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November 2009

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The Lost Fountain of Truth

by Glen Emerson Morris
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An October 2009 FTC ruling now makes it against the law to endorse a product or service on the Internet for payment without revealing that it was a paid endorsement. To quote the FTC, “Under the revised Guides, advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the Guides – which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as “results not typical” – the revised Guides no longer contain this safe harbor.”

“The revised Guides also add new examples to illustrate the long standing principle that “material connections” (sometimes payments or free products) between advertisers and endorsers – connections that consumers would not expect – must be disclosed. These examples address what constitutes an endorsement when the message is conveyed by bloggers or other “word-of-mouth” marketers. The revised Guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service. Likewise, if a company refers in an advertisement to the findings of a research organization that conducted research sponsored by the company, the advertisement must disclose the connection between the advertiser and the research organization. And a paid endorsement – like any other advertisement – is deceptive if it makes false or misleading claims.”

It’s not surprising that we need a law like this. America has a credibility crisis. On the international level, American science is increasingly seen as “for sale” to the highest bidder. At the national level we have a “government by lobbyist” system with politicians basing critical decisions largely on the basis of information supplied by special interests. It allows politicians to say they made decisions on the best data available (though not necessarily the most objective or truthful information). The more political the information is the more likely it is to be cooked. Sadly, much scientific and economic research is funded in order to back up some political policy long on promise, and short on fact. Scientists and other researchers are essentially paid take an end result and backfill the facts to make it plausible. Unfortunately, it’s not that hard.

Some time ago the Greeks noticed that a good orator could make almost any argument sound plausible if they were good enough. Living proof of this happened on the October 8, 2009 episode of the NPR Diane Rehm show (available online at www.npr.org). A bank industry representative was on the show defending bank policies of clearing the highest value debit card charges first to maximize the number of charges that might bounce, thus generating the most revenue from overdraft charges (in 2008 banks collected 28 billion in overdraft charges). She said most customers wanted banks to clear the highest value charges first because the higher charges tended to be the most important payments to customers. “No one wants their mortgage payment to bounce,” she said. “But who pays their mortgage payment with a debit card?” a panelist asked. Well, they wouldn’t want their power or phone bill to bounce she said. Still it’s hard to imagine someone being happy about paying multiple $35 dollar charges each for a bunch of 99 cent iTunes because the bank ran a charge for a $10 pizza first.

One might think that the customer who bounced the checks held the responsibility for overdrawing their account. After all, all they had to do was go online, or to their nearest bank’s ATM, and query their account balance. I mean we can trust the bank to tell us how much is in our account, right? Well not quite. Recently Wells Fargo was hit with a class action lawsuit for the practice of re-crediting charges after the charges had initially cleared, and after some period, deducting them again. According to the lawsuit, many people were misled into believing they had more in their account than they actually did, and were hit with overdraft charges as a result. Wells Fargo has denied any wrongdoing in the practice, stressing that ultimately it’s the responsibility of the customer to know how much is in their account.

The credibility problem with salespeople is even worse, especially now that the hard economic times make sales and marketing people desperate enough to say anything to get a sale.

Even before the crash, the QA team at Ariba, a major user of Mercury test automation software, got so tired of Mercury salespeople overstating the capability, and understating the problems, of new releases and product upgrades that they adopted a unique tactic. They refused to talk to the Mercury sales team, and insisted that the head technical support engineer come over and be questioned by all of the team before they would consider buying anything from Mercury. The rationale was that the tech support person knew that the Ariba QA team would be calling him, not the salespeople, when the product did not perform as promised. The tech support person used phrases that the Mercury sales team had never been heard to utter. These included: It can’t do that. It’s incompatible with that. It can work that way, but it’s a kluge and a pain to do.

In one way or another this, this is happening on a large scale and the effect is really damaging the economy. By misrepresenting product and service capabilities, salespeople are trading short term profits for long term problems. A pervasive distrust with business in general means businesses and consumers buy less products and services than they would otherwise, even from businesses that have always been honest with them.

Once again, small to midsized businesses are largely blameless for the problem, and as usual, they are paying as much, or more, for the problem as those who created it. Is it too much to expect that businesses will have correct information to base business decisions on, or that they will provide correct information to customers for them to base their decisions on? Evidently the answer depends on what answer you expect, whom you ask, and how much you’re willing to pay them for an answer.



Glen Emerson Morris was recently a senior QA Consultant for SAP working on a new product to help automate compliance with the Sarbanes-Oxley law, an attempt to make large corporations at least somewhat accountable to stockholders and the law. He has worked as a technology consultant for Yahoo!, Ariba, WebMD, Inktomi, Adobe, Apple and Radius.





Copyright © 1994 - 2009 by Glen Emerson Morris All Rights Reserved


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