A letter filed with the Federal Trade Commission late last month points to statements from ExamSoft’s former director of marketing detailing an expansive effort to recruit and compensate customers to act as “Ambassadors,” creating content and appearing at conferences for the purpose of promoting ExamSoft. The letter, filed by attorney Thomas McMasters, identifies officials for key customers as self-proclaimed ExamSoft Ambassadors, and raises possible violations tied to the payments.
It’s a serious allegation, but whether or not these are actually violations is a bit beside the point. The people who buy ExamSoft — and then who you complain to about ExamSoft — may well be working on the side for ExamSoft.
The question of illegality doesn’t strike me as clear cut as this suggests. We’re entering the murky world of the FTC’s disjointed effort to advise consumers about “sponsored content,” so buckle up. At the highest level, the interview that forms the basis of this section of the FTC letter indicates that ExamSoft saw the Ambassador program as an opportunity to convince non-customers to sign on based on the strength of current client testimonials. Which is a totally reasonable! It’s the basis of decades if not centuries of advertising strategy.
But then we have some line-drawing to do. It’s fine for Kim Kardashian to drink a certain energy drink in a commercial. It’s also fine for Kim Kardashian to drink a certain energy drink in a social media post. But if she took that selfie after the company paid her then she needs to clarify that her “real” life is functionally a commercial — or she would if anyone believed that family has a non-commercial existence at this point. The point is, she might have had that drink anyway, but customers should know that she might not have without the money.
This gets more confusing when you’re talking about initiatives like the ExamSoft Ambassador program. As described by former ExamSoft marketing director Stephanie Totty in a 2017 podcast, reproduced with emphasis by McMasters in the letter to the FTC:
But a big portion of our content creation strategy actually utilizes our actual clients. Our ambassador, or market term would be client evangelist, we call them ambassadors, is so incredibly important to us…. we honestly rely on our clients a lot to help us create and then distribute that content.
I have, at this moment in time, about 80 active client ambassadors. They are from all different educational disciplines. They are all different roles. And I let them do as little or as much as they want. I have some ambassadors who are actively on the phone with me and saying, hey, I came up with this really great new idea. I would love to do a video, or I would love to write a blog post, or I want to speak at this conference, would you support that. Who are actively working with me and giving me new ideas.
What we’re dealing with here are instances where the customer has an idea of their own that they want to push and they’re hoping that ExamSoft will fund it. This isn’t a situation where the speaker is being tasked with creating an advertisement, they’re just looking for a grant to say something over which ExamSoft has no editorial control beyond whether or not to pay for it. That doesn’t seem all that problematic, yet, to revisit our example, just because Kim was going to drink that energy drink regardless doesn’t relieve her of her duty to disclose that she was paid.
But then there’s this passage from the podcast, again with emphasis included in the letter to the FTC:
And then I have ambassadors who are really great at actually hosting a webinar or speaking at a conference or writing a research paper, but I really have to put that idea in front of them and push them to create for me. And some of them do one project a year, some of them do 17 projects a year. It really just depends. I let them decide how involved they wanna be, because obviously I know they have a quote normal full-time regular job as well. Probably several.
So I let them be as active or inactive as they want. I do compensate them for their work as well, which is a big motivator for a lot of them. It’s a little side gig that they take to, and that they really like, some of them, they really enjoy doing.
Now we’ve raised the stakes. We’ve moved beyond funding independent content and into directing tailored content at the behest of the company. That’s less “causally relaxing with an energy drink” and more “causally relaxing with my refreshing, lower calorie #BlunderbussEnergyDrink #GetAFacefulOfBlunderbuss.”
And, yeah, this is all the fault of institutions that chronically underpay staff to the point that a gig economy of multiple overlapping side jobs is necessary to stay afloat. Add in, as Totty noted, that academic jobs require employees to publish and present all the time and ExamSoft therefore has some leverage where it can pay people to do the uncompensated tasks required by their “day job.”
There’s no public record of how much any specific Ambassador received or if every act of content creation was compensated. For example, several state bar officials were scheduled speakers at a 2019 ExamSoft conference. The Chief of Strategy for the NCBE wrote promotional material for ExamSoft. Were these compensated projects or not? They fit the character of what Totty describes but that doesn’t mean these specific projects were compensated. Which is kind of McMasters’s point because it’s impossible to tell what’s compensated content and what’s just a gratuitous appearance at a show — commercials and testimonials become impossible to distinguish.
To get even murkier, as the letter points out, many folks openly disclosed that they were Ambassadors on their LinkedIn profiles… so just how many times did they need to repeat that relationship to satisfy the FTC’s rules? Did they need to stop every few minutes during the presentation to say “the CLE code is ‘NO2PENCILS’ and ExamSoft paid for my hotel room”?
Ultimately though, all this line-drawing may be necessary for the legal questions but obscures the bigger problem. Whether specific Ambassador projects were proper or misleading in convincing non-customers to buy ExamSoft products, forging financial relationships with officials holding influence over purchasing decisions created conflicts of interest within current customers. Most places have rules about this sort of thing and some degree of wining and dining is part of the sales process. But discrete events like a dinner or a conference outing aren’t the same as building an ongoing contractor relationship with key personnel working for the client. How can an institution know that its purchasing decisions are in the best interest of the entity when the individual making the decision is also working for the vendor?
Every ExamSoft client should immediately review their policies and look into whether or not anyone within the institution is a current or former Ambassador and implement appropriate firewalls to alleviate any potential conflicts.
Unless, of course, the people in a position to order such a review are also conflicted and then we’re all in trouble.
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.