can’t seem to determine what the FTC wants in these regulations. If I am going to be potentially legally liable for my actions being not compliant with the guidelines, they need to give me clearer guidance about exactly what is expected of me. Basically I (and I lot of other bloggers) just need better instructions than these from the FTC about exactly what it wants from us.

My second reservation (or rather request) is that I believe these guidelines should apply to everyone – traditional and new media. Many traditional media organizations do impose codes of ethics on their employees. But what they are exempt from under the new FTC guidelines is legal liabilities that are imposed in the guidelines on online media. Traditional media’s exemption from those legal liabilities creates an uneven playing field in the competition for certain editorial content between online and traditional media, and leaves the online media at a significant disadvantage. I’d like to see the guidelines applied equally to all forms of media so editorial content assistance is not withheld from online media because of additional potential legal liability that is incurred by companies when content appears in an online format.

That’s it. I just want the rules made clearer by the FTC, and applied equally to all forms of media so they don’t handicap one form over the other. Make it more straightforward, and make it fair. That’s all I’m asking.

This week the FTC issued a revision to its guidelines that govern the enforcement of regulations pertaining to endorsements, and which have left the blogosphere in a state of uproar. Many bloggers such as myself feel assaulted and unfairly targeted by the FTC simply by nature of the medium that we publish in, and are concerned for our ability to do our work in the future without inadvertently running afoul of the law. Given the number of bloggers in the scrapbook world using their blogs to promote themselves and the companies that they are associated with, and the number of scrapbook companies engaged in word-of-mouth marketing campaigns online,  legal guidelines that affect these activities are serious business for a lot of people.

In summary, the new guidelines impose extremely strict guidelines on bloggers to reveal any “material connection” they might have to a company when writing a positive review about it. In theory, it sounds great to make bloggers have “ethics” and reveal when their posts are actually paid ads.

The reality of the FTC’s attempt to implement that theory isn’t so great, though. Here’s why.

First, the rules are extremely broad about what constitutes an endorsement. Essentially, starting on December 1st, if I review a book that is sent for me for free and actually like it and tell Scrapbook Update’s readers that I do, it will be considered an “endorsement” or advertisement under FTC rules because I received the book for free. This means a whole slate of FTC rules will apply to what I say, including the fact that the company can be fined for any claims that I personally make about the product that are untrue.

You probably think I (and the company) have nothing to worry about as long as I am honest in the review, right? Let’s take a look at an example: Say I was sent a paper trimmer to review and in my testing of it was able to cut 3 sheets of cardstock at once. So I write that it can do that. But the trimmer wasn’t actually designed to do that and it can break the blade. If I received the trimmer for free to review, and the review is positive of the product, the company is legally liable for my saying that it can cut that much cardstock when it isn’t intended to. (Apparently, if I hate all over the product, the FTC couldn’t care less what I say.)

If companies have to be concerned that sending a free product to someone could result in legal liability to them for anything that is said in the review online, the result will be one of two things: companies will either have to incur significant additional time and expense to police the sites that write about them after receiving product, or companies will simply be forced to cut back on providing products, cutting them off from a significant marketing tool and online publishers off from an editorial tool that will continue to be available to their print competitors.

The necessity to declare the receipt of free products is particularly problematic for scrapbookers. The need to declare when free products are used in certain scenarios means that scrapbookers will have to track which products they have received for free for promotional purposes (items received through methods such as “free gift with purchase” programs are exempt) so that they can disclose if needed when those products are used. This is a significant burden when you are talking about numerous small items such as paper and embellishments that may not be used immediately upon receipt.

Second, these rules are broad and unclear. I’m reading interviews online where even lawyers are saying they don’t know how to interpret the guidelines in the document–which is intended as an interpretive document, illustrated by examples, to help people know what is expected of them. Key things are not defined in the guidelines, however. A blog post is considered “sponsored”  by the FTC if the author has a “material connection” to the company whose product it is about. “Material Connection” is fairly clearly defined if the product that is being written about was provided to the author. What the guidelines don’t address, is whether anything else might constitute a material connection, and if so, what. If the publisher sent me a book to review last year, but I bought this title myself, is that still a material connection? If it is, when does that connection “expire” if they haven’t sent me anything new? If I picked up a tote bag (or even won a prize) at their trade show booth, is that a material connection? And it goes on…

Another unclear component of the guidelines is what constitutes a disclosure that meets the guidelines. There is no guidance offered whatsoever about what is sufficient disclosure: location, format, frequency, etc. The stipulation is that the material connection must be “disclosed” to the reader. That is all the guidance that is provided, and yet failure to meet that guideline correctly in the eyes of the FTC could result in an $11,000 fine per violation for the writer, as well as penalties for the advertiser.

The FTC repeatedly states in the new guidelines that potential infractions will be judged on a case-by-case to determine if they are in violation or not. It is eerily reminiscent of the FCC’s “we’ll know it when we see it” stance on obscenity.

Then there is the question of why bloggers are being singled out for enforcement action. Why do bloggers feel they are being unfairly targeted? The reason is simple: “traditional media” publications are explicitly excluded from having to comply with the same guidelines that were just issued for online media. Richard Cleland, the head of the FTC Bureau of Consumer Protection, seems in interviews like one he gave to Edrants to have a persistently negative perception of the ethics of bloggers, and an unrealistic view of the way that traditional media operates. In the Notes document that contains the new enforcement guidelines, the justification for excluding so-called traditional media is that when readers read reviews in traditional media, the FTC believes that “knowing whether the media entity that published the review paid for the item in question would not affect the weight consumers give to the reviewer’s statements.” (p. 47)

In reality, traditional media reviewers are treated the same as many new media reviewers by marketers. They are courted and showered with free product and swag by marketing representatives. Their ethics are subjected to the same temptations as new media reviewers. The FTC cites “editorial oversight” of traditional media reviewers as a reason to make the distinction, but many bloggers (such as those like myself at WebWorkerDaily who work for a blog network) are subject to the oversight of an editor. Yet the guidelines make no mention of whether we should be treated the same as “old media” or still classed in with the “new media” ghetto of required disclosure.

And requiring disclaimers on only new media will create a perceived ghetto in media formats. For most consumers, being presented with disclaimer text sets off their internal alarms that something isn’t right about the thing they are looking at. Requiring disclosures to be posted all over the work of bloggers, while allowing “traditional media” who are doing the exact same work in another medium to avoid them, feeds the incorrect perception held by people like apparently Richard Cleland that the blogosphere are evil and the traditional media are good. It creates a perception that bloggers are sinners and traditional media are saints.

Bottom line, there are bad neighborhoods everywhere in media. Yes, some bloggers take payment without disclosing it to pump up products. But check out the pages of some of your favorite magazines and notice the placements of some of the ads in some of them–close to relevant ad content. Have you ever seen your hometown newspaper do a big profile of a local business that just coincidentally is a big advertiser? A lot of traditional media content is “advertorial” in nature–ad content masquerading as editorial content. It’s accepted practice in a large segment of the industry.

So why is the FTC singling out bloggers and not targeting traditional media? Maybe because the regulators don’t understand new media (which is pretty obvious from the guidelines). Maybe because big media companies have expensive lobbyists in Washington and bloggers don’t? Take your pick, or come up with your own reason. Whatever the explanation, it isn’t fair to impose different regulatory burdens on writers because of the medium that their writing is published in.

These guidelines don’t go into effect until December 1st. Hopefully the FTC will rescind or clarify them before then because right now they cause a lot more problems than they solve.