FTC and Blogger Disclosure Rules

posted by Deven Desai

As I argue in my essay Individual Branding the web presents important and amazing new possibilities for individuals to earn money and much of that potential will flow from one’s online reputation. In short, as one blogs or shares information in another form, one becomes a trusted source and can start extract money from those activities. I argue that those acts have the seeds of the possible destruction of Benkler’s world of sharing. Today the FTC has targeted a practice that arguably could increase the reliability of social network endorsements but will also upset many people.

As CNET reports, “Independent bloggers who fail to disclose paid reviews or freebies can face up to $11,000 in fines from the Federal Trade Commission, according to revisions to the agency’s “Guides Concerning the Use of Endorsements and Testimonials in Advertising” published Monday.” The FTC has not updated the Guidelines since 1980. The press release is here. The full text of the Guides are here (pdf). It is 81 pages, and I have not read it as yet but one thing people should know is that the effective date is December 1, 2009.

From the release it appears that the guides take am expansive view of what presents a moment to disclose “The revised Guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service.” CNET suggests that celebrities and “mommy bloggers” could be in trouble under the new rules. (Here is my prediction on the riposte to come but that I don’t think is accurate: “The FTC hates moms. In a down economy and with more and more people needing new ways to earn, the FTC actions are a direct attack on the importance of moms.” Now back to our regularly scheduled blogging.)

There are a ton of oddly connected things here. First, I just blogged about CITP and its FedThread project. That project would allow one to track this sort of moment rather quickly. Second, I was just at the Works In Progress Intellectual Property Conference at Seton Hall (which was yet again an excellent conference and for which everyone at Seton Hall deserves many thanks) where Zahr Stauffer presented a fascinating paper called Novels for Hire: Branded Entertainment, Copyright and the Law that I think will have something to say about these changes. As one blog notes, the practice of giving journalists freebies is common. Zahr’s paper shows how advertising and novels have had a rather curious interaction over the years. I think the paper will help understand the way writing and advertising have co-existed in either good or bad ways at different times with the shift to blogging fitting in as part of that history. The paper should be available soon so keep an eye out for it.

Electronics and other big ticket items seem to be where the concerns are. I look forward to finding out whether book, film, and music reviewers have to tell readers whether they received a review copy of the book. In general if one only says nice things about a review subject, one might receive more books etc. I think that non-professional blogs and other online information sources such as rating systems and FaceBook will allow people to find out whether they should buy a product (i.e., one might use a personal network to ask whether a product is good). That practice could undercut the quiet payment model.

Here is a possible way to understand this turn of events. 1) Secret endorsements die out and full disclosure of what has been given is the norm. 2) Small bloggers and big agencies are no longer able to seem credible as reviewers. 3) If people want independent reviews, they must pay magazines or other pay sources who can afford to buy the review items and avoid the taint of being given free stuff. 4) The public does not want to pay and instead reads the blog reviews with the disclosures and augments the research with social networks and user ratings which are more difficult to fake and possibly more reliable. 5) Yet again paid, professional independent news and reviews seems to be squeezed out.

  October 5, 2009 at 1:44 pm  Tags: Blogging, FTC, guides  Posted in: Blogging, Consumer Protection Law, Cyberlaw, First Amendment, Media Law, Web 2.0   Print This Post   7 Comments

Antitrust in Obamaland

posted by Spencer Waller

Antitrust enforcement was one area where most observers expected significant changes from the Bush years, particularly at the Antitrust Division of the Justice Department. For the past eight years, the Antitrust Division had vigorously prosecuted cartels, but had not been active in monopolization or merger enforcement. In addition to bringing relatively few cases in these areas, the Division had filed a number of amicus briefs in support of defendants, opposed a petition for certiorari sought by its sister agency the Federal Trade Commission, and issued a number of reports and policy recommendations that restricted the reach of the antitrust laws or imposed significant burdens on private plaintiffs. During this same period, the FTC proved to be more active in the competition area, particularly in the health care and intellectual property fields which suggests that the FTC will have a greater continuity in the competition area despite key changes at the Commissioner and staff levels.

The key officials in the Obama administration came into the antitrust agencies promising change. Christine Varney, the new head of the Antitrust Division, gave a speech in her early days promising more vigorous enforcement and hearkening back to the days of Thurman Arnold during the latter half of the New Deal. At the same time, she repudiated a highly restrictive report on monopoly power issued during the waning days of the prior administration issued by the Justice Department alone because a majority of the FTC had refused to endorse. In addition, the Division has reversed policy and filed an amicus brief in support of plaintiffs in a key Supreme Court case involving the pharmaceutical industry. Most recently, the Justice Department and the FTC jointly announced a new initiative to revisit the Merger Guidelines of the 1990s used by both agencies to decide which mergers and acquisitions to challenge on competition grounds. Read the rest of this post »

  October 1, 2009 at 12:57 pm  Tags: Antitrust, DOJ, FTC, Live Nation, Obama administration, Ticket Master  Posted in: Antitrust, Consumer Protection Law, Uncategorized   Print This Post   No Comments

Responsibility and Duty Meet Social Networking

posted by Deven Desai

In light of the events in Iran, many may laud the power of tools such as Twitter and Facebook as they allow information to reach the world. Here in the United States, however, a few stories highlight how social networking tools and blogs run into ideas of fairness, honesty, and even justice. First, the FTC is planning on investigating bloggers who are paid for their posts but who do not disclose their affiliation. The article claims “The common practice of posting a graphical ad or a link to an online retailer — and getting commissions for any sales from it — would be enough to trigger oversight.” Second, the Ninth Circuit has just ruled that a woman’s blog posts about her co-workers and job environment were not protected speech. As such, her demotion was lawful. Third, a recent Law.com article makes a strong argument that tweeting while on a jury should not be allowed and jeopardizes the fairness of a trial.

The FTC action seems too aggressive, yet it shows that the idea of blogs having some sort of purity is not always the case. But if it prompts bloggers to be more forthcoming about their affiliations and to develop some best practices (as the article suggests), that could be a good outcome. It also seems to embrace the idea of more information is better which may keep many online happy. Those who think tweeting is some sort of anointed right err. The trial context shows that rather well. As for the blog and speech case, I need to find the decision. The article claims that the court “concluded that [the plaintiff's] speech was not a ‘public concern’ but rather was ‘racist, sexist, and bordered on vulgar,’ and it characterized her behavior, in part, as ’salacious’ and ‘mean spirited.’” I leave it to the First Amendment folks to unravel that one, but I wonder whether this case will be appealed to the Supreme Court.

In any event, these three events show that while we can say that tools that enhance free speech are wonderful in the extreme cases such as the situation in Iran, the more subtle cases raise on-going questions about the contours of speech. As always the issues are familiar. Now, however, simply saying keep your hands off the Internet or keep it free is an insufficient guideline. Too many people are online and too much online behavior tracks offline experiences and problems. In other words, although the technologies seem to make the questions different and requiring special treatment, they may only make the old questions and responses more salient.

  June 22, 2009 at 11:22 am  Tags: Blogging, free speech, FTC, juries, regulation, Twitter  Posted in: Cyberlaw, First Amendment   Print This Post   No Comments