FTC

More Hypocrisy Regarding FTC Blog Regulations

by Elizabeth Jacobson on October 21, 2009

in Health and Illness, Healthcare, Regulation

Michael Masnick at Techdirt offers up another incidence of government inconsistency in light of the FTC’s blog-watching rules, reminding us that “clinical research on drugs isn’t even remotely trustworthy, as it all-too-often seems to involve doctors who have serious conflicts.”

Doctors with conflicts-of-interest, who push and promote certain drugs while receiving all kinds of goodies from pharmaceutical companies, seems, at the very least, like a more justifiable place for regulators to stick their noses (although there’s definitely an argument to be made about the medical industry being over-regulated already). Forgive me if it’s difficult to digest the claim  that a mommy blogger with a free bottle of toilet bowl cleaner is somehow a bigger menace to the public than a doctor who pushes his patients into clinical trials without disclosing his “material relationship” with the drug maker.

FTC Sets its Sights on Bloggers

by Elizabeth Jacobson on October 19, 2009

in Features, Tech & Telecom, Zeitgeist

The blogosphere has been up in arms over the last two weeks, ever since the Federal Trade Commission issued an update to its “Guides Concerning the Use of Endorsements and Testimonials in Advertising.” In the past, these guidelines have determined the kinds of research claims companies or celebrity endorsers can make about products in advertising. With the recent update, though, the FTC has chosen to extend its reach onto the Internet, applying its regulations to blogs, Facebook pages, even Twitter feeds. L. Gordon Crovitz explains in the WSJ:

The guidelines require people to disclose online if they have what the FTC vaguely defines as “material connections” with the sellers of a product or service. This could include getting free samples on which they base comments or reviews. Bloggerl objected to the double standard that exempts traditional media from the rules – many newspapers, magazines and broadcasters accept free books and other products for their reviewers.

The FTC’s aim is to go after advertisers, but its vague definitions don’t offer much clarity. Further complicating the issue is the FTC’s intention to handle violations on a selective, case-by-case basis. Laws ought to be clear and enforcable, not ambiguous and imposed at the whim of some unelected government regulator. Either all bloggers who break the rules are criminals, or none of them are.

Netizens should recognize how unnecessary these regulations are. Bloggers who care about their reputations already practice honesty and transparency. Bloggers who don’t disclose their commercial ties risk alienating their readers and losing traffic. This relationship between content creators and users is what makes social media self-regulating. Citizens don’t need the government to clean up the Internet’s garbage.

Regulation of the Day 41: The Color of Beer Cans

by Ryan Young on August 27, 2009 · 2 comments

in Deregulate to Stimulate, Nanny State, Politics as Usual, Regulation, Regulation of the Day

Having already solved all of the country’s economic problems, the FTC now has time to threaten to step in and stop Budweiser from selling cans of Bud Light with college sports team colors on the labels.

Hat tip to Mark Calabria.

LibertyWeek 54: Read My Lips

by Richard Morrison on August 3, 2009

in CEI Projects, Podcast

Your host Richard Morrison welcomes back returning guest co-hosts Michelle Minton and Jeremy Lott for Episode 54 of the LibertyWeek podcast. We start with ominous hints of new taxes, California state employees making strike threats and the possible antitrust implications of the Microhoo partnership. We continue with a double-dipping pay scandal, the suppression of dissent in Venezuela and some fully transparent Olympic News.

Can the Blogosphere Be Regulated?

by Evan Banks on July 1, 2009

in Regulation, Tech & Telecom

The Federal Trade Commission seems to think so. A fresh set of proposed Federal Trade Commission guidelines, if approved this summer, would potentially allow the agency to police the relationship between bloggers and advertisers, forcing bloggers to disclose any revenue, gifts, or freebies they have received for publishing consumer reviews of goods and services. These guidelines mark the FTC’s first systemic foray into regulating the blogosphere, a Herculean task if ever there was one. An example, excerpted from the aforementioned guidelines:

Example 7: A college student who has earned a reputation as a video game expert maintains a personal weblog or “blog” where he posts entries about his gaming experiences. Readers of his blog frequently seek his opinions about video game hardware and software. As it has done in the past, the manufacturer of a newly released video game system sends the student a free copy of the system and asks him to write about it on his blog. He tests the new gaming system and writes a favorable review. The readers of his blog are unlikely to expect that he has received the video game system free of charge in exchange for his review of the product, and given the value of the video game system, this fact would likely materially affect the credibility they attach to his endorsement. Accordingly, the blogger should clearly and conspicuously disclose that he received the gaming system free of charge.

As you can see, the proposed guidelines target bloggers who are paid in hard-money and soft-money (free demo copies of products, etc.) compensation to blog on certain topics by sponsors, which are connected to the bloggers through media advertising companies such as Pay Per Post. Bloggers critical of sponsored “monetized blogging,” such as those at TechCrunch, label the phenomenon an online version of radio payola, and BusinessWeek goes as far as saying that sponsored blogging is “Polluting the Blogosphere.” Enter the FTC to save the day, right?

Well, the blogging community has historically defied traditional regulation (which helps explain why its growth was so explosive), and according to this AP article, “Bloggers complain that with FTC oversight, they’d be too worried about innocent posts getting them in trouble, and they say they might simply quit or post less frequently.” I would add that these are not “complaints” but rather legitimate concerns about overly heavy-handed federal retribution towards the very people we have to thank for the blogging revolution in the first place. Marketers have additionally voiced similar concerns.

This move could potentially spell bad news for the blogging community, which up until now has enjoyed a measure of immunity from the regulatory standards imposed on traditional news outlets. But as the line between professional journalism and independent reportage begins to blur, increasing numbers of voices in the blogosphere have been calling for more uniform disclosure agreements among themselves. And seeing as how the general blogging community is generally suspicious of itself and especially wary of posters who accept compensation for their work, the system will generally work to scrutinize, discredit, and stigmatize bloggers that choose to accept compensation for reviews without a prominent disclosure statement. Since policing the series of tubes for nondisclosure would be akin to trying to catch a waterfall in a paper cup – a daunting task even for Big Brother – perhaps self-mediated blogger honesty and transparency may be, in fact, the best policy.

FTC to Monitor Blogs for Undisclosed Compensation

by Elizabeth Jacobson on June 22, 2009 · 2 comments

in Regulation, Tech & Telecom

So much for the idyllic “free information” model of the internet. The Federal Trade Commission is drafting new rules that would extend its authority to encompass bloggers who promote products in exchange for compensation or giveaways. The FTC’s new oversight could be quite extensive, even covering the common marketing practice of affiliate links, as the Associated Press reports:

New guidelines, expected to be approved late this summer with possible modifications, would clarify that the agency can go after bloggers — as well as the companies that compensate them — for any false claims or failure to disclose conflicts of interest. It would be the first time the FTC tries to patrol systematically what bloggers say and do online. 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.

While professional journalists in print or broadcast media are held to strict standards (they usually can’t receive gifts or payments), Internet bloggers need not subscribe to any common code of ethics. However, government oversight in the blogosphere seems a bit drastic and unnecessary. It’s one thing for the FTC to enforce guidelines on electronic advertising conducted by tax-exempt organizations, corporations, or bloggers officially affiliated with them. But applying these rules to independent, small-time consumer product reviewers and noncommercial bloggers who use AdSense oversteps any reasonable exercise of regulatory power in the name of “consumer advocacy.” The FTC even wants to extend its reach to Twitter and other social media services. Perhaps Twitter will have to increase its 140-character limit if users who tweet about a product will be required to include a “#CompensatedReviewFTCCompliant” hashtag.

These new regulations – specifically, the threat of an FTC investigation – could have serious consequences for the availability of information on the Internet. When the FCC regulated political content on broadcast radio in the 20th century, the result was a “chilling effect” on political speech. Broadcasters stopped providing potentially controversial content for fear of an FCC investigation. Unsurprisingly, our government has not learned its lesson. The AP continues:

Between ads on her five blogs and payments from advertisers who want her to review products, Rebecca Empey makes as much as $800 a month, paying the grocery bill for a family of six. She also has received a bird feeder, toys, books and other free goods. Now the 41-year-old mother of four in New Hartford, N.Y., worries that even a casual mention of an all-natural cold remedy she bought herself would trigger an FTC probe.

Last, there’s the obvious problem of manpower. The feds couldn’t possibly believe that they have sufficient resources to monitor the entire blogosphere, could they? Add to that the Twitter timeline and all those public MySpace pages, and you’re looking at a pretty long list. Let’s not forget the millions of Internet message boards - surely those would be included, too. Who’s going to regulate those blogs not based in the U.S.? Cnet’s Caroline McCarthy sums it up best:

…does the FTC realize just how many small-time bloggers are out there? Championing business ethics is a worthy goal, but, um, good luck getting much done when there are hundreds of thousands of blogs out there and new ones popping up more or less daily. Ever heard of the expression “herding cats?”

Consider this more evidence that government attempts to enforce any kind of content regulation over the Internet are almost always short-sighted, heavy-handed, and usually lack any technological understanding. Certainly, bloggers ought disclose compensation arrangements, gifts, and conflicts of interest, and most reputable bloggers already do, but do we really need the FTC to keep its eye on every amateur blogger with a coupon? While it may be desirable for the FTC to promote competition and fair business standards in some contexts, going after blogs is another example of the government injecting itself where it’s neither needed nor welcome.

LibertyWeek 47: Persian Powder Keg

by Richard Morrison on June 15, 2009

in CEI Projects, Podcast

Your host Richard Morrison welcomes back guest co-host Jeremy Lott and special guest Greg Conko for Episode 47. We start with the new Obama-Geithner plan for expanding regulation of financial markets, the protests over the disputed presidential election in Iran and the Federal Trade Commission’s investigation of telemarketing robocalls. We then move on to the “beer bikes” of Amsterdam and some potentially scandalous investment choices made by Sen. Dick Durban. Finally, we talk health care with CEI Senior Fellow Greg Conko, covering President Obama’s address to the American Medical Association and the recent Forbes article in which Greg and Dr. Henry I. Miller describe what an ObamaCare plan might actually look like (hint: it won’t be pretty).

Your Interests Are My Interests

by Cord Blomquist on March 11, 2009 · 2 comments

in Features, Regulation, Tech & Telecom, Zeitgeist

If you’re a fan of professional print journalism, you may be a little worried as of late.  Denver’s Rocky Mountain News just closed its doors after nearly 150 years in the news game.  Meanwhile the San Francisco Chronicle and the Seattle Post-Intelligencer are both on life support.  Even the New York Times, the largest newspaper in America, has cut its dividend and mortgaged its headquarters for $225 million.

It seems clear that the age of broadsheet newspapers is coming to an end, yet the web hasn’t come to its rescue.  Partially this is because ad rates from the old world of print were inflated to reflect the size of the total audience of the paper.  Online ads, by contrast, are micro-targeted at just those folks who advertisers believe are most likely to buy their products or services.  This makes sense, but the numbers involved are still staggering.

Consider that the New York Times online as of 2007 had about 13 million unique users.  Compare that to its weekday circulation of 1.1 million and its weekend circulation of about 1.6 million.  The Grey Lady’s web presence had tenfold the reach of the paper, yet online revenue made up only about 10% of the Times total revenue.  That means that a product with ten times the reach is getting only 1/10th of its old-school equivalent.

Long story short: the industry needs all the help it can get.

This is where Google comes in.  Along with being a giant in the search industry, Google is empowering a network of publishers to the tune of $4.2 billion in revenue passed to them in 2007—according to members of Google’s DC office, the 2008 numbers are even larger.  In fact, Google knows it is better to give than to receive—it gives more money out to its publisher network than it keeps for itself in profits.

Now this giant of monetization is introducing an even better advertising mechanism, Google’s “Interest Based Advertising” program.  IBA works by collecting information whenever a user visits a site that features a Google AdSense network ad.  This information is turned into a sort of a profile that helps to focus ads on a per-user basis, rather than just basing that ad on the content of the web page alone.

This means that advertisers will have a more effective means of getting their message out online—news that should be music to the faltering print news industry’s ears, not to mention their loyal readers.

Understandably, this news sounds ominous to many.  Tracking your browsing?  And we were worried about the Bush administration tapping our phones!

However, unlike when dealing with government looky lous, you have the choice to tell Google to mind their own business.  Also, Google is telling consumers about the program.  Folks concerned with privacy issues call these elements “notice” and “choice.”

The notice comes in the form of clear labels on all Google-based ads, something the company already does with the exception of some of their print ads.  Currently, all ads served by Google feature their name, but some don’t feature the name of company paying for the ad spot.  Now that will change.  Users will know that Google is serving the ad and who’s paying them to do so.

Additionally, Google is allowing users to choose—this is the control part—how they’re classified by the new program.  Their Ads Preferences Manager will let users view, delete, or add interest categories associated with their browser so that the advertising they see will at least be relevant to them.

Finally, Google is also giving consumers the ultimate control over the program in the form of a set of tools to permanently opt-out.  They have even designed plug-ins for browsers that will maintain your opt-out choice.

It remains to be seen how this program—and others started much earlier by Yahoo! and other Google competitors—will increase revenues for publishers.  However, since all of these systems are designed to serve more relevant ads to consumers, it would seem that all parties involved stand to benefit.

Yet, there is sometimes no satisfying the privacy alarmists. The AP relayed this comment from EPIC’s Marc Rotenberg:

“This is a very serious development,” said Marc Rotenberg, executive director of the Electronic Privacy Information Center. “I don’t think the world’s largest search engine should be in the business of profiling people.”

Yet, with all Google is doing to allow users to opt-out of this system, one wonders if Mr. Rosenberg and those who share his opinion believe there should be any innovation whatsoever in online advertising, or if the industry should simply come to a stand-still.

Criticism of Google’s plan seems especially dubious given the alternatives offered.  Mr. Rotenberg believes that the FTC should reexamine Google’s merger with DoubleClick.  Translation: consumers are too dumb to manage their privacy, so the FTC should do it for them by tearing apart business deals that are deemed unsavory.

The appropriate level of privacy in our lives can’t be set by the government. It can only be set by free people able to explore the full range of choices offered in the marketplace.  When you consider not only Google’s consumer-friendly ad program, but other products like pre-paid cell phones, nameless debit accounts, proxy servers, anonymous email accounts, and the like, privacy seems to be out there for those who want it.

The best advice for those who want privacy: don’t go online.  The Internet is the modern public square, no more a private retreat than is a public park.  Technologies can help to mask your identity, but ultimately much can be found out about who you are online.  The only thing stopping that now is the free market’s respect for contracts and the choices of consumers.  Attacking that very freedom to choose is no way to secure great privacy in the future.

More Money For Your Mattress

by Cord Blomquist on January 3, 2009 · 9 comments

in Features, Politics as Usual, Trade

Leggett & Platt, an American innerspring manufacturer, has been busy lobbying the Department of Commerce.  The fruit of their labor: a tariff of anywhere from 164.75% to 234.51% on innersprings from China, their biggest competition.

This tariff means that you can expect to pay double for your next mattress.  Because innersprings are the most expensive part of traditional mattresses and the tariff has effectively removed affordable, low-priced mattresses from the market.

This is the result of a petition to the International Trade Commission filed in December of 2007 by Leggett & Platt—a Fortune 500 company based in Carthage, Missouri.  The petition started an investigation into alleged “dumping” by several Chinese spring makers.

For those not familiar with the doublespeak of trade policy, “dumping” refers to the act of shipping large amounts of a product into a foreign market at well below current market prices.  This seems like a good thing for mattress makers as well as consumers who buy mattresses.  Others disagree, namely Leggett & Platt.

The folks at Leggett & Platt argue that laws like these are necessary to protect American manufacturers (namely themselves)  from unfair competition from abroad.  But, rather than protecting American businesses, this policy is killing them.

Small mattress makers—think obnoxious ads on your local televisions stations—add padding, memory foams, lovely flower print coverings and other components to innersprings to make a finished mattress.  These small to medium sized businesses are paying a steep price for Leggett’s “protection.”

Leggett was already responsible for 70 to 80 percent of the domestic innersprings market.  Without foreign competition, they now have a virtual monopoly on the market.  In short, mattress makers are now forced to buy from Leggett at any price they set.

This means many mattress makers have discontinued discount mattress lines.   Almost all have had to raise their prices in order to pay for Leggett’s high-priced product.

Many small mattress makers relied on foreign sources of innersprings in order to compete with their larger competitors. This new tariff means that’s no longer an option, so  many small mattress makers maybe forced to close their doors.

Those with a dark sense of humor may chuckle at the regulatory underpinnings of this tariff.  The DOC has the authority to investigate dumping and enact such anti-dumping tariffs under Title VII of the Tariff Act of 1930, otherwise known as the Smoot-Hawley Tariff Act.  Under Smoot-Hawley, exports and imports plunged by over 50 percent, from their high in 1929 to the depressed levels of 1932.  Most economists agree that this policy was one of the major catalysts that led to the start of the Great Depression.

Smoot-Hawley has, thankfully, been reformed several times in the decades since those dark days.  But, thanks to companies like Leggett & Platt, who manipulate trade policy to avoid competition, Smott-Hawley is being put back together piece by piece.

But don’t lose any sleep over it; after all, you paid so much for that mattress.

Full disclosure: The author worked for Leggett & Platt as a shipping clerk for a summer in college .  It was a great job.

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