Digital Media

(Credit: Josh Lowensohn/CNET)

Prominent users of Twitter and Facebook won't be exempt from controversial new Federal Trade Commission guidelines that keep tabs on blogger freebies and giveaways, according to Richard Cleland, associate director for the FTC's advertising division. The agency absolutely plans to keep tabs on social networks as well as blogs in accordance with revised regulations that could see violators fined up to $11,000, he said.

Here's a sample scenario: a celebrity or other prominent figure with loads of friends on Facebook receives free hotel says from Hotel Chain X in exchange for running Hotel Chain X ads on his or her blog. If that person then signs up as a Facebook fan of Hotel Chain X--which, remember, could mean that the person's name can show up for his or her Facebook friends alongside Hotel Chain X display ads on the social network--he or she could be held liable by the FTC.

"It would be the same thing if you were going to pay the celebrity a thousand dollars to go register as a fan," Cleland said. "In that case, there wouldn't be any question about it."

Facebook spokesman Barry Schnitt told CNET News that the social network doesn't have anything concrete to say in reaction to the new regulations just yet. "I don't think we have anything to say other than that we've had an ongoing dialogue with the FTC and we'd love to talk to them more about what this means," Schnitt said. "I think we're already consistent with the spirit of it."

Schnitt added that some of the practices that may be encompassed by the new FTC guidelines are already banned by Facebook. "We say in our statement of Rights and Responsibilities, and people actually applauded this when we added it in a few months ago, that you will not use your personal profile for your own commercial gain such as selling your status to an advertiser." This is contained in section 4.2 of the document, he said.

As for Twitter, the FTC isn't letting you get a pass with the excuse that 140 characters--Twitter's famous text limit--is simply too short. "There are ways to abbreviate a disclosure that fit within 140 characters," Cleland said. "You may have to say a little bit of something else, but if you can't make the disclosure, you can't make the ad."

The question still remains as to exactly how the new guidelines will be enforced, given the sheer scope of online media--not to mention the millions upon millions of active Twitter and Facebook users.

"As a practical matter, we don't have the resources to look at 500,000 blogs," Cleland said. "We don't even have the resources to monitor a thousand blogs. And if somebody reports violations then we might look at individual cases, but in the bigger picture, we think that we have a reason to believe that if bloggers understand the circumstances under which a disclosure should be made, that they'll be able to make the disclosure. Right now we're trying to focus on education."

That's worth highlighting. Small-time bloggers freaking out over whether the FTC will really crack down on them may be pleased to know that the FTC at least claims its aim is to make everyone aware of what's right and wrong rather than to hunt down every Twitter user who may have been given a free toaster or something. Unless, that is, somebody rats them out--and at least one blogger is already raising concerns that angry readers may use the regulations to attempt to get back at blogs they don't like.

Industry blogger Peter Feld of Brandchannel thinks he can see another outcome. "A safe prediction for 2010: some big scandal when the first celebrity to run afoul of the new rules, by promoting a product on Twitter or a talk show, gets fined by the FTC."

This post was updated at 5:13 p.m. PT with comment from Facebook.

Independent bloggers who fail to disclose paid reviews or freebies can face up to $11,000 in fines from the Federal Trade Commission, according to revisions to the agency's "Guides Concerning the Use of Endorsements and Testimonials in Advertising" published Monday.

This marks the first time that the Guides document has been updated since 1980.

From an FTC-issued release:

"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."

The FTC also has its eye on celebrities. "Celebrities have a duty to disclose their relationships with advertisers when making endorsements outside the context of traditional ads, such as on talk shows or in social media," the release explaining the revisions explained.

That means, theoretically, that if a celebrity gushes about a new car on his or her Twitter account and it turns out that the car was given away for free, the celebrity could be fined by the FTC.

Word of the FTC's crackdown on blogger endorsements first broke in June and set off a wave of chatter in communities of bloggers who are well used to receiving and keeping free products from marketers and PR agencies--most notably the thriving "mommy blogger" sector.

It's going to be hard to police--there are a lot of bloggers out there, not to mention a lot of different kinds of bloggers, and a lot of marketers. And as some media critics have pointed out, undisclosed endorsements of freebies have plagued some sectors of the magazine industry for decades now.

A 17-year-old from Michigan has filed a lawsuit against e-commerce powerhouse Amazon after it deleted a book he had purchased for his Kindle device.

The high school student, Justin D. Gawronski, filed suit in a Seattle court along with California resident Antoine J. Bruguier, and they are seeking class action status.

Amazon forcibly (and ironically) recalled copies of George Orwell's "1984" and "Animal Farm" earlier this month after it was revealed that they were unauthorized. Justin Gawronski's complaint alleges that he was reading "1984" as summer reading for an advanced-placement class and had to turn in "reflections" on each hundred pages. With the loss of the digital book, Gawronski claims his page count was thrown off and his notes were "rendered useless because they no longer referenced the relevant parts of the book."

Amazon has declined to comment on the lawsuit, which appears was first reported late Thursday by The Wall Street Journal's Digits blog.

While buyers received refunds for the recalled copies of the Orwell books, the fact that no advance notice was given threw many customers off and created an uproar against Amazon. The lawsuit, for one, alleges that Amazon did not make it clear enough to customers that remote book deletions were a possibility. It also alleges, as do critics, that the company violated its own terms of use.

"The power to delete your books, movies, and music remotely is a power no one should have," the lawsuit quoted Slate's Farhad Manjoo as saying in an opinion piece following the book deletions.

Amazon founder Jeff Bezos put out a public apology shortly after the fiasco unfolded, but it's not clear how the company's policies will (or won't) change in the future.

Updated at 1:25 p.m. PDT.

Google-owned video-sharing site YouTube is silencing music videos in the U.K. after negotiations with the country's Performing Right Society (PRS for Music), which collects licensing fees for artists and labels, failed.

"Our previous license from PRS for Music has expired, and we've been unable so far to come to an agreement to renew it on terms that are economically sustainable for us," a statement from YouTube read. "There are two obstacles in these negotiations: prohibitive licensing fees and lack of transparency. We value the creativity of musicians and songwriters and have worked hard with rights-holders to generate significant online revenue for them and to respect copyright. But PRS is now asking us to pay many, many times more for our license than before."

The YouTube statement continued: "The costs are simply prohibitive for us--under PRS' proposed terms we would lose significant amounts of money with every playback. In addition, PRS is unwilling to tell us what songs are included in the license they can provide so that we can identify those works on YouTube--that's like asking a consumer to buy a blank CD without knowing what musicians are on it."

But a statement from PRS for Music claimed that Google doesn't want to pay enough for licensing fees.

"PRS for Music is outraged on behalf of consumers and songwriters that Google has chosen to close down access to music videos on YouTube in the U.K.," read a statement from the industry group, which noted that Google rakes in billions of dollars in revenue. "Google has told us they are taking this step because they wish to pay significantly less than at present to the writers of the music on which their service relies, despite the massive increase in YouTube viewing."

A report from the BBC suggests that the change will take effect later on Monday.

Royalty fees in the U.K. reportedly caused streaming music service Pandora to pull out of the country (along with other non-U.S. markets) two years ago, and many smaller players in digital media are currently feeling the pain. PRS for Music has also targeted small businesses in the U.K. for playing radios publicly, which the group says is a form of piracy.

Since it only pertains to music videos, this won't affect, say, Queen Elizabeth's royal YouTube channel. But U.S. digital media companies, particularly when it comes to music, have repeatedly encountered rough seas abroad.

One of the most high-profile has been Apple's iTunes, which several years ago came under scrutiny from one European government after another, typically concerning digital rights management restrictions in its iTunes Store. But music videos have been contentious both in and outside the U.S., with labels apparently unclear as to whether the best strategy would be to ink deals with YouTube--where they have less control--or go at it on their own. Much of the controversy comes from the fact that the music industry says it just doesn't profit much from having its videos on YouTube.

Sources told CNET News earlier this month that YouTube was working with Universal Music Group to create a standalone site "closely linked" to YouTube, a shadowy project that has been described as a Hulu for music videos. And Viacom has created its own hub, MTVMusic.com. It's complicated enough in the U.S.; bringing overseas players and viewers into account opens many new cans of worms.

One day after Virginia Tech released thousands of documents solely to families of victims in last year's massacre, the university's student newspaper made them public.

On Thursday, the Collegiate Times posted the documents, which include e-mails sent from the account of gunman Seung-Hui Cho, who killed 32 fellow students and faculty members and then killed himself on April 16, 2007.

The nearly 14,000 pages also include the police report on the massacre, e-mails from faculty sent to fellow professors and to Cho, a 2005 harassment complaint against Cho, post-massacre clean-up plans, administration plans on how to present the tragedy to the public, and post-massacre fundraising advice.

According to The Washington Post, the newspaper's editor in chief, David Grant, said that no one hacked into the university's computers to access the documents. He would not say how they were obtained.

Families of the victims were given access to the records as part of a legal settlement to avoid lawsuits, according to the Associated Press. The university was expected to make the documents public in February

A Virginia Tech representative told the Post that the newspaper's publication of the documents was "disappointing" because the families didn't have time to absorb the material first.

Hasbro is apparently content to call its contest with the makers of Scrabulous a draw.

The toy maker on Friday withdrew its copyright and trademark lawsuit filed against the creators of the ad-supported online application, according to court documents cited in an Associated Press report.

A game of Scrabulous on Facebook.

(Credit: Scrabulous)

The game, which rose to fame when its creators turned it into an embeddable Facebook application, was a word game that resembled the classic board game Scrabble. The game boasted an astonishing half-million daily users on Facebook, but was removed from the social-networking site not long after the lawsuit was filed in July.

The game manufacturer, which owns the rights to Scrabble in the United States and Canada, filed the suit against India-based brothers Rajat and Jayant Agarwalla, and their company, RJ Softwares. The suit had asked Facebook to pull the game, citing the Digital Millennium Copyright Act, and asked the Agarwallas to close their Scrabulous.com site.

The brothers subsequently modified Scrabulous' design and points system, and relaunched it as Wordscraper in the United States and Canada within days of its initial demise. The Scrabulous Web site relaunched as Lexulous.com in September.

The Scrabulous site launched in 2005 and the game was added to Facebook in 2007. But a Hasbro representative told CNET News in July that the company waited, "in deference to the fans," to file its lawsuit until it launched its official Scrabble Facebook app earlier in July. That version was created by Electronic Arts and is used by a mere 8,900 daily users.

Hasbro did not immediately return a message left seeking comment.

Digital ad firm Agency.com has sued rival iCrossing for poaching a number of high-level employees and clients, including former Agency.com CEO Charles Donald Scales, according to a complaint filed in a Texas state court last Thursday.

The complaint alleges "massive employee raiding, customer solicitation in violation of contractual and common law prohibitions against same, breach of the express terms of a settlement agreement...gross acts of disloyalty and breach of fiduciary duty, misappropriation of Agency.com's confidential information and trade secrets and other wrongs," and seeks at least $19.5 million in damages.

Neither company is headquartered in Texas. But the New York-based Agency.com, a subsidiary of ad giant Omnicom, says that iCrossing's executive poaching forced it to close its Dallas-based office, as well as heavily scale back its Chicago office.

Scales, according to the complaint, had non-competition clauses in his original contract with Agency.com that would've barred him from taking the executive job (first as chief operating officer and eventually CEO) with iCrossing. That led to a settlement agreement between the two firms, which Agency.com now alleges was ineffective because Scales proceeded to recruit numerous Agency.com employees to iCrossing. One of them, the complaint details, had started soliciting clients on behalf of iCrossing before he had actually started work there.

Neither party is willing to comment on the litigation.

There's more rumbling in Europe about Apple's iTunes Store, and this time, it comes from Norway, where, according to Reuters, a consumer agency has announced plans for legal action against Apple and what it says is unfair copyright restriction.

"I want (Apple) to make their services interoperable so that you can play music bought on iTunes on other devices, including mobile phones," Norwegian consumer ombudsman Bjørn Erik Thon told Reuters on Tuesday. Consumer agencies in Norway have been making this complaint for .

Songs purchased from the iTunes Store, except for a limited "iTunes Plus" selection, can be played only on handheld devices from Apple, in addition to Macs and PCs. Other music-enabled cell phones and music players, like Microsoft's Zune, are incompatible.

Early last year, the Norwegian government declared iTunes illegal for the same reason, and provided an October 1, 2007 deadline--a year to the day later, the threatened shutdown hasn't taken place.

Numerous other European government groups have taken action against iTunes, a phenomenon that has been virtually invisible in the United States until this point--though that's changing, as this week, there has been a stateside showdown between Apple and the Copyright Royalty Board.

A French attempt to behead iTunes' digital rights management, or DRM, failed in 2006. Similar efforts from countries such as Sweden and Denmark also made little headway.

Tim Westergren, the founder of popular Web radio start-up Pandora, has said in an interview with The Washington Post that his company may be close to a shutdown.

"We're approaching a pull-the-plug kind of decision," Westergren said in the article, published Saturday. "This is like a last stand for webcasting."

The problem, he explained, is last year's royalty hike for Web radio, which makes it extremely expensive for an independent start-up to stay afloat in the business. The royalty increase will eat up 70 percent of Pandora's $25 million in revenue, Westergren said.

SoundExchange, an organization comprising representatives from record labels and performers, believes that Internet radio owes a bigger cut of profits than traditional radio does. Activist groups like the SaveNetRadio Coalition, along with start-ups like Pandora, have fought the fee hikes.

A few Web geeks weren't convinced that Pandora's situation is as dire as Westergren says it is. "I love Pandora like my old baseball glove, but they can only pull this Chicken Little move so many times," marketing consultant Brian Oberkirch posted to Twitter on Monday morning.

But Westergren assured in the Post interview that he's not exaggerating. "We're funded by venture capital," he explained. "They're not going to chase a company whose business model has been broken. So if it doesn't feel like it's headed towards a solution, we're done."