Executive Summary – The FTC decided it is going to go after bloggers who receive consideration for mentioning products or websites in their blogs without stating that they received any compensation for the mention in the blog. Sometimes a blogger will receive a free product in return for a favorable review and they do not mention they received the product as compensation. These new rulings will also affect facebook and twitter. The fines the FTC will impose go up to $11,000.
Analysis – This will affect blogs based in the USA. It will affect bloggers and advertisers based in the USA. The FTC has no jurisdiction when it comes to websites hosted out of the USA, advertisers based out of the USA and bloggers based out of the USA. The FTC said it is predominantly going to go after advertisers for this reason. American companies will not be able to promote themselves and their products this way because they will risk the FTC going after them.
Will this help the consumer? Yes a little. These social sites have been able to move penny stocks up in value and then the price can crash in what is referred to as a pump and dump scheme. This it should stop although there are already laws for this and the SEC enforces it so this casts a suspicious light on the FTC proposal. It seems that a lot of blogs are political and attack the elite like Obama. It seems they want to make it harder for these blogs and social sites to make any money while at the same time attacking the elite.
Obama has commented negatively about bogs on occasion. While on the one hand it seems favorable for the consumer and it is, it is also politically motivated to dry up the income stream of the bloggers. Much of this business will just move away from the US out of the reach of the FTC.