It turns out that Village Green Network wasn’t just forging new income opportunities for food bloggers. 


It was also forging a new advertising path with federal regulators. 


VGN’s role connecting large numbers of bloggers to producers of health-oriented food and “green” products, in some cases with blogger endorsements, prompted the Federal Trade Commission (FTC) to launch an investigation of VGN last fall. The FTC, which monitors deceptive advertising nationally and can institute fines and other penalties against companies it decides are violating its rules, said in a February letter to VGN, that it was “concerned that VGN did not require that its network bloggers adequately disclose that they had received compensation from marketers, and, as a result, a number of bloggers in VGN’s network endorsed products in their blogs without adequately disclosing such compensation.”

As farmers and other food producers know from unhappy experiences with the U.S. Food and Drug Administration, a federal agency poking around in your business affairs is highly disruptive….and expensive. It requires hiring specialized lawyers and devoting owner and staff time to answering involved questions. (Though it appears the FTC is much less dogmatic, and not necessarily biased against smaller companies liked the FDA.)


And so it was for VGN. In a letter to bloggers this weekend, Ann Marie Michaels stated: “VGN is currently experiencing extreme financial hardship. We spent a considerable amount of money last fall on legal fees and staff responding to an investigation by the FTC. I wiped out all my personal savings loaning the company money so that we could fund this fight.” 


According to Michaels, “It was the right thing to do, and I’m glad we did it.”


Earlier this year, after completing its investigation, the FTC decided to back off, in part because of the newness of the VGN aggregator advertising model. In the February letter to VGN, the FTC said it wasn’t pursuing any kind of enforcement actions against the blog aggregator, in part because “we have not previously publicly addressed the obligations of an intermediary, i.e., a party facilitating payments from a marketer to an endorser, for the failure of endorsers to disclose material connections with marketers.” 


The FTC also said it ultimately concluded that most VGN bloggers weren’t doing anything questionable. Only “a relatively small number of bloggers failed to adequately disclose their material connections, and most of those blogs contained some indication that may have alerted some consumers to the connections.”  


I was struck just in viewing the post Michaels did three years back (linked to by Sylvia Gibson in comments following my previous post) on California dairy producers, including Organic Pastures, there was this disclosure: “PAID ENDORSEMENT DISCLOSURE: In order for me to support my blogging activities, I may receive monetary compensation or other types of remuneration for my endorsement, recommendation, testimonial and/or link to any products or services from this blog.”


The FTC also commended VGN for having “revised its contractual agreements with its bloggers and committed to take reasonable steps to monitor its bloggers’ compliance with the obligation to disclose compensation.”


As Michaels described it in her letter to bloggers this weekend, “We ultimately won and we were able to protect hundreds of bloggers from being prosecuted for violating FTC regulations.” 


The Internet has obviously created a whole new world for producers of nearly all products. The FTC is being hit with complaints about deceptive advertising and business practices by a host of well known online sources, including Yelp and CarMax, not to mention identity thefts by the boatload. It would be nice to think that farmers producing nutrient-dense food primarily for their local communities are above the fray of contractual obligations and government oversight. But, alas, it isn’t to be. Food clubs, farms with CSAs (community-supported-agriculture) and various other models for distributing food are being drawn into the new world of online advertising and distribution. As one example, a growing number of farmers are using online ordering and distribution software developed by Max Kane’s Farm Match.  All kinds of new distribution food models are shaping up, including home-delivered grass-fed beef  and kosher meat, among many others.  


In her letter to contractors, Michaels noted that the contractual battles with bloggers (described in my previous post) developed “at the tail end of this FTC battle…” The contractual battles led to a 90% drop in company revenues, along with layoffs of VGN personnel, and no pay for Michaels or her husband, Seth Shapiro, since last fall, she said. 


Michaels in her letter left open the possibility that VGN may initiate lawsuits against those bloggers VGN decides violated their contracts by withdrawing early this year. “Bottom line: We are committed to doing whatever it takes — including lawsuits — to honor our commitments and pay back our debts.” 


Unraveling this seemingly innovative business model may take as much time as putting it together did. Per comments following my previous post, this has been a painful and unfortunate outcome to well-intentioned people collaborating for positive change. The path to new food learning and earning models won’t necessarily be smooth, but it definitely won’t end with VGN.