Caveat Emptor (and the Reader, too)

Do you remember that commercial that opens with a man saying, “I’m not a doctor, but I play one on TV”? It appears that now we could have that type of disclosure with online reviews.

The Federal Trade Commission recently passed regulations that state that advertisers “must disclose any material connection between a person endorsing a product and the company selling the product.” In other words, if you’re being paid to endorse or review something, you’ve got to make that clear from the outset.

This is a good general rule for those writing a blog, Facebook page or “tweeting” on behalf of a company. But it will be interesting to see how this can be enforced with online review sites such as Yelp, Chowhound and even iTunes. The New York Times reported that the FTC had settled charges with a California marketing company that had been alleged to engage in deceptive advertising by having its employees write and post positive reviews of clients’ games in the Apple iTunes Store, without disclosing that they were being paid to do so.

This can also work the other way, with negative reviews. With the loss of inhibition and sense of anonymity that people experience online, reviews may be vicious and can even be defamatory. Additionally, rival companies can post negative “anonymous” reviews about competitive businesses, a practice that’s unethical, but legal (at least superficially, but such reviews can also be defamatory ). Defamatory reviews or comments may not attract the attention of any governmental agencies but can involve significant liabilities through "self-enforcement" (civil lawsuits).

Employers and employees need to be aware of the disclosure rules and the potential costs to their reputation and the business' bottom line. Last year, the Times reports, the State of New York had reached a $300,000 settlement with Lifestyle Lift, a cosmetic surgery outfit, over faked reviews of its products on the Internet.

Whether you call it “astroturfing,” propaganda, or even if you think it's outright fraudulent, the practice falls into an ethical gray area and, in some cases, could ultimately be illegal.

p.s.   This Just In:  The Wall Street Journal Law Blog reports that a lawsuit involving singer Courtney Love will be tried in February and explores whether defamatory "tweets"  can give rise to liability. 

Stay tuned....

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