There was nothing extraordinary about the overblown marketing claims that Herbal Groups made about its prostate-health remedy Prostalex Plus. The National Advertising Division (NAD), the ad industry's self-regulatory body, blasted those unsubstantiated claims and testimonials just as they would any others that pledged users would "regain ... youthful prostate function" and promised to "stop your constant need to urinate" without the science to support the assertions.
But the NAD, an investigative unit of the National Advertising Review Council (NARC), found new, more disturbing problems with Herbal Groups' promotions.
Not only did the supplement maker publicize exaggerated claims, it did so on a Web site called the "Prostate Health Blog," a seemingly independent blog Herbal Groups sponsors.
On Aug. 11, NAD determined the whole blog functioned as an ad by providing information about various prostate problems while recommending Prostalex Plus as the solution. Paired with a judgment from the Electronic Retailing Self-Regulation Program, another NARC unit, against Urban Nutrition over similar marketing claims made on ostensibly independent Web sites, the two decisions mark NARC's first foray into regulating blogs.
The decisions come in the wake of the Federal Trade Commission's (FTC) proposed updates to its endorsement and testimonial guides, which address new advertising challenges in the Internet age. Together, the FTC and NARC's moves reflect a shift toward tighter, more aggressive online ad enforcement that requires greater disclosure to consumers about the ties between bloggers and businesses, as well as the typicality of results in ad claims.
And advertisers aren't happy. Industry groups responded to the proposed revisions to the FTC's "Guides Concerning the Use of Endorsements and Testimonials in Advertising" with negative comments urging the agency to rethink the changes.
The FTC's two-pronged approach focuses on how advertisers clarify and support testimonials--both online and through traditional media--while also targeting material connections between companies and the bloggers who write about and recommend their products.
Industry groups argue the guidelines place an undue burden on advertisers. In one set of comments jointly submitted by groups including the American Association of Advertising Agencies and the U.S. Chamber of Commerce, they said the proposed revisions represent "a drastic change in ... policy that would result in ... increased costs for marketers, and impede the use of even truthful consumer testimonials."
Critiquing the Critics
The FTC's endorsement guides haven't seen significant updates since their creation in 1980. In congressional testimony July 22, David Vladeck, director of the FTC's Bureau of Consumer Protection, highlighted rapidly changing technology as a key reason for the updates.
"In 1980, the advertiser always disseminated the advertisement," Vladeck testified. "With the advent of advertiser-promoted consumer blogging, the advertiser is not always disseminating the endorsement, although it expects to profit from the message." Comments on the changes, introduced in late 2008, were under review at press time.
Many consumer-driven blogs provide product reviews or recommendations, which the FTC says could be unfairly biased if the blogger receives either cash or free products from the company.
The proposed FTC guidelines require clear disclosure of any material connection between bloggers and advertisers, which would prevent blogs such as Herbal Groups' Prostate Health Blog from posing as an independent resource.
"What [the NAD decision] says is blogs are presumed to be consumer generated," says John Feldman, a partner at Reed Smith. "Accordingly, if a blog is not consumer generated, and is a form of advertising, that fact must be clearly disclosed so consumers can put the information provided in context."
Because it's often the blogger's responsibility to clarify the relationship, the blogger and the advertiser could be liable for failure to disclose the ties, says Liisa Thomas, a partner at Winston & Strawn. "The company can ask [the blogger] to disclose the relationship, but it doesn't have control over them," she says. "So there's concern that there isn't enough thought [in the proposed guidelines] about how to address the fact that the company may not have control over these people."
The proposed guidelines also target testimonials in ads--both online and off. Under the proposed guides, companies must support any testimonial claim, such as total weight lost from using a diet product, with proof that it is the typical result. If the testimonial does not highlight a typical result, the age-old catchphrase, "Results not typical," would no longer be enough to preclude false advertising claims. Advertisers also would have to clearly display what the typical result actually is.
Not only would this clarify for consumers what their anticipated results might be, it would also undermine the proliferation of false testimonials appearing on Web sites, says Jeffrey Knowles, a partner at Venable.
"In some cases, [the FTC] is finding evidence that marketers are making up fictitious people and fictitious results and disseminating the claims all over the Internet," he says.
While the guidelines would help root out fabricated testimonials, they also would seriously encumber honest advertisers, Knowles says. The trouble with clarifying typical results is that it's impossible to identify a single average outcome, particularly when it comes to weight-loss products, he says. Results often vary based on a person's age, height, weight, gender and fitness level.
"If marketers want to show extraordinary results, they're going to have to do a study, and it might even have to be a clinical study that could cost hundreds of thousands of dollars, to show what the average loss would be," Knowles says.
Tough to Follow
A series of FTC studies influenced the recommendations in the proposed guidelines, but many in the industry feel the research doesn't give consumers enough credit for accurately parsing out exceptional but true claims--as well as weighing the impact a free product would have on a blogger's bias.
"[Commercial speech] has to be regulated in the least restrictive way to achieve the legitimate state interest in regulating it," Feldman says. "To do otherwise raises constitutional concerns."
Though industry groups argue the FTC's proposals will face practical difficulties, companies are nonetheless eager for more guidance regarding online marketing practices.
"As currently drafted, they would be difficult for a company to implement," Thomas says. "But companies want to follow the guidelines, which is why you're getting a lot of input from the industry. They want to have a document that everybody can be on board with and that makes sense for everybody."