In a recent Corporate Counsel article, the authors describe a Federal Trade Commission ruling about the disclosure of connections between corporate advertisers and those who shill, directly or indirectly, the advertisers’ wares. 

In this particular case, a media firm working for Hyundai Motor America had given certain bloggers gift certificates as an incentive to include links to Hyundai advertising videos in their blogs and/or to comment, in advance, on Hyundai’s 2011 Super Bowl advertisements.  Some of the bloggers had not disclosed to their readers that the media firm had provided these (admittedly minimal) incentives for the bloggers to drop Hyundai’s name into their blogs.

Problem was, Section 5 of the Federal Trade Communications Act requires the disclosure of a material connection between an advertiser and an endorser, when such a relationship is not otherwise apparent from the communications containing the endorsement.  See 15 U.S.C. §45.  The FTC has explained this requirement in some detail in its aptly named “Guides Concerning the Use of Endorsements and Testimonials in Advertising,” found at 16 C.F.R. Part 255.

Fortunately for Hyundai, the FTC decided not to punish it for the conduct of the outside media firm, because (1) Hyundai had a robust corporate compliance program in place that barred such conduct, and (2) neither Hyundai nor the media firm had intended to deceive consumers.  The authors then use this little tale to point up the need for corporate compliance programs, particularly in the areas of antitrust and consumer protection (noting, ominously, that federal criminal antitrust fines exceeded $1 biiiillllion dollars in 2011).

The article, and the FTC’s investigation, raise a couple of interesting issues.  First, yes, I do believe that corporate compliance programs in the “Age of Compliance” serve multiple purposes, not the least of which is to meet the Government’s expectation that your clients have them.  Indeed, I, myself, have written on this topic in the past.  (FTC:  Please note my full disclosure of the connection between Me The Blogger and Me The Author of the Article, in case that wasn’t otherwise obvious.)  Having just attended an ABA conference that included an in-house counsel panel discussion on this topic, however, one might reasonably wonder just how much good such programs do.  On the one hand, they may prevent shenanigans before said shenanigans occur.  On the other, and as some in-house counsel noted at the conference, when was the last time you heard of the Government cutting a Fortune 500 company any slack in a criminal case, just because it had an expensive compliance program in place?  Just sayin’.

Second, and I have to ask:  Is this whole FTC thing just stupid?  According to the article, the bloggers were commenting on, and including links to, Hyundai Super Bowl ads.  Does that mean they were vouching for the quality and desirability of Hyundai vehicles?  And even if they were, ask yourselves these questions:  (1) Do you trust bloggers to give you the unbiased, unvarnished truth about anything?  I mean, they’re bloggers, for goodness sake.  (2) Do you buy products based on what someone says about the company’s advertisements?  (3) Do you buy a car because one guy in the local paper writes a good review of it?  (4) Is the FTC’s investigation patronizing?  Is this the Nanny State run amok?  Are we truly too stupid to decide for ourselves whether we like a commercial and want to buy the product?  Or whether we should believe, and/or agree with, anything that Me The Blogger just wrote?  Just sayin’.

Kurt Stitcher, a trial lawyer and former federal prosecutor, is a Partner in the Chicago office of Faegre Baker Daniels LLP.  Kurt's practice encompasses white collar defense and investigations, product liability, and commercial/business litigation.  He can be reached at kurt.stitcher@faegrebd.com or at 312-212-6526.
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