Feds Target Bloggers with New Disclosure Rules

Bloggers beware: Earlier this week, the Federal Trade Commission extended the heavy hand of government into the blogosphere (and other social media sites like Twitter and Facebook) in its new guidelines for product endorsements and testimonials.

Even Joan Q. Citizen could be fined for violating the new guidelines, which would apply to anyone who discusses a product and also receives material compensation connected with the product’s seller. Potential targets of an FTC crackdown include book critics who receive free books from publishers, bloggers receiving freebies or manufacturers’ coupons, and even B-list celebrities who mention products on Twitter. Anyone who fails to abide by the disclose rules will be subject to a hefty fine of up to $11,000.

Woefully inadequate manpower is the first big problem federal blogosphere cops will likely face. The FTC seems to have vastly underestimated the “size” of the Internet, which is for all practical purposes infinite. Practically speaking, the sheer quantity of bloggers, Twitterers, and Facebook users all but guarantees that most instances of undisclosed compensation will go unseen. Thus, to police even a modest portion of the Web would be a insurmountable task, especially given the FTC’s finite (albeit sizable) budget.

The FTC also seems to have forgotten that the Internet is a posterchild of market dynamism. Even if consumer watchdogs could manage to expose every blogger or tweeter who violates the rules, hundreds of thousands of new ones could spring up overnight. And even if the rules were limited to commercial bloggers, the healthy turnover in Internet marketing websites ensures that shutting one class of sites down would simply cause unscrupulous product endorsers to go someplace else.

Complicating the regulatory agenda even further is the lightning-fast speed of e-commerce evolution. No government agency – or anybody, for that matter – can reliably predict what the digital marketplace will look like a mere year from today. Imagine if the FTC had taken up this issue eighteen months ago, back when Twitter was a tiny, virtually unknown startup. Where would Twitter be today?

The proposed rules aimed at shining light on celebrity product endorsements are not only vague but also downright unnecessary. If Kim Kardashian tweets favorably about a restaurant after its manager serves her a few cocktails on the house, does that count as an endorsement? Should Twitter be forced to up its current 140 character limit to provide space for a new #CompliantWithFTCCompensationDisclosureRules hashtag? Better that the FTC recognize that consumers aren’t stupid and that it’s no secret that celebrities are showered with free gifts all the time. That’s why most people take the word of a celebrity with a grain of salt.

The FTC’s proposed guidelines highlight government’s worrisome tendency to fall prey to “mission creep.” This time, it’s the Internet that is in the crosshairs. In the name of “protecting America’s consumers,” the FTC’s new guidelines will put the Internet, which has long been touted as the ultimate platform of free expression, at risk of significantly greater government involvement. In the last century, government attempts to regulate content under the “Fairness Doctrine” (among other policies) had chilling effects on controversial content distributed over the airwaves. In the same way, the FTC’s new powers to investigate and act against bloggers could threaten all sorts of speech, both commercial and noncommercial.

To be sure, bloggers that care about ethics certainly ought to disclose any financial or material compensation relating to products they review. In fact, most reputable bloggers already do just that. Like the print journalists that preceded them, bloggers – and readers – are guiding the development of a common set of standards that will ultimately enable consumers to identify authors that offer unbiased reviews. In fact, Web users already flock to reliable content on the Web. Consider that most blogs with significant readership also offer honest, reliable commentary and analysis. On the other hand, spam-infested, fly-by-night marketing sites tend to remain in relative obscurity, earning little meaningful traffic.

Regulations enacted in 2009 will at best reflect a snapshot of the Internet as it exists today. They cannot account for new innovations that will assuredly emerge in coming years. If the FTC were truly concerned about advancing consumer welfare, it would simply leave the blogosphere alone.