Traditionally, one of the more disturbing pieces of news that any company could receive was that the Federal Trade Commission was investigating their business. An FTC investigation is, to be frank, the opposite of fun. It can be expensive, intrusive and embarrassing. It can lead to massive fines, or forcible changes in the way you do business as part of a consent decree.
To paraphrase my 10 year-old son, an FTC investigation completely sucks.
Historically, the FTC has been primarily interested in consumer fraud and antitrust violations. Thus, unless you were (a) engaged in some type of deceptive marketing practice, or (b) a budding monopolist/price fixer, the FTC hardly seemed to be an immediate worry. Sure, if you were involved in a merger or were a big time advertiser you had to think about these things, but for most businesses the FTC was as far removed from their experience as a regulator in Ulan Bator.
But the rise of the Internet changed things. The FTC had always been interested in national advertising and nationwide marketing practices, but most advertising in the pre-Internet age was not national in the slightest. Most advertising and consumer outreach was localized, and thus ignored by the FTC.
With the Internet almost everything is national, and the regulators quickly took note. First the FTC became fascinated by the Internet through the lens of privacy abuses. Then the FTC became intrigued by the fact that e-commerce technology wildly expanded the potential for fraud and deception. In 2000, the FTC put out its landmark Dot Com Disclosures Guide, which addressed many of these concerns for the first time in a comprehensive fashion.
More recently, though, the FTC has become concerned with the use of testimonials and endorsements on the 'net. In some cases, these relate to the question of whether someone (say, a blogger) has financial interests in the products he is touting. In other words, how deceptive is it for a company to set up an "independent" blogger to talk on their behalf? How much disclosure is necessary?
The other common scenario has particular relevance to the world of social media: reviews and comments. Just this past week, the FTC settled a complaint with a PR firm that had asked its employees to pose as ordinary customers to write phony reviews on the iTunes website. Perhaps because this was viewed as a shot across the bow of the industry, no fine was assessed. However, the PR firm was publicly scolded by the FTC and any further violations of the consent decree will result in fines.
Astroturfing is, of course, a time-honored tradition in politics, in marketing and, well, life. It involves the systematic creation of the appearance of grassroots enthusiasm. It can be found in high schools where "influencers" are paid to hype a product or a band. It can be found in politics, where large-scale PACs do everything possible to create the impression of authentic, human scale activity where none previously existed.
So for as long as there have been people and organized commerce, there have been astroturf campaigns. But the line between astroturf and deception has always been a fine one. There's nothing wrong, for example, in trying to create viral excitement about your product. There is something wrong, however, with lying about it.
In the social media context it is enormously tempting to "seed" sites with positive buzz. It can, in fact, be a powerful marketing tool. But before you do you need to consider whether you are crossing that line between developing excitement and deception. That equation will vary from situation to situation (as always, there are no bright line rules) but it is an important thing to think about when you are writing that review on yelp.com - and before you hit send.