Ethics Warning for PR in FTC's Word-of-Mouth Ruling
Charting the future of public relations
Holmes Report

Ethics Warning for PR in FTC's Word-of-Mouth Ruling

About a month ago, the Word of Mouth Marketing Association released what it called “the WOMMA Ethics Assessment Tool,” an attempt at self-regulation in the form of a series of questions designed to help marketers identify and eliminate potential ethical pitfalls in their word of mouth marketing programs.

Paul Holmes

About a month ago, the Word of Mouth Marketing Association released what it called “the WOMMA Ethics Assessment Tool,” an attempt at self-regulation in the form of a series of questions designed to help marketers identify and eliminate potential ethical pitfalls in their word of mouth marketing programs before they are implemented.

Last week, one of the questions suggested by the WOMMA tool—“Does everyone working on our behalf use their true identity and disclose their affiliation with our company and agencies”—became more than just a friendly suggestion, when the Federal Trade Commission made it clear that anyone paid to endorse or promote a product via word-of-mouth must disclose the commercial nature of their relationship.

That’s a question that has equal relevance for other forms of public relations, and the fact that the FTC has indicated an interest in the answer suggests that the PR industry as a whole—not just those engaged in word-of-mouth campaigns—needs to ensure that it adheres to a strict code of ethics when it comes to transparency.

The FTC’s statement came into a complaint filed by Commercial Alert in October 2005 urging that government regulate companies engaged in buzz marketing practices. The FTC announcement was welcomed by WOMMA, which had urged the agency to recognize the distinctions between buzz marketing, which it says is “a legitimate marketing tactic and strategy,” and stealth marketing, “a practice we strongly condemn and oppose.”

Commercial Alert had cited two specific word-of-mouth marketing campaigns in its complaint. The first was an initiative launched by Sony Ericsson in 2002 to promote its T68i mobile phone and digital camera. That campaign enlisted 60 actors and actresses, paid by the company, to pose as tourists at top attractions in New York and Seattle. The actors would accost passers-by and ask them to take their photo using the camera—a way to generate buzz about what was at the time a new technology.

Commercial Alert also complained about Tremor, a marketing unit created by Procter & Gamble to take advantage of the growth of word-of-mouth, which has assembled a volunteer force of 250,000 teenagers who promote the company’s products to friends and relatives.

There is a significant difference between the two campaigns—one the FTC implicitly recognized in its response this week. The actors in New York and Seattle were paid representatives of Sony Ericsson, but did not identify themselves as such. Participants in the Tremor campaign, on the other hand, receive no compensation from Procter & Gamble (some do receive sample products) and a free to talk positively or negatively about the company’s products.

The FTC found that word-of-mouth advertising is already covered under existing FTC regulations that govern commercial endorsements. In a staff opinion, the FTC noted that word-of-mouth marketing could be deceptive if consumers were more likely to trust the product’s endorser “based on their assumed independence from the marketer.”

“The petition to us did raise a question about compliance with the FTC act,” said Mary Engle, FTC associate director for advertising practices. “We wanted to make clear… if you’re being paid, you should disclose that.”

The FTC said it would investigate cases where there is a relationship between the endorser of a product and the seller that is not disclosed and could affect the credibility and effectiveness of the endorsement.

The FTC’s ruling is most obviously applicable to more mainstream forms of public relations when companies provide support to external, non-profit organizations—front groups—to carry their message to a broader audience. Front group are used for precisely the same purpose as word-of-mouth—because they add credibility to an organization’s message—and there is no reason they should not be subject to the same regulatory scrutiny, even when their purpose is less directly commercial, such as when they are designed to influence the public policy arena rather than simply sell more product.

Any organization that receives funding from a commercial entity should reveal the nature and extent of that funding upfront in all of its communications. That means that those organizations should be open about any financial relationships they have when dealing with the media—every call with a reporter should start with making sure he or she understands the organization’s financial ties—and when they communicate directly with the public, via a website, for example. That means that the home page of the site should contain an easily found link to information about the organization’s finances.

If an organization lobbying on automotive issues receives financial support from carmakers, it needs to be absolutely transparent about that support. If a group underwriting research that questions the extent or cause of global warming receives financial support from the oil industry, it needs to explain that fact on every press release it sends out. If a researcher promoting a drug for a pharmaceutical company receives payment or holds stock in the company, that payment needs to be acknowledged on the front page of any papers published and before any interview with a reporter.

Companies that use the blogosphere should also exercise caution. It is likely, given this recent statement, that activities that in the past have attracted the scorn of bloggers—such as Edelman’s recent efforts on behalf of Wal-Mart—could in the future provoke the ire of the Federal Trade Commission.

As a matter of consistency, I believe these same principles should apply to organizations on the other side of the fence, and according to FTC rules, they may already do so in some cases.

For example, an activist group that receives funding from plaintiffs’ attorneys must surely have the same responsibility to reveal its commercial relationships as any other front groups, since any activity designed to embarrass or vilify a corporate foe can also have a commercial benefit for the group’s backers. Activists funded by labor unions may not be in quite the same situation in regulatory terms, since union communication may not come under the scrutiny of the FTC, but should certainly be held to the same ethical standards by the public.

Finally, it will be interesting to see how, in the light of its statement on word-of-mouth, the FTC continues to justify its attack on television stations that use video news releases.

The FTC’s statement on word-of-mouth appeared carefully worded to make it clear that the agency is interested only if a financial relationship exists between a company and a spokesperson. People who say nice things about a company by their own choice, without receiving either monetary consideration or goods in return are not likely to be subject to regulatory scrutiny.

Since television news stations receive no compensation for airing video news releases, it is hard to see why they have been singled out for FTC scrutiny despite the non-commercial nature of their relationship with the organizations whose VNRs they use (just as it is hard to see why print journalists who use print news releases have not come in for similar criticism).

The bottom line, however, is that public relations professionals need to exercise much greater ethical caution in any form of communication that attempts to use third-party individuals or organizations to enhance the credibility of their message, at least when money changes hands.

The PRSA’s code of ethics lists six core values (advocacy, honesty, expertise, independence, loyalty and fairness) but does not mention transparency—an omission that should be rectified. Some may argue that the pledge to “deal fairly with clients, employers, competitors, peers, vendors, the media, and the general public” implies an obligation to be honest and open about any financial relationships, the reality is that front groups proliferate at an alarming rate, and relatively few provide detailed information about their finances.

The industry could also benefit from an ethical questionnaire similar to the one recently established (see below) by the much younger—and apparently much-savvier—Word of Mouth Marketing Association.

Modeled on the WOMMA Ethics guidelines of honesty of relationship, opinion, and identity, the WOMMA Ethics Assessment Tool guides marketers through the questions they should ask before initiating a word of mouth campaign. The answers generated will quickly identify unethical actions and point out safeguards for avoiding them in the future.

“We’re empowering marketers to sort out the good ideas from the bad ones,” says WOMMA CEO Andy Sernovitz. “We’re ending the ‘don’t ask/don’t tell’ option for stealth marketing.”

One of the ongoing challenges for word-of-mouth marketers, Sernovitz says, is to ensure that all staff and contractors are aware of the ethics rules and are given the training to recognize an inappropriate program when it is proposed. “Unethical campaigns often happen when a junior executive isn’t fully aware of the ethics rules, or when agencies that use unethical practices are hired without the client understanding the implications.”

Honesty of Relationship
1. Do we insist that our advocates always disclose their relationship with us—including all forms of compensation, incentives, or samples?

Honesty of Opinion
2. Do we insist that all opinions shared with the public express the honest and authentic opinion of the consumer or advocate without manipulation or falsification?
3. Are those individuals who are speaking for us free to form their own opinions and share all feedback, including negative feedback?
4. Is all of the information provided to advocates, consumers, and the media factual and honest, and are all of our claims accurate? 

Honesty of Identity
5. Have we repudiated and forbidden all forms of shill, stealth, and undercover marketing?
6. Does everyone working on our behalf use their true identity and disclose their affiliation with our company and agencies?
7. Do we forbid the blurring of identification in ways that might confuse or mislead consumers as to the true identity of the individuals with whom they are communicating? 
8. Do we forbid the use of expressly deceptive practices from our employees/advocates, such as impersonating consumers; concealing their true identities; or lying about factors such as age, gender, race, familiarity with or use of product, or other circumstances intended to enhance the credibility of the advocate while deliberately misleading the public?

Taking Responsibility
9. If we use agents or volunteers of any sort, do we actively instruct them in ethical practices and behaviors and insist that all of those working under our instructions similarly comply with this standard? 
10. Do we instruct all advocates to repeat these instructions and responsibilities in the downstream conversation?
11. Do we have a plan to monitor any inappropriate word of mouth generated by our advocates?
12. Do we know how will we correct any inappropriate or unethical word of mouth done by volunteers or resulting from actions taken by us?
13. Do we insist that campaign organizers disclose their involvement when asked by consumers or the media and provide contact information upon request?

Respecting the Rules
14. Do we respect and honor the rules of any media we might use, including all such procedures and stipulations as may be deemed appropriate by specific websites, blogs, discussion forums, traditional media, or live events?  (Examples of actions that break the rules: violating the terms of service of any online site, spamming, violating privacy rules, or defacing public property.)
15. Do we prohibit all word of mouth programs involving children aged 13 and younger?
16. If our campaign involves communicating with or influencing minors aged 14 to 17, do we a) have mechanisms in place to protect the interests of those teens, and b) have parental notification mechanisms in place, where appropriate?

When Hiring an Agency
17. Does the agency subscribe to the same high standards of ethical behavior and practice, and are they willing to guarantee the ethics of their own work as well as that of all subcontractors?
18. Do they have reporting and operational review procedures in place permitting us to ensure full compliance with all ethical standards?
19. Have they previously engaged in unethical practices?
20. If they have ever engaged in such practices in the past, do they now prohibit them, and will they guarantee that they will not use employees who have engaged in fraudulent practices to work on our behalf?

As An Extra Measure of Assurance, Ask Yourself . . .
Would I be uncomfortable if my family or friends were involved in this campaign?
Is there anything about this campaign that we would be embarrassed to discuss publicly?


View Style:

Load 3 More
comments powered by Disqus