Pay For Undisclosed WOM Now. Pay Steep Fines Later.

Washington Post reports on the federal government’s oversight activity as it relates to one of the marketing industry’s hottest segments.

The Federal Trade Commission yesterday said that companies engaging in word-of-mouth marketing, in which people are compensated to promote products to their peers, must disclose those relationships.
The FTC said it would investigate cases where there is a relationship between the endorser of a product and the seller that is not disclosed and could affect the endorsement. The FTC staff said it would go after violators on a case-by-case basis. Consequences could include a cease-and-desist order, fines and civil penalties ranging from thousands of dollars to millions of dollars. Engle said the agency had not brought any cases against word-of-mouth marketers.

Meanwhile, Jason Calacanis is willing to pay $100 for information on Digg and Netscape users being paid to promote stories on the social bookmarking sites. It should be noted, Calacanis just reinvented Netscape in Digg’s image. It should also be noted that he no longer works for AOL, Netscape’s owner.