As marketers more frequently look to recruit consumers brand agents to spread goodwill for brands, industry attorneys view buzz marketing as a likely area of regulatory involvement, especially around the issue of compensating people to participate in buzz programs when they fail to disclose their connections to marketers and agencies. While there is no legal precedent specific to word-of-mouth marketing, there are Federal Trade Commission guidelines for ads that are likely to apply.
"If the motivation for [an endorser] is to profit from his or her endorsement, that connection probably needs to be disclosed," said Douglas Wood, chairman of advertising and marketing law at Reed Smith. "But since disclosure undermines the value of buzz marketing, advertisers are in a Catch-22."
An FTC official said while word-of-mouth isn't something that the agency is looking at, disclosing commercial relationships is crucial to avoid violating the law. "The real question is whether consumers are being misled someway," said Rich Cleland, an assistant director of advertising practices for the FTC.
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