Word-of-mouth marketing in the U.K. will face radical restrictions starting May 26, when it will become a criminal offense for brands to seed positive messages online without making the origin of the message clear.
Brand owners will face fines or even prison sentences if they contravene the consumer-protection regulations. The legislation came into force across Europe on Jan. 1, 2008, and is set to begin in the U.K. next month.
The rules make it an offense to blog, use brand ambassadors or seed viral ads while "falsely representing oneself as a consumer." They also apply to bloggers who fail to disclose they have accepted money to write about a product.
"If advertisers and their agencies ignore the ethics of responsible advertising, the damage to the advertising and marketing industry generally will be considerable," said Marina Palomba, legal director at the Institute of Practitioners in Advertising, the U.K.'s agency association.
Sony famously pushed buzz marketing too far with its "All I want for Christmas is a PSP" viral. The campaign combined "amateur" video footage with a blog supposedly written by a friend of one of the characters in the video.
When consumers discovered the campaign had been masterminded by Sony and its agency, Zipatoni, there was a huge backlash and a formal apology from Sony.
Other examples of online deception include the founder of Whole Foods criticizing his competitors through online forums under an alias and the "Wal-Marting Across America" road trip that was sponsored by Wal-Mart, working with public-relations firm Edelman.
Chris Applegate, community-marketing and -insight manager at digital-communications agency Outside Line, said the new regulations are "a very good thing. It gives everyone a chance to get recourse. Cases such as Sony are high-profile and get found out, but I'm sure there are many that don't."
In the U.K., all paid-for advertising space on the internet is regulated by the same voluntary codes as advertising on traditional media. Seeding and blogging are not yet part of this self-regulatory system.
'Risky and undesirable'
"Consumers who have been duped are unlikely to continue to have trust and loyalty to that brand," Ms. Palomba said. "Many advertisers will choose to continue with such campaigns and get away with them due to the sheer size and problems of enforcement, but this is a risky and undesirable way forward."
So far the exact penalties haven't been spelled out, and it will likely take a test case, reported to the Office of Fair Trading and prosecuted, to make clear the size of the penalty and whether jail time is really likely.
"People who are saying this will end word-of-mouth as we know it are talking rubbish," Mr. Applegate said. "Brands have to be up front and have an honest dialogue with consumers."
In the U.S., word-of-mouth marketers are hoping self-regulation will do the trick and that the government won't have to step in, although they shouldn't assume it won't happen, said Jim Nail, chief strategy and marketing officer at Cymfony and a board member of the Word of Mouth Marketing Association.
"It's perfectly fine for a company to participate and comment, as long as you identify who you are and what your interest is." He said if word-of-mouth marketers don't regulate, they could meet the same fate as the e-mail industry: "The [industry] didn't do a lot to enforce self-regulation, so the government stepped in. It's very much in marketers' hands."