Gamification Law: FTC Guidelines

Ed Note: When it comes to social media, online interactions and gamification, many people often overlook how the law factors in. Working in an industry surrounded by ever-changing technology and innovation, legal precedents and regulations are also in a constant evolution in order to keep up. These laws exist to protect users, developers and business owners alike – but we can’t work within the guidelines unless we first understand what they are. Thankfully we have the insight of James Gatto, Partner at Pillsbury, Winthrop and leader of the firm’s Social Media, Entertainment and Technology group to lend us some of his expertise in the fields of intellectual property, internet and technology law. – Gabe Zichermann

As many people are aware, in 2009 the FTC implemented guidelines that addressed the use of endorsements and testimonials by bloggers. The mainstream press highlighted just the part of these guidelines that require disclosure by bloggers of compensation received for recommending a product or service.  However, the guidelines include some lesser known provisions which apply more broadly to consumer generated media and to gamification.

The guidelines are not limited to bloggers, but cover any advertising message, including consumer-generated media, that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of the endorser. This includes consumer testimonials, such as reviews or recommendations endorsing a product or service on any social media site, not just blogs. When a connection exists between the endorser and the seller of an advertised product that might materially affect the weight or credibility of the endorsement, such connection must be fully disclosed. In one example, the FTC says that if a blogger gets a free video game to evaluate and review, he must clearly and conspicuously disclose that he received the game for free. In another example, it states that if someone receives redeemable points each time they tell friends about a product, this fact needs to be clearly and conspicuously disclosed. Since points and other rewards are often given in exchange for sharing links through Twitter, “liking” on Facebook or otherwise sharing with a friend, this is extremely important for developers of gamified apps to consider. A virtual economy needs to have a real-world value that users can easily understand.

The FTC also states that the company needs to advise the consumer giving the testimonial that this connection should be disclosed, and it should have procedures in place to try to monitor the consumer’s postings for compliance. The company and the consumer both need to be responsible for following these guidelines, but the greater burden falls on the company. Advertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers – but endorsers may also be liable. Whenever an advertisement represents, directly or by implication, that the endorser is an expert with respect to the endorsement message, then the endorser’s qualifications must in fact give the endorser the expertise that he or she is represented as possessing with respect to the endorsement. This raises potential gamification issues with leader boards, badges and expert status to the extent that this implies an “expert” status that the user does not actually posses.

These are just a few of many examples of little known laws that relate to gamification and social media.  Business owner and developers must be careful in their relationships to their users, especially as the users become more engaged and involved in the app or site. For more information on legal issues with gamification contact James Gatto below:

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James Gatto created and is the leader of the firm’s Virtual Worlds & Video Games team and co-leader of the Open Source team. He leverages his unique combination of over 25 years of IP experience, business insights and attention to technology trends to help companies develop IP and other legal strategies that are aligned with their business objectives. His practice focuses on all aspects of intellectual property, internet and technology law, including patent, trademark, copyright, trade secret and open source. He was also a speaker at the inaugural GSummit – his presentation “Managing Legal Risk in Gamification” can be viewed as streaming video.