Ashton Kutcher is many things--actor, tech investor, social media guru, butt of many jokes--but he is not a good journalist. This week, Kutcher guest-edited a digital issue of Details on "The New Titans of Tech" and shamelessly plugged a number of startups. To real journalists' dismay, however, he failed to disclose the fact that he's also an investor in many of those startups. Thursday afternoon, the Federal Trade Commission told Nick Bilton at The New York Times that an investigation was "certainly a possibility" but clarified on Friday that the agency "is not and has no plans to investigate Ashton Kutcher."
As Bilton mentions in his blog post, Kutcher also mentions these companies in many tweets to his millions of followers. In fact, Kutcher doesn't just mention companies he's invested in on Twitter, he endorses them:
- "If you need some style advice my man's got you covered fashism.com/summerfridays," Kutcher tweeted July 12. (Kutcher invested in Fashism last November.)
- "The solution for travel search on the ipad has arrived. Thank you @thehipmunk," Kutcher tweeted on June 23. (He invested in Hipmunk last October.)
- "If you are a design junkie like me I think you'll dig this. http://fab.com/," Kutcher tweeted on June 9. "If you are into rad design. Do not miss this. It's on fire http://fab.com," he tweeted the same day. (News also broke that day that Kutcher was an investor in Fab.) The list goes on.
"If you're out there promoting individual products that you have a specific investment in, it needs to be disclosed," Richard Cleland, the F.T.C.'s assistant director of the division of advertising practices, told The Times on Thursday. "If you have a significant economic investment that is not otherwise apparent, that may potentially affect the credibility of your endorsement, and I see that as a potential problem."
Kutcher's Twitter endorsements also fall within the problem zone. In 2009, the F.T.C. issued a clarification for bloggers that their guidelines for traditional media also applied to digital media and social media. As Cleland says, consumers might interpret an endorsement differently if they understood it to be coming from someone who stands to benefit directly from making the endorsement. As Jeff Bercovici at Forbes points out, "celebrities may be subject to a looser standard of disclosure than non-celebrities," but that loophole applies more to television commercials, where it's obvious that a celebrity is endorsing something. Consumers might not know when a celebrity is clearly making an endorsement on Twitter, which is why they're required to make a disclosure, says Jeff Hermes, the assistant director of the Citizen Media Law Project at Harvard University.
"If a celebrity has a personal Twitter feed wherein they discuss random aspects of their life and in the course of the Twitter feed seems to be endorsing a product," Hermes told The Atlantic Wire, "It won't necessarily be clear to the person who's following the tweets that the celebrity might benefit financially."
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As an investor, Kutcher has what the F.T.C. calls a "material connection" with the companies that he's endorsing on Twitter. He inevitably stands to benefit by telling his 7.5 million followers to check out Hipmunk, Fab or Fashism in the same way that he stands to benefit from promoting his start-ups in Details. Though there's passing mention in the introduction to his Details issue that Kutcher "puts his money where his mouth is, backing many of the companies he champions here," there's no indication on Twitter of his material connection to the companies. "You have to affirmatively disclose that connection if it isn't obvious," said Hermes.
So how much trouble is Ashton in? These kinds of investigations can lead to a cease and desist letter in the best case scenario for Kutcher or a federal lawsuit in the worst case. Despite the extent to which bloggers seem to love putting the word "criminal" right next to "Kutcher," it's a civil liability issue and would almost certainly result in a fine. That said, the F.T.C. is an organization with bigger fish to fry (like Google).
"They make their decisions based upon where they think their limited resources will be best applied," said Hermes, adding that the F.T.C. does sometimes go after "a particular individual or a particular situation just to make a point."