The Federal Trade Commission (FTC) is planning to regulate online viral marketing that uses blogs and social networking sites.

Marketers are spending billions worldwide to get the endorsements of key bloggers and groups on social networking sites. One tactic, used by Microsoft and others, is to send products to bloggers on 'long-term loans' on the understanding that they will comment about them on their sites.

Under the new regulations being proposed, such bloggers would be legally liable if they make untrue statements about the products or services. The companies too would face sanctions.

"This impacts every industry and almost every single brand in our economy, and that trickles down into social media," Anthony DiResta, an attorney representing several advertising associations, told The Financial Times.

This is the first revision of the rules on this kind of advertising by the FTC since 1980 and is needed, according to the organisation, because new forms of communication have opened up new fields to marketing.

"The guides needed to be updated to address not only the changes in technology, but the consequences of new marketing practices," said Richard Cleland, assistant director for the FTC's division of advertising practices. " Word-of-mouth marketing is not exempt from the laws of truthful advertising."

Advertisers are resisting the changes, however, which threaten a highly effective form of marketing new products and services.

"Regulating these developing media too soon may have a chilling effect on blogs and other forms of viral marketing, as bloggers and other viral marketers will be discouraged from publishing content for fear of being held liable for any potentially misleading claim," Richard O'Brien, vice president of the American Association of Advertising Agencies, said in an advisory to the FTC.