Reference no: EM131451483

Question: Could Google have launched Gmail in a way that would have avoided the media fi restorm over privacy? Explain your answer.

REVERB COMMUNICATIONS • Truth in Advertising

In October 2009, the Federal Trade Commission (FTC) announced its new "Guide Concerning the Use of Endorsements and Testimonials in Advertising," marking its first regulatory update since 1980. Concerned about the new trend of "official" blogs and social media sites that companies were setting up to create buzz around their products, the FTC now required all bloggers to disclose any financial relationship with the company whose products they were reviewing or face fines as high as $11,000. Critics, while applauding the intent to ensure planted reviews were being controlled, found the guidelines to be confusing for consumer and personal Web sites where advertising content and editorial content overlap. For example, if a blogger uses Google Adwords as a revenue source on his or her blog, the selection of advertisers is automated by Google's keyword "bots," and the blogger has no control over whether or not readers choose to click on the ad (generating pay-per-click revenue for both the blogger and Google). Should the blogger be obligated to disclose that he or she may be receiving revenue from an advertiser? The guidelines are vague on that issue, leaving advertisers and bloggers alike to wait for legal precedents to establish guidance on how the guidelines will be enforced by the FTC.

In August 2010, the FTC provided the first example of such guidance by settling a complaint with video game PR firm Reverb Communications, based in Twain Harte, California. Representing clients such as MTV Games, Ignition Entertainment, and Demiurge Studios, Reverb's performance fee often included a percentage of game sales. From the FTC's perspective, this relationship should have been disclosed under the 2009 guidelines. The complaint against Reverb alleged that between November 2008 and May 2009, Reverb posted reviews about their client's games on Apple's iTunes store "using account names that gave readers the impression the reviews were written by disinterested customers." A sampling of the allegedly fraudulent reviews included: "Amazing new game" and "ONE of the BEST." While there were no monetary penalties involved in the settlement, Reverb and its founder Tracie Snitker were required to delete any comments still on the Web and are barred from making similar review postings in the future without disclosing their affiliation with the parent company of the product they are reviewing.

As the first target of the new FTC guidelines, Reverb has received a great deal of presumably unwanted media attention over the complaint. Snitker declined most interview requests, and Reverb elected to post a statement in the comments section on every available blog and message board that covered the news of the settlement of the complaint. The statement took a very clear position on the issue: During discussions with the FTC, it became apparent that we would never agree on the facts of the situation. Rather than continuing to spend time and money arguing, and laying off employees to fi ght what we believed was a frivolous matter, we settled this case and ended the discussion because as the FTC states: "The consent agreement is for settlement purposes only and does not constitute admission by the respondents of a law violation." This issue was specific to a handful of small, independently developed iPhone apps that several team members downloaded onto their personal iPhones in their own time using their own money and accounts, a right and privilege afforded to every iPhone and iTouch user. Any iTunes user will understand that each time a product is purchased you are allowed to post one comment per product.

Seven out of our 16 employees purchased games which Reverb had been working on and to this the FTC dedicated an investigation. These posts were neither mandated by Reverb nor connected to our policies. Bottom line, these allegations are old, this situation was settled a while ago and had nothing to do with the clients that many outlets have been reporting. The FTC has continuously made statements that the reviews are "fake reviews," something we question; if a person plays the game and posts one review based on their own opinion about the game should that be constituted as "fake"? The FTC should evaluate if personal posts by these employees justifi es this type of time, money and investigation. It's become apparent to Reverb that this disagreement with the FTC is being used to communicate their new posting policy. We stand by the statement from the FTC that "The consent agreement is for settlement purposes only and does not constitute admission by the respondents of a law violation."