In a staff opinion, lawyers for the FTC, which has the power to oversee advertising, said for the first time that the agency would monitor and investigate incidents of fraud and deception using the fast-growing online marketing tactic.
In Oct. 2005, Commercial Alert, an advertising and marketing watchdog group, petitioned the FTC to take action against viral marketers. Citing viral marketing campaigns employed by T-Mobile and Procter & Gamble as possibly deceptive, the group asked the FTC to issue guidelines for viral marketers requiring paid agents to disclose their relationship with the company whose product they are promoting.
Viral marketing has quickly become a popular tool for online advertisers, who encourage users to plug products on Internet properties ranging from MySpace pages to blogs.
Under current FTC rules, word-of-mouth advertising — the most analogous tactic to viral marketing — is governed by regulations that deal with commercial endorsements. The FTC’s staff opinion clarifies the rules by noting that viral marketing could be considered deceptive if consumers were more likely to trust the product’s endorsers “based on their assumed independence from the marketer.”
“We wanted to make clear, if you're being paid, you should disclose that,” FTC Associate Director for Advertising Practices Mary Engle said.
The FTC said it would investigate alleged violators on a case-by-case basis by issuing cease-and-desist orders, fines and civil penalties.
To date, the FTC said it has not brought actions against any viral marketers.
“This letter tells marketers like Procter & Gamble that their 'sponsored consumers' must disclose that they are shilling, or they are probably in violation of the prohibition against deceptive advertising,” Commercial Alert Executive Director Gary Ruskin said. “That's big. “It will change practices in the word-of-mouth marketing industry.”
