The Federal Trade Commission is moving forward to implement rules it put into place at the end of last year requiring anyone paid to provide an online endorsement or testimonial to make that clear to the audience. The rule sent a shudder down countless bloggers' spines as the wording implied they were subject to the rules as well. While the language does suggest that, one of the first cases the FTC has pursued suggests it had bigger subjects in mind.

In its first major investigation under these new guidelines, Reverb, a public relations agency hired by video game developers is settling FTC charges that it engaged in deceptive advertising by having employees pose as ordinary consumers posting game reviews at the online iTunes store, and not disclosing that the reviews came from paid employees working on behalf of the developers. "Companies, including public relations firms involved in online marketing need to abide by long-held principles of truth in advertising," said Mary Engle, Director of the FTC’s Division of Advertising Practices. "Advertisers should not pass themselves off as ordinary consumers touting a product, and endorsers should make it clear when they have financial connections to sellers."

Reverb provides public relations, marketing, and sales services to developers of video game applications, including mobile gaming apps. Between November 2008 and May 2009, the firm posted reviews about their clients' games at the iTunes store using account names that gave readers the impression the reviews were written by disinterested consumers, according to the FTC complaint. Reverb did not disclose it was hired to promote the games and that they often received a percentage of the sales.

According to Michael Davis-Wilson and Ilana Rubel at Fenwick & West, the implications of the Reverb settlement extend beyond the direct posting of online reviews. Although the FTC complaint did not name Reverb’s clients, under FTC guidelines, sellers may be liable for misleading endorsements of their products, the duo said in a client note. "The FTC's move here raises particular concern for companies that rely on word of mouth, especially early in a product’s lifecycle, when online buzz often begins with individuals connected to the producer - employees, friends, family, beta testers, etc."

It seems unlikely that a company would be held liable for unsolicited comments by connected individuals, they said, but a 'spread the word' campaign without proper disclosure could run afoul of FTC guidelines.