The Federal Trade Commission says that companies must disclose if they're using paid endorsers in word-of-mouth marketing, reports the Washington Post.

In October 2005, an advertising and marketing watchdog group petitioned the FTC to consider taking action against word-of-mouth marketers. The group called for the FTC to issue guidelines requiring paid agents to disclose their relationship to the company whose product they are promoting, including any compensation.

Word-of-mouth advertising is already covered under existing FTC regulations that govern commercial endorsements. But in response to the petition, the FTC sought to clarify further that marketing made to look like word-of-mouth that uses paid endorsers could be deceptive if consumers were more likely to trust the product's endorser "based on their assumed independence from the marketer."

Andy Sernovitz, chief executive of the Word of Mouth Marketing Association (WOMMA), told the Post that FTC's decision is an endorsement of the industry's efforts to police itself. Early last year WOMMA released its code of conduct and ethics to the word-of-mouth marketing community, which included the Honesty ROI: Honesty of Relationship, Opinion and Identity.

As before, the FTC can go after violators on a case-by-case basis, with consequences that could include cease-and-desist orders, to fines and civil penalties ranging from thousands of dollars to millions of dollars.