FTC Response to WOM Issue Won't Change Much

  |  December 13, 2006   |  Comments

With the Word of Mouth (WOM) marketing industry already policing itself when it comes to disclosure, a recent FTC statement sent in response to a call to investigate the industry probably won't change a whole lot

With the Word of Mouth (WOM) marketing industry already policing itself when it comes to disclosure, a recent FTC statement sent in response to a call to investigate the industry probably won't change a whole lot.

OK, that's my assessment. Gary Ruskin, the man behind Commercial Alert, the marketing watchdog group that sent the petition over a year ago, managed to eek out a positive comment while speaking for a Washington Post story. “It will change practices in the word-of-mouth marketing industry.”

Ruskin says that because in the letter sent to Commercial Alert, dated 12/7, the FTC writes, "it would appear that consumers may reasonably give more weight to statements that sponsored consumers make about their opinions or experiences with a product based on their assumed independence from the marketer." In other words, the failure to disclose the consumer/marketer relationship would be deceptive, similar to previous false testimonial related cases cited in the letter.

"In conclusion," states the missive, "the FTC staff will determine on a case-by-cased basis whether to recommend law enforcement actions to the Commission." It goes on to suggest Commercial Alert "bring to our attention instances in which word of mouth marketing practices may cause consumer injury."

Commercial Alert isn't exactly pleased with what seems to be the FTC's request for more hard examples of deception. The org put out a press release recently regarding the letter suggesting, "the Commission gave the word of mouth marketing industry a giant Christmas present by refusing to launch a wholesale investigation of the industry for deceptive marketing.”

Evidently, Commercial Alert figured demonizing Procter and Gamble’s Tremor in its original petition was enough to get the FTC started. (Tremor is P&G's WOM agency that has thousands of kids signed on to help pitch products but doesn't required disclosure.)

To me, this looks like the FTC saying, yes, disclosure is important, but we're not about to put the time and energy into a full blown investigation of an industry in which the majority of its campaigns take place offline in actual in-person conversation. A very small percentage of WOM actually occurs online where the FTC might be able to track it.

Also, and perhaps more important, what Commercial Alert requested is a disclosure requirement. The fact is the Word of Mouth Marketing Association has spent the past year developing a set of guidelines for disclosure of the relationship between its member companies (from agencies to big brand marketers) and the people they enlist to spread WOM. Oh, and let's not forget it'd be pretty tough for the FTC to police what people say to one another, especially offline.

An interesting thing to note are some findings from a study by Professor Walter Carl that practically dismiss the notion that disclosure will somehow erode the supposed power of WOM:

For about 5% of the conversational partners who were not aware of the agent’s affiliation with the marketing organization there was a negative “backlash” effect when they found out. These negative feelings could be directed toward the agent, the interaction with that agent, the brand being discussed, and/or the company who made the brand, product, or service. There were virtually no negative feelings, however, when the conversational partner was aware of the agent’s affiliation.

It'll be interesting to see if Commercial Alert attempts to provide solid examples of deception via WOM marketing. To be honest, I think the disclosure issue is a red herring.

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ABOUT THE AUTHOR

Kate Kaye

Kate Kaye was Managing Editor at ClickZ News until October 2012. As a daily reporter and editor for the original news source, she covered beats including digital political campaigns and government regulation of the online ad industry. Kate is the author of Campaign '08: A Turning Point for Digital Media, the only book focused on the paid digital media efforts of the 2008 presidential campaigns. Kate created ClickZ's Politics & Advocacy section, and is the primary contributor to the one-of-a-kind section. She began reporting on the interactive ad industry in 1999 and has spoken at several events and in interviews for television, radio, print, and digital media outlets. You can follow Kate on Twitter at @LowbrowKate.

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