Transparency in Your Business – Legal or Otherwiseusiness – Legal or Otherwise

By Valerie Young

If you have a small business, or are planning to start one, the Federal Trade Commission (FTC) has issued new regulations that could affect you.

Essentially the new regulations require bloggers, celebrities, book reviewers and anyone who endorses a product or service where there is also an exchange of money or goods to disclose the relationship.

For example, say you blog about urban chicken farms. An author sends you his or her book on CPR for chickens. If you like the book and tell your readers that, because you did not pay for the book (or really even ask for it), you still got a free book so would need to disclose that.

Similarly, you need to disclose any affiliate relationships. That means if you have an online book store featuring books about chickens with “buy” links to Amazon, for which you receive a small affiliate fee, you must disclose that as well.

Finally, say you wrote an eBook on how urban chicken farmers could make extra cash selling eggs in the neighborhood. Some of your happy customers send you testimonials in which they say they regularly earn an extra $100 a month selling eggs. It used to be that you could simply say “Results not typical” and the regulators were satisfied. Not any more.

Problem or Opportunity?

A lot of people are upset about the new regulations, crying big government is out to get us. I see it differently. We all know Tiger Woods is paid to endorse Nike or American Express. But still, there are situations where, for example, I would like to know that the physician who appears in an ad for a pharmaceutical company is being paid for their endorsement.

Some of the new guidelines are still a little fuzzy to me. For example, I recently recorded a call where one of the people who graduated from my Passions into Profits Coach Training program talked about charging her clients $450 for a multi-week session. Is that a “testimonial” or simply information? Clearly I still have some homework of my own to do!

I do agree that if you are going to tell your blog readers that Crazy Face Chicken Feed is the only food you recommend — and you have an ongoing financial arrangement with XYZ — then your readers have a right to know. You instance you might say, “This blog is sponsored by Crazy Face Chicken Feed.”

What does concern me is that a lot of people will instantly make the leap from, “Oh, they’re getting paid” to “What they say must not be true.”

Maybe I’m naïve, but I like to think that most celebrities — or their agents — would not want to jeopardize their reputation to make a fast buck pitching a product. I assume Jamie Lee Curtis believes in Activia yogurt or that former Publisher’s Clearing House pitchman Ed McMahon was sufficiently satisfied that he was representing a reputable company.

I also happen to think consumers have a responsibility to do their due diligence before they make a purchase, especially a major one. Have people really won money with that sweepstakes? Are there statistics that support the claim that the product helps with digestive issues?

We’ve all seen the testimonials for business opportunities where a grinning person says, “I made $10,000 my first week stuffing envelopes from home.” That’s just bull.

Or if it’s a paid actor “posing” as an actual customer and using made up numbers, then I agree with the FTC. The consumer, i.e. you and me, need to know.

Having said that, I’ve certainly had weeks where I’ve made $10,000 doing legitimate work. So, assuming it is a real person, then it is entirely likely that they really did see those results. 

Even then, I’ve been in the business of helping people to change course for going on 15 years now. So I know that whenever someone is making a lot of money doing something, the results are never typical. Not because they are not necessarily untrue. The reason they’re not typical is because the people using the product, the system, etc. are different.

An urban chicken farmer selling organic eggs in Brooklyn who invests a mere 15 minutes a week into their business is going to make a lot less than someone who treats it like a part-time job and is out there every weekend at the farmer’s market or does a ton of networking.

When it comes to legitimate testimonials, I for one, like to know that it can be done, because if it can, then I figure if I am willing to hustle that I have a shot. But again, I do see where the FTC is coming from and how the abusers made some kind of regulations necessary.

If you want to learn more, Mary Engle at the Consumer Protection Agency put out a series of super short videos on the new endorsement guidelines with titles like “What do the new Endorsement Guidelines mean to bloggers” and “Is the FTC planning to sue bloggers.”

You can watch them here and once you do I think it will set your mind at ease:

http://www.ftc.gov/multimedia/video/business/endorsement-guides.shtm.

The Bottom Line

I get approached by companies wanting me to promote their stuff to my readers all the time. I pass on 80 percent. The ones I do endorse, I pass along to you. From now on you’ll see a notice whenever I have an affiliate or sponsorship arrangement.

Although it makes things a bit more cumbersome for business owners, and like I said, I know there will be people who will automatically be suspicious, and therefore never take advantage of things I know really could help them, I am proud of my 15 year reputation, so have to trust that it’s all good.

If you are a blogger or have a website or a newsletter that includes affiliates links as mine does, first and foremost, make sure that whatever you recommend or otherwise endorse is something you personally stand behind. It’s not worth jeopardizing your reputation or legacy to promote crap, no matter how much money someone is paying you.

So be fussy… very, very fussy.

The true test: Ask yourself, “Would I recommend it even if no money exchanged hands?” If the answer is yes, then go ahead.

Next, if you live in the USA, make sure you understand the new guidelines. Then consider putting together a list of criteria for deciding whether to recommend or endorse something and make that information available to your readers. Here’s what I did to spell out whether I’ll give something the Changing Course Seal of Approval.

And of course, if you are at all confused about the new guidelines, check with the FTC or with an attorney.