Last Updated Oct 5, 2009 4:56 PM EDT
Essentially, all links between the advertiser and celeb (or blogger) must now be disclosed. Violators face $11,000 fines. The rules will most severely affect agencies such as PayPerPost, which -- as the name suggests -- pays bloggers every time they mention a client's product.
The new rules will prevent a repeat of the lengthy battle the FTC had with Garvey for much of the 2000s. At the beginning of the century, the FTC sued Garvey (and his infomercial client) over bogus claims for the Enforma System, including the use of a "nutritionist" who turned out not to be a nutritionist. The company settled for $10 million.
But Garvey fought on. Eventually, in 2004, the Ninth Circuit court of appeals agreed that a celebrity was "merely a spokesperson" and therefore not liable for the ads' content.
It was a humiliating defeat for the FTC, which usually wins deceptive advertising cases because it tends to go after the weakest bad actors: The small, fly-by-night operations who air the most extreme false claims on late-night TV.
The new rules will largely prevent a Garvey-type situation from recurring because ads in which a celeb talks about their experience with a product will need to carry "not typical" disclaimers.
That rule will heavily affect marketers such as NutriSystem, which relies entirely on celebrities who have had unusual weight-loss successes for its advertising.
Other new rules, per the FTC:
- advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect.
- "material connections" (sometimes payments or free products) between advertisers and endorsers â€" connections that consumers would not expect â€" must be disclosed.
- the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service.
- both advertisers and endorsers may be liable for false or unsubstantiated claims made in an endorsement â€" or for failure to disclose material connections between the advertiser and endorsers.