Back in 2002, cell phone distributor Sony Ericsson launched its now famous 'fake tourist' marketing scheme in which it placed 60 actors on New York and Seattle streets equipped with the T68i mobile camera phone and had passersby stop to photograph them. The problem was, the actors failed to disclose they were being paid by Sony Ericsson to promote its latest product. Well now, the FTC is dealing with the issue of word-of-mouth advertising, brought to them by Oregon marketing advocacy group Commercial Alert in late 2005. Said Mary K. Engle (pictured), FTC associate director for advertising practices, "We wanted to make clear . . . if you're being paid, you should disclose that." Engle added her agency would consider looking into violations of advertising practice from this point forward. One possible major culprit is The Procter & Gamble Company, which has assembled 250,000 teenage 'volunteers' to promote the company's products to friends and relatives in exchange for free Procter & Gamble products. The company counters its volunteers are free to talk negatively or positively about its products and they do not receive compensation (the samples are mere so they can generate an informed opinion).
• Sources: Washington Post, USA Today (on Procter & Gamble word-of-mouth practices), CNET, Word of Mouth Association gets SEC invite,
• Related commentary: Lies, Damn Lies, and Word of Mouth
• Potentially impacted stocks and ETFs: Procter & Gamble (NYSE:PG)
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FTC Moves to Unmask Word-of-Mouth Marketing: Endorser Must Disclose Link to Seller