FreeColorado.com, a journal of politics and culture.

Tuesday, December 1, 2009

Abolish the FTC: New Blogging Rules

The Federal Trade Commission (FTC) has imposed unjust new rules -- "Guides Concerning the Use of Endorsements and Testimonials in Advertising" -- that take effect today.

Eric Robinson summarizes the nature of the rules:

[The FTC's rules] suggest that bloggers or other consumers who "endorse" a product or service online may be liable for civil penalties if they make false or unsubstantiated claims about a product or fail to disclose "material connections" between themselves and an advertiser. (Although Richard Cleland, assistant director of the FTC's division of advertising practices, told Fast Company that the Commission will focus on warnings and cease-and-desist orders, rather than monetary fines, and told PRNewser that the Commission will target advertisers for violations, not bloggers. Another FTC official reiterated this.)


The new rules pose a variety of problems. The FTC has no legitimate authority to issue such rules, which defy the First Amendment and constitute censorship and the chilling of free speech. The rules are extremely broad, ranging from free review copies of books to Twitter posts. The rules are arbitrary and ambiguous, such that their precise requirements and penalties cannot be determined in advance. The rules thus open the door to political abuses. The rules are discriminatory in that they subject bloggers to different standards than print journalists.

The FTC is acting in blatant defiance of the First Amendment to the United States Constitution, and therefore the FTC should be abolished and its rules rescinded.

First I summarize the basic arguments against the FTC's rules. Then I link to other commentaries about those rules. Finally I review and analyze the rules in some detail.

FTC's Rules Overreach and Violate Rights

1. The FTC's rules constitute censorship and onerous controls.

Censorship consists not only of forcibly restricting what people may say and write, but forcing people to say and write things against their judgment. In this case, the FTC is forcing people to issue disclosures regarding communications that do not in any way violate anyone's rights.

Edward Champion points to an article by Caroline McCarthy for Cnet News indicating that the FTC rules apply to Facebook and Twitter posts as well. The FTC's Richard Cleland told McCarthy, "There are ways to abbreviate a disclosure that fit within 140 characters [Twitter's limit]. You may have to say a little bit of something else, but if you can't make the disclosure, you can't make the ad."

The FTC thus requires that any Twitter post that could be construed as an "endorsement" include a disclosure that meets the FTC's guidelines, within 140 characters. Such a policy limits the amount of information a user can post to Twitter or discourages the use of Twitter for certain purposes.

Champion notes that even an "Amazon Affiliates link" might trigger the FTC's disclosure requirements.

The FTC's rules constitute onerous controls in that they require bloggers and others to spend time complying with the FTC's rules. For example, the primary documentation of the rules runs 81 pages in length. The effort spent complying with the rules detracts from time available to write about other issues.

2. The FTC's rules are capricious and nonobjective.

The FTC's rules, by the agency's own admission, cannot be decided in advance in all cases. Instead, the FTC will "consider each use of these new media on a case-by-case basis for purposes of law enforcement" (page 8. Unless otherwise specified, page numbers refer to the FTC's documentation of the rules).

The FTC's rules depends on what "consumers are likely to believe" about a communication, a subjective guideline that cannot be determined in advance (e.g., page 4).

The rules also extend to those who supply free samples or review books. Using the example of a video game manufacturer who sends a free copy of a game to a reviewer, the FTC states, "The manufacturer should advise [the recipient] at the time it provides the gaming system that this connection should be disclosed, and it should have procedures in place to try to monitor his postings for compliance" (pages 79-80). What constitutes adequate compliance, and under what circumstances a supplier might be subject to enforcement, the FTC declines to detail.

In an interview with Edward Champion, the FTC's Richard Cleland offered only guesswork in answer to whether a free movie screening constitutes compensation: "The movie is not retainable. Obviously it's of some value. But I guess that my only answer is the extent that it is viewed as compensation as an individual who got to see a movie."

Cleland chose to "reserve judgment" on another matter. Champion writes, "In cases where a publisher is advertising one book and the blogger is reviewing another book by the same publisher, Cleland replied, 'I don't know. I would reserve judgment on that. My initial reaction to it is that it doesn't seem like a relationship.'"

Cleland further told Champion, "These are very complex situations that are going to have to looked at on a case-by-case basis to determine whether or not there is a sufficient nexus, a sufficient compensation between the seller and the blogger, and so what we have done is to provide some guidance in this area. And some examples in this area where there's an endorsement."

Furthermore, as Champion reports, whether the FTC will target bloggers with fines -- and how much the fines might be -- remain points of ambiguity.

In other words, often there no objective way to determine when and how the FTC's rules apply prior to an enforcement action by the FTC.

As Walter Olson notes, "FTC enforcers will engage in their own fact-specific, and inevitably subjective, balancing before deciding whether to press for fines or other penalties. In other words, instead of knowing whether you're legally vulnerable, you have to guess."

Moreover, Olson notes, the receipt of freebies can "after some ill-defined point" create a relationship requiring a blogger "to disclose that relationship whenever writing about the institution in question."

Ann Athouse argues that the FTC has "deliberately made a grotesquely overbroad rule, enough to sweep so many of us into technical violations, but we're supposed to feel soothed by the knowledge that government agents will decide who among us gets fined. No, no, no. Overbreath itself is a problem. And so is selective enforcement."

The FTC's rules will therefore have a chilling effect on free speech. Those who are not part of an organization with legal representation -- and those who cannot independent afford to pay lawyers -- will now face a serious risk in publishing commentary.

Moreover, book publishers and others will face increased costs associated with complying with the rules, increasing the difficulty especially of small firms to publish works and advertise via review copies.

3. The FTC's rules open the door to further political abuses.

Political operatives inside government once turned to tax audits to punish ideological opponents. More recently campaign finance complaints have chilled free speech. The FTC's rules will provide yet another opportunity for political attack dogs to harass their opponents by filing complaints with the FTC based on perceived technical violations of the rules.

Even if the FTC clears the accused party, fighting such complaints can consume considerable money, energy, and worry. The possibility for such politically-motivated abuses will further chill free speech.

The FTC's Richard Cleland told Caroline McCarthy, "As a practical matter, we don't have the resources to look at 500,000 blogs. We don't even have the resources to monitor a thousand blogs. And if somebody reports violations then we might look at individual cases..."

McCarthy notes that "angry readers may use the regulations to attempt to get back at blogs they don't like." Ron Workman predicts that "the trolls will have a great time turning these offenders in."

4. The FTC's rules undermine the equal protection of the laws.

The FTC "acknowledges that bloggers may be subject to different disclosure
requirements than reviewers in traditional media" (page 47).

The FTC's Richard Cleland explicitly acknowledged that the FTC's rules subject bloggers to different standards than newspaper book reviewers.

5. The FTC's rules violate privacy.

A blogger properly has the right to choose what information to disclose and what information to keep private.

In some cases, the FTC's rules might require bloggers to disclose information that could compromise an individual's privacy or safety. For example, following in the footsteps of America's founders, someone might choose to write anonymously about a controversial political issue, such as abortion or homosexuality. A blogger with a material connection to the writer could not write about the anonymous work without disclosing personal information about the author.

The ability to write anonymously is central to the First Amendment, as it was central to American independence and the creation of the United States Constitution.

6. The FTC's rules are unnecessary.

In clear-cut cases of a seller paying somebody to promote a product, generally those parties do have a moral obligation to potential customers to disclose the nature of the relationship. However, most things that are moral obligations ought not be forced by law.

Publications large and small generally implement policies to assure readers or viewers that their material is free from financial incentive, or that any incentive is disclosed. Bloggers have an incentive to disclose relevant material connections in order to build trust with readers, and consumers tend to promote reputable sources of information. Producers and consumers of information tend to interact voluntarily to resolve potential problems of disclosure.

Those who hide a clear bias generally suffer exposure and ridicule, as John Lott discovered after posting positive comments about his own work under an assumed name.

The government does have a legal responsibility to crack down on fraud. For instance, if someone claims to be an uncompensated reviewer but is in fact paid to write positive reviews, that would constitute dishonest fraud, properly the target of a criminal or civil suit.

However, short of fraud and overt calls for violence, what people say and write, and how they say and write it, is properly none of the government's business.

The FTC's rules rest on the fallacious doctrine that material conditions determine ideas. Granted that some people express views because of financial incentives, generally what matters most is a person's ideological conclusions. While ideology is necessary to integrate ideas, it can adhere to the facts of reality or stray from them. Often the more dangerous bias arises not from financial incentives but from ideological blinders, and obviously no federal rule can address that vastly more serious problem.

Even a direct and substantial financial connection need not indicate any financial bias. Often a paid spokesperson already supported the product in question. The much weaker and distant material connections the FTC's rules may also cover, ranging from free books to Amazon links, don't pose any serious problem of bias, and certainly not any problem serious enough to warrant threats of federal enforcement actions.

Whether a substantial financial relationship is present or not, and whether it is disclosed or not, consumers of information and products have a responsibility to critically evaluate claims. A consumer who takes a single blogger's weakly substantiated word about some product is frankly an idiot, and no federal rule can compensate for that.

The FTC's rules continue the trend of infantilizing American adults. The FTC presumes that American consumers are just too stupid to check the facts for themselves and properly evaluate claims about products. Yet such rules tend to generate a self-fulfilling prophesy: they encourage consumers to rely on government bureaucrats to do their thinking for them. Such rules promote Homer Simpson's mentality: "The whole reason we have elected officials [and their legions of bureaucrats] is so we don't have to think all the time." Thus, such rules undercut the self-responsible individualism that is the backbone of America's success.

Links to Other Commentaries About the FTC's Rules

Regulating Speech to Death
by Diana Hsieh
October 5, 2009

A double standard for online speech
by Vincent Carroll
October 14, 2009

Interview with the FTC’s Richard Cleland
by Edward Champion
October 5, 2009

FTC: Bloggers Must Disclose Payments for Reviews (NYT)
by Ron Workman
October 5, 2009

Yes, new FTC guidelines extend to Facebook fan pages
by Caroline McCarthy
October 5, 2009

Where Did You Get That Keychain?
by Walter Olson
October 16, 2009

New FTC Rules Aim to Kill the Buzz on Blogs
by Eric P. Robinson
October 8, 2009

The FTC going after bloggers and social media is like "sending a government goon into Denny's to listen to the conversations in the corner booth and demand that you disclose that your Uncle Vinnie owns the pizzeria whose product you just endorsed."
by Ann Althouse
October 6, 2009

Letter to the FTC on Guides Governing Bloggers>
by Laura Sell, Senior Publicist, Duke University Press
October 7, 2009

Disclosures

The document, "Ari Armtrong's Disclosures Unjustly Compelled by the FTC," has now been published. I will update it from time to time in an attempt to comply with the FTC's unjust and rights-violating rules.

As I note in that document, "I do not expect that the FTC's rules will be ambitiously enforced in the short-term. Many bad laws (and authorized rules) have no noticeable impact when they are first implemented. Often such laws and rules remain on the books for years before bureaucrats and prosecutors take advantage of them to actively violate people's rights. That does not make their existence more comforting."

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posted by Ari at 4 Comments