Broadcast testimonial advertising has a deservedly bad reputation – it’s common sense that one shouldn’t endorse what they wouldn’t use – but the practice can be even more insidious on the internet.
The FTC has fined a provider of guitar instructional DVDs for not only soliciting rave reviews, but paying the reviewers a commission for any sales generated.
Here’s how the FTC lays out its case against Legacy: “Legacy Learning advertised using an online affiliate program, through which it recruited ‘Review Ad’ affiliates to promote its courses through endorsements in articles, blog posts, and other online editorial material, with the endorsements appearing close to hyperlinks to Legacy’s website. Affiliates received in exchange for substantial commissions on the sale of each product resulting from referrals. According to the FTC, such endorsements generated more than $5 million in sales of Legacy’s courses.”
The FTC explained that it “…charged that Legacy Learning and Smith disseminated deceptive advertisements by representing that online endorsements written by affiliates reflected the views of ordinary consumers or ‘independent’ reviewers, without clearly disclosing that the affiliates were paid for every sale they generated.”
The result is a $250K settlement payment made by Legacy to the FTC, along with reporting conditions on affiliate marketing arrangements and commissions paid to them.
“Whether they advertise directly or through affiliates, companies have an obligation to ensure that the advertising for their products is not deceptive,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection. “Advertisers using affiliate marketers to promote their products would be wise to put in place a reasonable monitoring program to verify that those affiliates follow the principles of truth in advertising.”
RBR-TVBR observation: When we were becoming aware of the world outside our play range, it was common to observe that to err is human, but to really screw up you need a computer. Apparently a related comment can also be made: to run a deceptive ad is human, but to run a really deceptive ad, you need a computer.