Today, I attended via webcast the FDA’s hearings on the use of social media to promote medical devices and drugs. The hearings started at 8:00 this morning and I listened uninterrupted until around 3:00, and then off and on after that. The speakers included drug companies (including some that also make cosmetics, such as Johnson & Johnson), medical device manufacturers and suppliers, physicians groups, health-focused websites and bloggers (all sponsored by drugs and medical device companies), industry and advertising trade organizations, public interest and consumer groups, attorneys and social media strategists.

An “individual consumer” is listed as a speaker, and I presume she will speak tomorrow. Each speaker spoke for an allotted period of time (some were allotted a lot more time than others), and the FDA officials present were given a chance to ask questions after each presentation. The FDA representative were fully engaged and asked a lot of good questions on all sides of the issues presented. The hearings will conclude tomorrow but I will not be able to attend. The FDA has promised to make a full transcript publicly available (though it’s not clear whether there will be a charge for them). When it does, I will share the link with you, along with more of my impressions.

While this 2-day round of hearings concerns drugs and medical devices, it is my belief that whatever the FDA does in these areas will form at least some of the basis for what they eventually do where food and cosmetics are concerned. I want to make sure that small and independent businesses are positioned to positively impact the process, and informing ourselves at the hearing stage is the first step in that process. Note that I am not an expert in the drug and medical device field so I am sort of learning as I go. If anything published here is incorrect or requires clarification, I will make sure that happens in a way that fully and fairly informs you in future blog posts.

While a variety of views were expressed today, and there are numerous differences of opinion, there we some consistent themes. Here is a quick wrap-up of my initial impressions.

1. Levels of Corporate Responsibility. Everyone seems to agree that full and complete disclosure and transparency must exist with respect to any promotional content that is created or sponsored (directly or indirectly) by drug and medical device companies (I’ll call them “pharma” for short). From there, the suggested levels of corporate disclosure responsibility differ greatly.

   Some speakers (in particular Diana Zuckerman of National Research Center For Women & Families) suggested that companies should be responsible for content whether or not they actually sponsor it, and whether or not they even actually know about it. Ms. Zuckerman suggested some sort of social media user fee in order to fund FDA regulation in this area. (This was a very scary proposition and I’m keeping a close eye on such suggestions.)

   Other speakers, predictably pharma companies, were less willing to embrace the notion that they should be responsible for third party content over which they have no real control. Non-manufacturer companies like health-focused websites were very concerned that whatever action is taken should not affect their ability to maintain the pharma sponsors that form the backbone of their business models.

2. Wikis. Wikis, online portals that can be edited by anyone, regardless of expertise, were the subject of much discussion. Everyone agreed on the power of wikis, including Google Side Wikis, and most seemed to agree that they present potential problems where drugs and medical devices are concerned because anyone can modify wiki content at any time, and no special expertise is required in order to do so.

   There was also discussion of Wikipedia’s policy to delete promotional material, and how, in practice, that does not always happen. It was clear that the sort of “crowdsourcing” through wikis presents significant concerns as data continues to indicate that consumers rely largely on the Internet to collect health-related information.

   The obvious issues revolve around corporate responsibility for third party content on wikis — what responsibility do companies have to monitor the content? What responsibility do they have to actually force the removal of content that is incorrect? No one had good answers to these questions, but they are issues for pharma, just like they are issues for all businesses large and small.

3. 3 C’s. Rohit Bhargava, Senior Vice President, Digital, Strategy & Planning Group, Ogilvy 360 Digital Influence (who also maintains his own blog here), offered an interesting approach. He suggested a “3 C’s” approach to determine a company’s responsibility for online promotional content.

   (1) Creation: If the company created the content and the content has not been altered by third parties in any way, but instead exists in its original form, the the company is fully responsible for the content.

   (2) Collaboration: If the company worked directly or indirectly with the creator of the content to create the message, the company is responsible for the content and full disclosure and transparency must apply. The question is, of course, what constitutes this “full disclosure.” There is discussion of a “one-click” mechanism that allows people to view the content, and then with “one click,” be taken to an authoritative site with all of the disclosures and risks fully addressed. (Some people like this idea. Consumer groups tend to think it does not go far enough.)

   (3) Compensation: If the company funded creation of the content or somehow compensated the creator of the content, the company is responsible for the message and full disclosure is required. (Again, “what is full disclosure” is the issue.)

   Unless the promotional content fits one of those categories, Bhargava urged, then that company cannot be responsible for that content. While it benefits everyone for companies to correct or even remove misinformation, one cannot expect a business to police the entire Internet, and/or be held responsible for content that business cannot remove or modify themselves. You can read Bhargava’s post about today’s hearings at his Ogilvy 360 blog.

Challenging Issues

These issues are challenging indeed, and this post barely scratches the surface. The hearings this week concern drug and medical device companies specifically, and even though companies participating in those industries are regulated very differently than companies in the food and cosmetics industries, the core questions are very similar. What if third parties publish content about your products or the ingredients used in them, and that information is incorrect or somehow causes harm to someone else? Are you responsible for that under all circumstances?

What if you are? What if you ask the third party to remove the content, but they refuse? Are you still responsible for the content? are you responsible at all if you did not have direct involvement in the creation of the content? Or are you only responsible if you participated or somehow sponsored or supported the creation of the content? same. What disclosure rules should apply?

Is your head spinning? Mine is.

What About Small Businesses?

One thing that bothered me about the hearing today is the the phrase “small business” was never uttered. I know that most drug and medical device firms are not small and independent business owners. But like all federal agencies, the FDA is under Congressional mandate through the Regulatory Flexibility Act to specifically analyze the impact of their actions on small businesses and to seeks the least burdensome means of regulation so that small businesses are no unnecessarily adversely impacted.

It seems to me that the FDA cannot do that on this issue unless it actually hears from small businesses. I think that a small business or an entity representing small business interests would have been a positive addition to today’s hearings. I’m not sure what can or should be done about that where the drug and medical device issues are concerned, but since the food and cosmetics industries are composed of a very large number of tiny businesses, we will have to see what can be done to get a seat at the table when the FDA turns its attention to food and cosmetics.

Remember, if you want to tune in tomorrow morning, you can do so at this link.

Oh! By the way, if you want to purchase a DVD of the proceedings, the price is only $140 at this link. I bet you know what I’ll have to say about that when I get the chance, don’t you?

Question: What do you thing of all of this? Do you have any opinions one way or another? If you tuned in to the hearings, please feel free to fill in what I might have left out.

On September 23, Senator Al Franken (D-Minn) introduced the Household Product Labeling Act. You can read the full text here (only 4 pages — yay!), and you can read the Senator’s press release here.

The Act requires that the product label for all household cleaning products include all of the ingredients in that household cleaning product. “Household cleaning product” is defined as follows: household cleaning products, air fresheners, deodorizers, floor and furniture polish, dishwashing soap, drain cleaners, laundry detergent, dryer sheets, epoxies and paints or stains.

The language in this bill is pretty straightforward, but there are a few issues that may or may not need to be addressed as we move forward. Here are some of them:

1. Ingredients is defined as “any fragrance, dye or preservative, and any component of such fragrance, dye or preservative.” My concern is that if your fragrance, dye or preservative supplier has a patent on the fragrance, dye or preservative, or considers the components a trade secret, they may not disclose them to you. If that happens, then you cannot comply with this Act.

2. Is a candle an air freshener? I think room sparys are air fresheners, But what about a candle? If so, and you can’t get fragrance components from your supplier, you cannot comply with this Act as it is currently written.

3. There is a provision that gives the Consumer Product Safety Commission the power to designate other “similar consumer products” subject to the Act at its discretion (or I supposed after rulemaking.) This is very broad and essentially allows them to sweep in any other products they deem fit whenever they want to. This may (or may not) leave too much to chance.

Question: What do you think of this new bill? Are there any issues I may have missed? Do you make any products that are covered by it? Can you get the specific ingredient lists for all of the components of those products? How would this bill, if passed into law, affect your business?

I am pleased to announce that, on December 3 and 4, I’m leading another delegation to the US Food & Drug Administration (FDA). The purpose of my visits is to share small business perspectives on pending cosmetics legislation, and also on current rules, regulations and current events affecting the cosmetics industry.

This is my second trip, and it comes after months of new developments where legal issues affecting small and independent business owners are concerned. This time, I will be accompanied by longtime IBN member Lela Barker of Bella Lucce (who came on my last trip) and Leigh O’Donnell, president of the Handcrafted Soapmakers Guild.

Why This Trip Is Crucial

More and more people see the wisdom of owning a small business of their own, and technology makes it easier and more practical for small businesses to get underway. As a result, there are thousands more competitors in every industry than there were just a few years ago, and many of the new entrants are very tiny, often home-based, businesses.

As these new participants come into the market, lawmakers and policymakers are not equipped to keep up with changing industry landscapes on their own. Instead, they do what they’ve always done — meet with the same lobbying firms and large business representatives to discuss legal and policy issues. While small businesses compete in the same industries as those large companies, and they are regulated in the same ways, small companies operate very differently from big companies.

Large companies and lobbying firms cannot speak for small companies. In addition to being their direct competitors, they also have no idea how small companies operate. Congress is therefore at a huge disadvantage when it comes to passing new laws. After all, if they don’t have any information about small companies in a particular industry, how can they be expected to pass laws that take their unique interests into account? They can’t.

And yet, the same “one-size-fits-all” laws and regulations do not work for an entire industry the way they used to. As a result, it is urgent that small companies participate in the process. We can’t wait around on the sidelines for a hammer to drop. History has shown that the stakes are too high for that.

History Need Not Repeat Itself

Consider what happened with the Consumer Product Safety Improvement Act of 2008 (CPSIA) (PDF), which requires that the Consumer Product Safety Commission require that all products designed for children ages 12 and under be tested for lead before they can be marketed in the United States. (You can listen to an Indie Business Radio Show episode devoted entirely to CPSIA at this link.)

CPSIA, which originated in Energy & Commerce, was signed into law by President Bush in August 2008 in order to curb the behavior of very large companies that were importing toys made in countries with unacceptable levels of lead content. The safety testing requirement is designed to force companies to produce safer products, which in turn benefits consumers.

While everyone agrees that the law has noble goals, since the same law applies with equal force to all market participants, even the tiny companies that were not contributing to the problem, the law ended up forcing small companies out of business because they could not afford the expensive testing. These little companies did not import toys or toy components. In fact, many of them made children’s products for years in small manufacturing facilities in small towns throughout the nation. Many of them were women-owned companies that made things like baby blankets, children’s hair accessories, and dolls. They did not use lead or lead by-products at all. And they made products in very small quantities.

Even though the law was passed in 2008, most people didn’t know about CPSIA until January 2009 when the CPSC began proceedings to create the rules that would be used to enforce the law. At that time, the small manufacturers rose up in protest, but by then, it was too late. The law had passed and the CPSC had no choice but to do what Congress told it to do.

An after-the-fact rally, threatened class action suit and several Internet petitions could not change what Congress had enacted. This terrible consequence points out how vitally important it is for small businesses to remain active in the legislative process so they can educate lawmakers about their businesses before new laws pass.

And this is what our trips to Energy/Commerce and the FDA are all about. For those just joining in, here’s a short historical summary of the events leading up to our trip.

1. April 2008. Word began circulating that the Energy/Commerce was circulating a draft of the FDA Globalization Act of 2008. I immediately got my hands on a copy and identified several items of concern. This video summarizes my very first impressions.In brief, I was concerned about 5 things: (1) a requirement that the current “Good Manufacturing Practices” (GMP), which are now guidelines, be made to apply as law, across the board, to all cosmetics manufacturers regardless of size or annual gross sales; (2) a requirement that all companies pay an annual fee of up to $12,000; (3) a requirement that all companies report “anticipated adverse events;” (4) the treatment of cosmetics in in similar fashion to the way other FDA-regulated products — food, medical devices and drugs — each of which is regulated very differently from cosmetics; and (5) the timing of a one-size fits all law that did not take into intersection between technology and the current recessionary economy, which are the combining to create new opportunities for people to pursue the American dream.Hearings on the draft bill took place on April 24, 2009.
2. June 2008. On behalf of IBN, I issued a press release criticizing the draft of the FDA Globalization Act of 2008.
3. May-July 2008. IBN Member Mobilization. After analyzing the legal issues involved, on July 24, I sent this letter (PDF) to Energy & Commerce on behalf of my IBN members. By August, we had collected over 4,000 comments and signatures from people who opposed the draft of the new law.
4. August 2008. First Delegation To Energy & Commerce and FDA. On August 5, I led the first delegation to Energy & Commerce and the FDA to share my members views about the current state of cosmetics regulation and how the draft bill, if passed into law, would affect them. I was delighted to be accompanied by a proactive and well-spoken group of small business owners who thoroughly articulated our positions and spoke eloquently on behalf of small business owners nationwide. These women deserve special recognition for traveling thousands of miles at their own expense, taking valuable time away from their businesses to speak for other small business owners.They are: Kayla Fioravanti of Essential Wholesale, Lela Barker of Bella Lucce, Anne-Marie Faiola of Bramble Berry and Jamila White.One of the first things that became clear to us upon arrival was how interested the Congressional staffers and FDA directors and deputies were to hear from us. They took notes, asked questions and began to understand the dynamics of small business ownership in a new way. We remained engaged with them throughout the rest of the year.

   The Soap Guild eventually joined our effort, and in October, IBN and the Soap Guild sent this joint letter (PDF) to Energy/Commerce to further elaborate on our position and policymakers were to hear from us.

   We sent a joint supplemental letter in February of this year.

   Our efforts continued through the end of the year. During this time, IBN members called and emailed their Congressional representatives to share their concerns that, if it became law, the FDA Globalization Act of 2008 would put them out of business for no reason and with no corresponding consumer benefit.

5. January 2009.In January 2009, the FDA Globalization Act of 2009 was introduced as HR-759. The bill was substantially different from the 2008 draft in many ways.First, instead of applying current “Good Manufacturing Practices” as law across the board to all cosmetics manufacturers, it empowered FDA to promulgate new GMP. This gives companies of all sizes an opportunity to urge FDA to change GMP to accommodate different manufacturing styles.Second, the annual fee was done away with completely. Imagine our excitement about that one!

   Third, the “anticipated adverse events”  requirement was changed to be more reasonable. While we’re certain Congress heard from people outside of our community of small manufacturers, we also know that the changes in the 2009 Act are a direct result of our advocacy efforts.

6. June 2009. In June, Energy & Commerce removed food entirely from HR 759 and began to focus efforts there via the Food Safety Enhancement Act of 2009. Drugs, medical devices and cosmetics were put on the “back burner” so that food issues could be sorted out via the food-specific legislation. We are all but certain that Energy/Commerce is poised to circulate a 2010 Act, and we believe it is highly likely that the cosmetics portion will be separated out as the subject of its own piece of legislation. The time is obviously now, to return and see how the wind is blowing as we bring Congressional staffers us to date on how our industry is growing and thriving.Throughout the summer and until now, I am also seeing increased activity from consumer groups that are spreading untruths about how FDA regulates cosmetics in the United States. In particular, the Campaign For Safe Cosmetics, an organization I have reached out to on numerous occasions — to no avail — in an effort to find common ground on behalf of small cosmetics companies.While most of their fear mongering points blame at large companies, the adverse impact is felt by small manufacturers in large part because consumers don’t always know enough about the industry to know how differently small companies operate from larger ones. I feel it is important to alert Congress and FDA to these issues so they can take them into account as they address the coming changes.

In light of these developments, I recommended to my members that a second visit to Energy/Commerce and FDA was in order, and those visits will take place on Thursday and Friday of this week. We will also be meeting with representatives from the Personal Care Products Council, the oldest trade organization serving the interests of the world’s largest cosmetics companies. While our manufacturing practices and philosophies are quite different, it is the same set of lawmakers and the same regulatory agency that we must deal with.

It is important that we do our part to ensure the free flow of information and work together, if possible, to urge passage of laws that benefit consumers while encouraging a level playing field for all industry participants. It is possible we will be able to meet with at least one representative from the Small Business Administration but I’m still sorting that out at the moment.

While the focus of our meetings will be HR 759, you can see that this is not just about cosmetics. It should be clear to everyone reading this that the issues are far bigger than cosmetics.

This is about men and women, mothers and fathers, young people and old people, and anyone who wants to create a better life for themselves and their families.

Technology is opening up new opportunities for small businesses to be successful. The barriers to entry in many industries have fallen drastically, thus paving the way for new companies that would not have been able to even start just a few years ago.

I firmly believe that the promise of technology can only be fully realized if lawmakers, policymakers and regulators understand that

the fact that to companies compete in the same industry does not mean that it is in the public interest to regulate them in the same exact way.

It’s not enough to simply say, as the Regulatory Flexibility Act requires, that the interests of small businesses are taken into account when new laws pass. More than that is required.

What’s required? You and me, that’s who! We cannot blame Congress and regulators for regulating us out of business if we are not at the table when the laws and regulations are passed. We have to show up. We have to introduce ourselves and participate in the process.

Complaining about how awful laws are does nothing to change them. Whining about the impact of bad legislation after the fact may result in lots of conversation and sharing of viewpoints, but it does nothing to change bad legislation. Bad-mouthing regulators for doing a poor job of regulating, and then refusing to communicate with them, perpetuates the problem.

We have to show up. So that’s what we plan to do this week. And we plan to do it over and over again, and we plan to ask for your help. Won’t you join us?

Question: What do you think of these issues? Are there other things you would like us to discuss? What have we missed?

[An article about this bill was originally published in April 2009 at my old FDA Globalization Act blog. Due to a technical glitch, the article did not transfer here. This is what I recall of that post.]

In April 2009, Senator Kirsten Gillibrand (D-NY) introduced the “Safe Baby Products Act of 2009 (PDF) requiring that the Food & Drug Administration (FDA) test cosmetics and personal care products that are likely contaminated with impurities or contaminants, including several ingredients specified in the bill.*

The bill is aimed specifically at products intended for children aged 7 and under such as baby shampoo, baby bath, lipstick, nail polish, lotion, cream, sunscreen, liquid soa, and baby wipes). The bill requires Congress to submit the test results to Congress and to make them public.

The bill also requires that the FDA establish a second set of good manufacturing practices (there is already one set of GMP that applies as a guideline to cosmetics in general) for each impurity or contaminant listed, by which companies using those ingredients can reduce or eliminate the use of those ingredients by switching to alternate ingredients or changing manufacturing processes to reduce or eliminate the ingredients.

According to a press release at Senator Gillibrand’s website, the bill was introduced in direct response to the Campaign For Safe Cosmetics’s “Toxic Tub” report.

In a phone call last week with Senator Gillibrand’s staffer assigned to the bill, I was informed that no formal action is being taken on the bill currently. I am monitoring progress and will post any updates at this blog.

*1,4–dioxane, nitrosamines, polycyclic aromatic hydrocarbons (commonly referred to as ‘‘PAHs’’), acrylamide, ethylene oxide, dioxin, 1,3–butadiene, formaldehyde, lead, and hydroquinone.

Yesterday, Kayla Fioravanti of Essential Wholesale (one of my sponsors) posted a useful summary of how household products, and cleaning products in general, are regulated in the United States. Her post points out one of the significant challenges to small and independent business owners when it comes to digesting and comply with regulations. Namely, that a single product could possibly be regulated by multiple agencies simultaneously.

And even in cases where it turns out that a product is not regulated by multiple agencies, due diligence requires that all manufacturers conduct research in order to confirm that. According to Kayla’s research, some of the agencies that regulate cleaning products are the Environmental Protection Agency, the Consumer Product Safety Commission and the Department of Agriculture.

While most of these agencies would not be impacted by the newly introduced Household Product Labeling Act, all businesses — even very small and independent ones — that manufacture consumer products must be aware of their existence and understand generally what types of products they regulate so that they can make informed decisions about launching new product lines and planning for future growth and expansion.

If you make any kind of cleaning product, whether for consumer or industrial use, Kayla’s post is a good resource.

Question: Do you manufacture any products that could fall under the purview of any of the agencies that regulate cleaning products? If so, how do you keep track of all of the laws, rules and regulations?

On October 29, the FDA sent a warning letter to Procter & Gamble concering their sale of combination over the counter (OTC) drug/dietary supplement products. Without making your eyes glaze over, the problem with this is that drugs must be approved by the FDA before they can be sold. Dietary supplements do not.

The FDA’s position is that when a dietary supplement is combined with a drug and sold together as a single product, the combination renders the entire product a drug. And since the dietary supplement portion of the product has not been tested and proven as safe when used in combination with the drug part, the product cannot be sold in its entirely unless and until the entire product has been approved.

Like the FDA/FTC letter to Dr. Weil from earlier this month, and the suspension of the Smart Choices labeling program, this action highlights that the FDA is stepping up its enforcement of existing law. Overall, this is a good thing, especially considering the fact that several new bills in Congress would change the way the FDA is required to perform its duties as regulator.

It’s generally a good idea to enforce the laws already on the books before you have to starting enforcing new ones.

In this post, I told you about the FDA/FTC warning letter to Dr. Andrew Weil. In this post, I want to tell you about the voluntary suspension of a food labeling program by the above companies. The suspension is the ultimate result of a letter from the FDA to the companies (see here) which called into question claims made through the program.

Specifically, that such programs may mislead consumers about the health benefits of certain foods, and it told manufacturers it will crack down on inaccurate labeling. It did not criticize specific products or label programs or give a timeline for enforcement.

Several media outlets are covering the story, the Chicago Tribune and Forbes.com to name a few.

This development is more clear evidence that the FDA is taking an entirely new approach to reviewing the labels of products it regulates.

I have scheduled an IBN member conference call to review applicable laws on November 5 at noon New York Time.

Tomorrow and Friday, the US Food and Drug Administration (FDA) will hold public hearings to provide an opportunity for what it calls “broad” public participation and comment on promotion of FDA-regulated medical products (including prescription drugs for humans and animals, prescription biologics, and medical devices) using the Internet and social media tools. The hearings will take place at the National Transportation and Safety Board Conference Center, 429 L’Enfant Plaza, SW., Washington, DC 20594, from 8:00 until 5:00 each day.

A live webcast link will be made available at this link.

It is my belief that much of the information shared and discussed this week will form the basis for similar hearings where other FDA regulated products are concerned, namely food and cosmetics. I plan to watch as much of the hearing as possible, and then share the information with you.

For more information on the hearings, including an agenda and list of speakers and FDA panelists, click here.

Last week, the Federal Trade Commission (FTC) issued Guides Concerning the Use of Endorsements and Testimonials in Advertising (PDF). The Guides were issued pursuant to the FTCs authority, as granted by Congress in Section 5 of the FTC Act, 15 U.S.C. 45, to protect consumers from deceptive trade practices with regard to endorsements and testimonials in advertising.

The Guides, which take effect on December 1, 2009, are the first updates to the advertising guidelines since 1980. This post provides an overview of the Guides and what they mean for small and independent bloggers and business owners. While I am an attorney, this summary does not provide legal advice for your specific situation. If you need a legal opinion about how the Guides apply to your business, please consult an attorney. (I can help you find one if needed.) The Guides consist of 81 pages, and this post was produced after one reading. It may contain errors, and if and when any are found, I will update the post. If you want to skip my introductory commentary and go straight to the Guides, then scroll down to “What The Guides Say.” If all you want is “The Quick And Dirty,” then scroll down to that heading.

Background: Your New Career As Publisher

Last year, I published a post entitled, “Your New Career: Publisher.” In it, I said:

To succeed in business today, …you have to use the Internet to connect with people. You have to be heard above the noise by creating genuine opportunities for your customers to interact with you and with each other. Thanks to technology, this is neither difficult nor expensive. You have to be your own media outlet, providing your target audience with the kind of interesting content that draws them in and connects them to you.

The year before that, in a post about how to pitch your products to bloggers, I said this:

If you pay a blogger to review your product, that’s an advertisement, not a product review. Reputable product reviewers almost always post an editorial policy at their site so you can see whether they require or accept payment before they post a product review. Readers are savvy enough to know that if money changes hands, they are not getting an objective product review. For maximum credibility, check the blogger’s site to see if they tell their readers that they do not accept payment in exchange for reviews.

The promulgation by the FTC of the new Guides formally merge the concepts in my posts by recognizing that today, everyone is a potentially profitable media outlet and, as such, has a responsibility to exercise their influence in ways that are honest and transparent. Because of the Internet and other new technologies, you and I have the power to compete in meaningful ways for the attention of people who were once a captive audience for large, multi-national corporations.

It is not now, nor has it ever been, legal for anyone to lie in order to sell a product. That’s nothing new. What is new (well, not that new — see below) is that today, there’s a whole new cast of characters when it comes to advertising. In years past, when companies wanted to spread the word about their products, they purchased an ad.

Businesses competed to purchase eyes and ears in the form of radio listeners, television viewers and magazine and newspaper readers. Those willing to part with enough money enjoyed a certain amount of time to advertise products and services to a certain number of eyes and ears. That’s how traditional advertising works.

The Media Is You! Today, eyes and ears are no longer glued to traditional television shows, radio programs, print magazines and newspapers. Instead, they are everywhere, including on my blog and yours, and on my radio show and yours, and on my YouTube pagee and yours, and on my Twitter page and yours, and on my newsletter and yours. Since eyes and ears are a moving target these days, traditional advertising no longer cuts the mustard as it once did.

Today, the potential for deception exists not only in regard to traditional advertising, wherever it may appear, but also in regard to endorsements that appear in our blogs, newsletters, Twitter pages, social networks, etc. The newly issued Guides expand what most of us think of as “the media” to include blogs that are owned by your average, everyday consumer. They also expand what most of us think of as “advertising” to include paid testimonials and celebrity endorsements that appear in blogs that are also managed by regular folks.

The law has not changed, but the group of people who fall within the purview of it has expanded to include a type of media outlet that was not contemplated when the law was enacted. Now, bloggers, social networkers and newsletter publishers like you and me are specifically covered by the FTC’s false and deceptive trade practice laws. Interestingly, the new Guides are designed to protect us as consumers, and simultaneously regulate us as bloggers.

However awkward and ironic that may be, bloggers like you and me really aren’t so “new.” I’ve been reviewing consumer products since the publication of my first online newsletter on January 16, 2000, when I reviewed candles, handmade soap and men’s facial toning spray. These products were given to me for review by members of IBN. (Oooops! Didn’t disclose that …) Over the years, I’ve published thousands of product reviews in my newsletter, at my blogs and on various social networks including IBN’s. I bet many of you have too!

What The Guides Say This section provides a high level overview of what the Guides say about how particular content will be treated when it amounts to an endorsement at your blog, social network or other online New Media outlet. If it is an endorsement, certain disclosure requirements apply. If it is not an endorsement, the disclosure requirements do not apply.

The Kind of Content Covered: “Endorsements” Rather than look at “who” is covered by these Guides, it’s best to look “what” is covered by the Guides. The central issue is what kind of content is covered. This is so because, no matter who you are, if the content you produce fits a certain description, it is an endorsement and the Guides apply. And they apply with equal force whether you are Suzy Homemaker or Oprah Winfrey. If you manage a New Media outlet, your first question will be whether particular content in your publication is covered by the Guides. Here’s the answer. If it is an endorsement, it’s covered by the Guides and must comply with them. If it is not an endorsement, it is not covered by the Guides. The Guides define an endorsement as:

… [a]n advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser. The party whose opinions, beliefs, findings, or experience the message appears to reflect will be called the endorser and may be an individual, group, or institution.

This is a fancy definition, I know. But we all pretty much know an ad or an endorsement when we see one. In essence, it boils down to the following:

if you were paid to publish the content, (either in cash or in the form of free products or anything else of value), the content is an endorsement, and the existence of payment must be disclosed if you have an ongoing relationship, such as an independent contractor arrangement with a network marketing company, and you publish content about their product or service, the content is an endorsement, and the relationship must be disclosed if you publish content as part of an organized word of mouth marketing program at your blog, social network or other New Media outlet, the content is an endorsement, and you must disclose the fact that the content is part of an organized campaign if you regularly review products that you receive from a particular company, type of company or group of companies, the content is an endorsement, and you must disclose the fact that your regularly review products that are a part of a particular company or group

The Guides are far more detailed than this, and they contain specific examples and nuances designed to help you as a content producer or advertiser decide whether a particular piece of content is or is not an endorsement. You can read these examples at your leisure, starting on page 61. The Guides state that all scenarios will be reviewed on a case-by-case basis. Chances are you will find a situation that resembles yours in the Examples starting at page 61.

Product or Service Suppliers: Advertisers Because artisans, crafters and Indies are often both content producers and suppliers (sometimes even in the same article!), it is important to know how your actions are viewed by the Guides under both scenarios. When you are supplying the products that someone else is reviewing as part of a social media campaign, you may be considered an advertiser, and as such, your conduct is covered by the Guides.

The important thing to remember here is that, as the advertiser, you can be held liable for false or unsubstantiated statements made through endorsements, even if you are not the direct source of the false statements.

For example, if you work with a New Media outlet to create a social media campaign to promote your products or services, you must make sure not only that the owner of the Media Outlet makes disclosure, but also that the others promoting your products at the site make disclosure. Thus, when you know that people at a blog or social network will be spreading the word about your products or services, you should make sure that they know about the disclosure requirements and do not violate them. You should also insist that the owner of the New Media outlet where your campaign appears monitors activity there to ensure that proper disclosures are made by all, and that any misstatements are immediately corrected.

Type of Disclosure Required The Guides say that, when content amounts to an endorsement, the relationship between the content producer and the product or service being reviewed must be fully disclosed so that anyone consuming the content is aware of the relationship. The disclosure must be meaningful. In other words, it must be clear, and conspicuous and understandable to the average consumer.

The Guides do not specify particular language that must be used in a disclosure. For a single product review, it could be as simple as disclosing that the product you are reviewing was sent to you at no cost to you, along with a request to review the product. The more involved a campaign is, the more detailed the disclosure may need to be.

For example, if a supplier asks you to review a new product (which they send you for free), and also asks you to ask your readers to re-post your review on their blogs, thereby multiplying the visibility of a favorable review, you and the supplier will want to make sure that re-posters use an appropriate disclosures as well. In this way, the hundreds of people who read a re-post know that it is the result of a review of a product that the original reviewer received for free or as part of an organized marketing campaign.

While Twitter, FaceBook and social networks where all types of blogs appear are not specifically mentioned in the Guides, it seems clear to me that you do not have to own the new Media outlet in order for content you post there to be covered by the Guides. I think there’s no doubt that the scope of the Guides extends beyond your branded blogs to cover your Twitter, FaceBook and LinkedIn pages, as well as comments posted to other people’s blogs, as well as blogs, groups and discussions that you are belong to at various other social networks.

I suppose it could even apply to actions you take to Digg posts. After all, when you click to Digg something, you are in effect endorsing something, and you are adding content to a New Media outlet. This Digg example may not be a stretch, but my point is that the owner and type of New Media outlet does not matter much. What matters is the content found there. If the content is an endorsement, the Guides apply no matter what form the content takes or who owns the space where the content appears.

Penalties A violation of the Guides could result in penalties of up to $10,000 per violation. Such liability could attach if the FTC initiates and wins an action in federal court. There may also be some agency or arbitration proceedings that could result in liability, but I have not investigated that yet. I suppose the FTC also has authority to issue cease and desist letters in an effort to stop violations before resorting to formal litigation.

A few reports I saw earlier this week (namely this one and this one) indicate that the penalty is $11,000 for each violation, I cannot find this figure anywhere. According to 15 U.S.C. 45, the statute pursuant to which (as far as I can tell) the Guides were promulgated, the correct amount is $10,000 per violation. If you can find the $11,00 figure anywhere, please let me know so I can correct this post.

The Quick And Dirty For Bloggers: If you manage or use a blog, a social network, a Twitter account, a FaceBook account and any other kind of New Media outlet, even if you do not consider yourself to be a blogger or a business owner, and even if you do not own the site you are managing or using, the Guides apply to the content at the New Media outlet. Always disclose the relationships between you and the people, products and services you endorse at your sites.

Whether you are paid $1,000 or all you get is a free bottle of lotion, disclose the fact of value received and you will likely be in compliance with the Guides. You should also post Editorial Policies at your site(s) so there is no doubt about how you handle the required disclosures. Make sure your employees, virtual assistants and others are familiar with your Editorial Policies and follow them. (Read this entire post and the Guides to be sure you inform yourself fully.)

For Advertisers: If you are an advertiser using bloggers and other forms of New Media to spread the word about your products, work with them to ensure that they make the proper disclosures. Also, to the extent possible, make sure they monitor their site and site users to ensure that the proper disclosures “follow” the endorsement wherever it goes. You should also post Editorial Policies at your site(s) so there is no doubt about how you handle the required disclosures. Make sure your employees, virtual assistants and others are familiar with your Editorial Policies and follow them. (Read this entire post and the Guides to be sure you inform yourself fully.)

For Everyone: These Guides and recent advances in technology have benefited all of us. As consumers, we have more options. As small and independent business owners, we have more profit-making opportunities. But there’s no such thing as “something for nothing.” If we want to profit from new technologies, we have to be accountable for how we use them. These new Guides and other laws, rules, regulations and policies are filtering down to us quickly and we have to remain vigilant. We must inform ourselves, our customers and other stakeholders.

We must keep up with the latest rules and policies as they are promulgated by legislators and policy makers at the state and local level. If you want to join me in an effort to make sure that our voices continue to be heard, and that future laws and rules do not have an adverse and unduly burdensome impact on small and independent business owners, please join me on FaceBook at the Indie Business Page where I am coordinating efforts expand my advocacy efforts on behalf of small businesses nationwide.

Questions and Conclusions

Whether a violation could result in a fine of $10,000 or $11,000, it’s clear that the FTC is taking aim at everyone who seeks to profit unscrupulously from New Media opportunities. The disclosure requirements in the Guides sound good in theory.

Who could argue with a requirement that bloggers disclose that they are raving about a product that was given to them by the manufacturer, or that the manufacturer paid for their endorsement? The challenge I see is in enforcing the Guides.

How on earth will the federal government have the resources to troll the Internet, find potential violators, monitor their blogs to assess the scope of an alleged violation, conduct an investigation, issue warnings or cease and desist letters and perhaps file suit in federal court to hold violators accountable?

And even if they can do that, how will they do it uniformly and fairly across the board? I’ve also been wondering why all this fuss is being made about bloggers and social media users, when television shows are filled with undisclosed sponsored product placements. They are not required by law to disclose that the product I see on my screen was placed there only because the manufacturer paid thousands of dollars (or more) for the privilege. (Are they?) This seems unfair to me.

(As an interesting side note, many actors are not happy about this either. When they perform in a show or movie, they are paid to act, not to endorse products. If a media outlet is paid because an actor drinks a particular kind of soda as part of a scene, the actor should be paid extra for that.)

Congress has empowered the FTC to do what it can to protect consumers from false and deceptive trade practices. Since consumers are turning in massive numbers to New Media to collect the information they need to make informed purchasing decisions, it stands to reason that the FTC would at least attempt to put everyone on notice that, even if you are a stay-at-home mom with a fun hobby blog, you must tell your readers when a company has somehow compensated you for a product review.

Tell The Truth

What this is really all about is telling the truth. And isn’t that what social media is about? Honest, open and transparent communication. While I’m not saying that your sincere efforts to always tell the truth excuse you from reading and complying with the Guides, they will go a long way toward helping you comply with them — without even trying. Honesty is, and has always been, the best policy.

Questions:What do you thin of the new Guides? Do you think it’s fair for all people with blogs to be includes, even if they are not “bloggers?” Are you going to post an Editorial Policy at your blog and other social media sites? If you think this information would be helpful to your friends on Twitter, FaceBook, LinkedIn and elsewhere, please use the icons below to share it!

When I was a cosmetics manufacturer years ago, I joined the Personal Care Products Council (formerly known as the Cosmetic, Toiletries & Fragrances Association). At the time, I lived in Washington, DC and I enjoyed going to their offices from time to time to use their library. I also learned a lot from them about how to run a successful cosmetics company under the authority of the Food & Drug Administration, which regulates cosmetics.

Today, the pending FDA Globalization Act of 2009 is poised to amend the cosmetics laws for the first time in decades. The pending legislation got me to thinking about an interesting quirk in the law the makes it difficult for startup and small and independent cosmetics companies to label their products in accordance with FDA law.

One of the documents I used most at the PCPC library was the “INCI Dictionary,” which contains the names required to be used to identify ingredients on cosmetic product labels. Then as now, only members or non-members who purchased the INCI Dictionary had access to it. As I recall, the price was somewhere around $400 and it was not available online. Today, the INCI Dictionary is available online from PCPC. The price is $995.00

What Are INCI Names?

INCI names are the names required by federal regulation to be used to identify the ingredients in a cosmetic, and must be listed in the ingredient declaration. The FDA established the requirement for cosmetic ingredient declarations on product labeling under the authority of Section 5 of the Fair Packaging and Labeling Act (FPLA) (21 CFR 701.3).

The FPLA provides authority to promulgate regulations “necessary to prevent the deception of consumers or to facilitate value comparisons.” To accomplish these goals, the regulation requires that cosmetic product labels be prominent and conspicuous so they are “likely to be read and understood by ordinary individuals under normal conditions of purchase…”
(21 CFR 701.3(b)). Further, Section 5(c)(3)(B) requires the use of “the common or usual name” for identification of each such ingredient included in the preparation.

In other words, the same names — INCI names — must be used on all products to ensure that cosmetic ingredients are consistently identified and consumers can readily compare ingredients when making purchasing decisions.

The specific section of the regulations that says the INCI names must be used is Title 21, Section 701.3 of the Food Drug & Cosmetic Act. You can find the entire section here, but the critical language where INCI is concerned is that, if the FDA does not specifically say which name should be used to identify an ingredient (and it does so only rarely), then name adopted for that ingredient in the PCPC dictionary — the INCI name — is to be used. (Note: PCPC is identified as CTFA, the former name of the PCPC.)

And where is this dictionary available? It’s available from PCPC’s PCPC website. Members can subscribe (PDF) to the online version of the Web Based International Cosmetics Ingredient Dictionary & Handbook for an annual fee of o $495. Non-members must pay $995. The hard copy version of the Dictionary is also available for $495.00 (PCPC members) or $795 (non members)

What’s A Small Business To Do?

This presents an obvious challenge for small businesses. They either have to join PCPC (PDF) at a minimum annual price of $640, and then purchase the INCI information for a minimum of $495, or they have to purchase the information without joining for between $795 and $995.

It would be one thing if using INCI names was optional, but it’s not. Requiring companies to pay a fee to a private non-profit entity in order to access information that is necessary (not optional) in order to comply with the law amounts to a barrier to entry into the cosmetics arena. Small businesses have adapted by getting the INCI information from second-hand sources. That is, people purchase the information from PCPC and then share it with others. This behavior obviously solves the small manufacturer’s labeling problem, but only to the extent they can trust the second hand source. (Of course, the fact that the INCI dictionary bears the PCPC copyright ownership notice is another issue altogether.)

The bottom line? The mandatory nature of the labeling rules forces small businesses to either rely on second hand information to comply with the law, or spend $1,000 a year to comply with federal labeling laws.

What Should Happen?

I am not sure, but I do not believe the current situation was the intent of Congress, the FDA or the PCPC. After all, the current regulatory structure was implemented at a time when only large companies made cosmetics. For them, $1,000 for a labeling manual was and still is a drop in the bucket.

At the leader of a 800+ member trade organization that serves the cosmetics industry, I know that there are thousands of tiny new entrants bringing massive amounts of innovation and energy to the industry. To me, it seems clearly unduly burdensome for these small companies to have to pay $1,000 to gain access to information that is required by law to be included on their product labels.

I think it’s time for Congress and/or the FDA to act, in particular while it is considering new legislation anyway, to create a level playing field that enables all companies, large and small, to have unencumbered access to the information needed to label their cosmetics in compliance with the law.

I will continue to monitor issues of interest as they impact progress on the FDA Globalization Act of 2009 and the Safe Baby Products Act, and report relevant information here.

Question: What do you think? Do you think it’s time for INCI names to be made public so all can see and have unfettered access to them? Post your thoughts and opinions in the comments section below.