How the FTC May Curb Free Speech Rights for PR Agency Employees

Last Updated Sep 1, 2010 1:31 PM EDT

People are puzzled as to why the FTC recently forced Reverb PR into a consent agreement that stops its staff from posting reviews for apps made by its mobile gaming clients in Apple (AAPL)'s iTunes app store. Here's the explanation: The FTC is telling the advertising and PR world how it will define "material connections" between people who post reviews online and their advertising clients. The Reverb case should thus be digested carefully by ad and pr agency staff -- and their lawyers -- as a guide to the new rules for online marketing. It also raises some interesting issues to do with the free speech rights of pr agency employees.

The New York Times seemed to be scratching its head as to why the FTC would wield its shotgun to kill the Reverb mosquito:
Given that fake reviews are widely understood to be common in the iTunes Store and on many Web sites, it was not clear why the trade commission had singled out Reverb.
The key thing is that when Reverb's staff posted their online reviews, they didn't declare in those reviews that they were employed by the gamemaker's PR firm. The FTC brought in new rules last year that
say
:
"material connections" (sometimes payments or free products) between advertisers and endorsers â€" connections that consumers would not expect â€" must be disclosed.
Reverb denies it did anything wrong:
According to [Reverb owner Tracie Snitker,] the issue was specific to a small number of independent iTunes apps that several Reverb employees had installed on their own iPhones using their own money and accounts. The posts were not mandated by Reverb, added Snitker, nor were they part of any company policies.
"Seven out of our 16 employees purchased games which Reverb had been working on and to this the FTC dedicated an investigation," she said in her statement.
Snitker's logic seems to be that because Reverb's clients didn't specifically pay for the reviews, and because Reverb's staff posted the reviews on their own time, that nothing untoward happened. They merely behaved like normal customers. The FTC is saying that doesn't wash. And it doesn't wash with anyone familiar with Reverb's business, such as PC World's Ed Oswald, either:
I have to say, that's the biggest line of malarkey I've ever heard. Yeah, you're going to work for a PR company, purchase a game you work with, and give it a negative review? Come on!
If you think this is some kind of secret practice, it isn't. In fact, I've seen on freelance job sites explicit requests by companies for writers to produce positive reviews on sites like the iTunes App Store for the sole purpose of boosting their ratings (and a nice chunk of change for doing so).
So there you have it: The FTC's new rules for reviewers and endorsers does not apply only to bloggers and celebrities. Using agency staff to sow the web with positive customer reviews is now a "material connection," and thus also banned.

Reverb caved and signed the settlement with the FTC because no fines were involved and because it did not have to admit wrongdoing. This issue will become more interesting when the FTC meets an agency that believes its staff have a First Amendment right to post reviews of clients' products online, when those staffers have not been specifically instructed to do so.

Related: Image by Flickr user sham hardy, CC.