Do we really need the FTC to police buzz marketing?

I saw this featured article (Word-of-Mouth, Buzz, or Viral Advertising: The FTC Provides Guidance) on KidAdLaw today. It basically says,

“Failure to disclose compensation for a product’s endorsement could be a violation of Section 5 of the FTC Act because the omission is both material and likely to mislead the consumer”

The article is directly in relation to Viral Advertising, Word-of-Mouth marketing, and Buzz Marketing. I came up with two questions that I think you should ask yourself:

1. Do we need the FTC to police the endorsements? So far the blog community has “fried” anyone that was even close to breaking the “ethical code of disclosure”. Here is my favorite example from my company’s PR agent:  Dan Keeney and the Chocolate War!
   
   Dan recieved a paying gig after he commented on a blog and the bloggers “let him have it” for not disclosing his relationship. However, he had no relationship at the time of the comment post. Dan is trying his best to work with the cultural change.
   
   
2. Is Word of Mouth Marketing Illegal? The FTC is treading a little thin. If someone gives you a “test product” like a demo site (go back to Claude Hopkins and see his sales best practices)… and you recommend it to a friend is that unfair and misleading business practice? If I write a post about an organization that I work with, like Houston Ad Federation, do I have to disclose details of my arrangement?

To be fair, they probably are only shooting for blatant violations meant to mislead.

“The FTC has declined to provide sweeping policy statements, and instead intends to investigate at each case individually to determine whether a reasonable consumer is likely to be mislead by the omission.”

Or at least I hope so. If they intend to try to rain in social networks and litigate… even “children” networks… They are in trouble. You can’t stop a tornado.