Regulating Viral Marketing

According to Financial Times.com, U.S. advertisers are bracing for regulatory changes they fear will curtail their viral marketing efforts through emerging media like online social media and blogs.

The Federal Trade Commission is reviewing new guidelines on endorsements and testimonials that would hold links in the word-of-mouth chain liable for untruthful or exaggerated reviews of products or services.

For example, if a blogger received a free sample of sunblock and then incorrectly claimed on their blog the sunblock cured their ache, the FTC could sue the company for making unsubstantiated statements and sue the blogger for making false representations about the company.

The advertising industry has argued that the revised regulations are too stringent and would stifle innovation in the emerging fields of social media and blogging. It remains in favor of self-regulation.

The FTC argues, "The guidelines needed to be updated to address not only the changes in technology, but also the consequences of new marketing practices. Word-of-mouth marketing is not exempt from the laws of truthful advertising."

Unfortunately, word-of-mouth marketing is a creature all its own. The FTC will find it difficult to regulate product gossip online or offline. Advertisers have been trying to just influence that viral gossip for decades, but, people talk, they blog, and read whatever they like.

The advertising industry has done an exemplary job of self-regulation and U.S. consumers are some of the savvies in the world. What self-respecting American consumer would make a purchase decision based solely on what they read on someone's MySpace page?

Whatever happened to "caveat emptor" (Let the Buyer Beware)?