The Federal Trade Commission is now actively policing comments left on commercial websites and punishing individual commenters who do not disclose their business interests to the government’s satisfaction. In a proposed order announced today, the FTC accused Reverb Communications, Inc., a public relations firm and its owner, Tracie Snitker, of violating § 5 of the Federal Trade Commission Act — which bans “unfair methods of competition” — because the company’s employees left positive reviews on Apple’s iTunes store for a video game marketed by one of Reverb’s clients.
The FTC recently granted itself the power to regulate online endorsements, and in this case, the Commission said Reverb employees should have disclosed their status in their iTunes comments. The FTC’s complaint said “these facts would have material to consumers in their purchasing decision regarding the gaming applications.” The Commission, however, cited no evidence that any customer relied on the reviews in purchasing the products in question. In fact, the Commission alleged no specific harm to any individual whatsoever.
Still, the FTC’s proposed order — which will expire in 2030 — subjects Reverb and Snitker to FTC monitoring of their speech going forward. If any Reverb employee makes a public comment about a product the firm has a “material connection” to without “clearly and prominently” disclosing said connection, the company and Snitker could be subject to contempt proceedings and daily fines. Similar penalties apply if the FTC, in its sole discretion, determines that any Reverb employee “misrepresents” himself as an “independent” reviewer on any website. The proposed order also requires Reverb to remove all comments deemed illegal by the FTC from the relevant websites.
While the Commission says it is merely applying “long-held principles of truth in advertising” to web commerce, the implication of today’s action is that merely posting a comment on a website can now make you the target of a federal investigation, even if there’s no evidence that any consumer was misled or suffered injury. In a case like this one, which was settled by “consent order,” the defendants likely incurred several thousand dollars in legal expenses, and their speech is now subject to 20 years of government censorship. Since the FTC rarely brings cases in isolation, today’s action is a signal that other individuals and businesses are also under investigation for comments posted on commercial websites.
UPDATE: There is a 30-day public comment period on the FTC’s proposed order. Anyone interested can submit comments here.
2ND UPDATE: There is one big unanswered question in all this: How did the FTC learn about what Reverb was doing? Someone had to tell the FTC. I can think of three likely explanations: (1) a Reverb employee acted as a “whistleblower”; (2) Apple, which owns iTunes, figured it out and told the FTC; or (3) a competing PR firm or application developer somehow got wind of it and complained. None of these scenarios are heartwarming, but the second one disturbs me the most. Apple is already on the FTC’s “must conquer” list, and — I’m merely speculating here — I’d hate to think the company is collaborating with the Commission on these nonsensical “blogola” cases in a futile attempt to get into the regulators’ good graces.
Again, I don’t pretend to have any proof that Apple was involved in bringing this case. But unless the FTC explains where the complaint came from — and they won’t — it’s reasonable to look at the most likely suspects.
3RD UPDATE: Russ Frushtick of MTV spoke to an FTC official, who said the agency “got reports from press that Reverb was involved in these fake postings and we decided to look into it some more, so we opened an investigation.” The official added that the Commission “reviewed internal Reverb materials and documents, so we were able to determine that part of [Reverb's] marketing campaign was to post these fake reviews on behalf of their client.” Frushtick also got a statement from Reverb:
During discussions with the FTC, it became apparent that we would never agree on the facts of the situation. Rather than continuing to spend time and money arguing, and laying off employees to fight what we believed was a frivolous matter, we settled this case and ended the discussion because as the FTC states: “The consent agreement is for settlement purposes only and does not constitute admission by the respondents of a law violation.”
4TH UPDATE: The FTC’s entire cases is predicated on the allegation that customers were deprived of “material information” because Reverb failed to disclose its connection to the game publishers in its iTunes reviews. Yet the FTC never once identified the games involved. Isn’t that strange? A case based on withholding material information results in an order…that withholds material information! This is internally inconsistent; after all, isn’t Reverb’s client just as guilty of violating the FTC Act as its public relations firm? Perhaps it is, and the FTC will soon announce another order. But that doesn’t negate the Commission’s failure to tell consumers what product they supposedly bought based on “misleading” online reviews.
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Great post (I was paid to say that).
Uh oh, now you’ve done it…
Great post. I would like to be paid to say this but I’m not. Please pay me. Please?
Funny how the words “Congress shall make no law …” have become so meaningless.
Congress made no law, the FTC did.
Looks like I’m going to have to add something to everything I post on the internet.
The poster of this message hopes to one day gain from a system of less government. Therefore everything posted by him is intended for personal gain.
Congress has no power to delegate lawmaking to others.
Sure they do — fire-power.
i guess they want what the SEC has for stocks.
It’s similar to what a Park Police Officer told me, “Congress didn’t pass a law; the NPS made a regulation.”
Way to split hairs – you fascist &^%$#@ @#$%^&^%$#@!!
Of course, any power not specifically granted to Congress is retained by the States and the People, but oh well. I guess ink on parchment cannot enforce itself.
When they’re tired of skulking around blogs hassling and intimidating people who post web comments, they can hire another few thousand rats and have them ride around on public transit listening to what people say to each other, and eavesdrop on phone conversations. Because you never know when someone will misrepresent their credentials when endorsing or criticizing a product, do you?
Better steam open all mail too – just in case.
I think they’re already listening in on phone conversations. You know, to catch the terrorists and such.
I think you’ve hit on something there Henry. This could fix the unemployment problem once and for all.
http://en.wikipedia.org/wiki/Stasi
“Between 1950 and 1989, the Stasi employed a total of 274,000 persons in an effort to root out the class enemy[5][6]. In 1989, the Stasi employed 91,015 persons full time, including 2,000 fully employed unofficial collaborators, 13,073 soldiers and 2,232 officers of GDR army[7], along with 173,081 unofficial informants inside GDR[8] and 1,553 informants in West Germany.[9] In terms of the identity of inoffizielle Mitarbeiter (IMs) Stasi informants, by 1995, 174,000 had been identified, which approximated 2.5% of East Germany’s population between the ages of 18 and 60.[5] 10,000 IMs were under 18 years of age.[5]
While these calculations were from official records, according to the federal commissioner in charge of the Stasi archives in Berlin, because many such records were destroyed, there were likely closer to 500,000 Stasi informers.[5] A former Stasi colonel who served in the counterintelligence directorate estimated that the figure could be as high as 2 million if occasional informants were included.[5]
Stasi efforts with one agent per 166 citizens dwarfed, for example, the Nazi Gestapo, which employed only 40,000 officials to watch a population of 80 million (one officer per 2,000 citizens) and the Soviet KGB, which employed 480,000 full time agents to oversee a nation of 280 million residents (one agent per 583 citizens).[10] When informants were included, the Stasi had one spy per 66 citizens of East Germany.[10] When part-time informer adults were included, the figures reach approximately one spy per 6.5 citizens.”
oliva is scheduled for a tax audit.
I wonder what game they were commenting on? I Want To Buy It!
I Must Buy It! (compelled by controversy)
Curiously, the FTC never names the games involved. Perhaps because they didn’t want to give them free advertising. Still, that’s another suspicious thing about this whole case.
Nice that this site still allows comments without having to register.
Hmmm, I hope you don’t keep track of url’s….
Next they will be going after blogs over copyright infringement in the comments sections.
Paul Krugman BS – who should regulate it? The FTC, the FDA, the EPA, the DOA. Perhaps they all need to step up enforcement – might actually create some jobs!
Disclosure – I was not paid a plug nickel for this post. (Not worth a )
What if Apple had paid them to make those comments instead? What then?
Then Apple would have been in violation of the FTC decrees.
I think he was commenting on how Apple is the biggest abuser of this sort of behavior yet they tend to get a free pass from the FTC.
This is a heroic move by the FTC. One of the chief causes of market inefficiency is asymmetric information. By abolishing the spread of asymmetric information by bringing all data through a single filter, market efficiency will be greatly increased.
Nice. I endorse this comment.
Meanwhile, in the teething police state of Canada:
http://www.smalldeadanimals.com/archives/014726.html#comments
http://nfa.ca/operation-zero-tolerance
I suppose so long as I don’t mention staying at hotels, I should be okay.
Well, unless one can see my leaving comments in such forums as generating interest in myself, leading people to look me up and find that I have published works on Austrian economics and that I have a book published, which could lead people to buy my book and thus benefit me financially.
Perhaps I should note that I am an author at the end of every post I make online in the future? When people get annoyed at it, I can always say, “I don’t have a choice. I’m not really advertising — the FTC is making me say it!”
“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances”
QUIS CUSTODIET IPSOS CUSTODES
This would be an okay settlement if there were any financial penalties or fines at all. As it is, they just have to submit paperwork. How is that punishment?
Not only did they do this, they actively promoted this “feature” within their marketing material and contracts, as you can see from a copy of a proposal and their marketing here:
http://www.mobilecrunch.com/2009/08/22/cheating-the-app-store-pr-firm-has-interns-post-positive-reviews-for-clients/
They committed fraud, egregiously, and promoted it to their clients as a bonafide feature of their services. They should be fined, at the *very* least.
clients are the ones to sue for willful misrepresentation, not a third party like the state.
Yet:
A. No one knows what the offense really was. The FTC is being intentionally vague and is refusing to say who, specifically, was harmed.
B. None of the supposedly harmed parties get anything. Even if someone was legitimately defrauded, it doesn’t do them any good for the government to get all the money. The injured party is still without any form of restitution.
I like to harken back to WorldCom. I was one of the affected parties by their fraudulent behavior. At no point did I want the SEC or any other government agency to get involved. Why? Because any settlement would go right into the pockets of the government. And that it did. And our government officials had the gaul to tell me justice was done. No it wasn’t. I’m still out the same amount of money as I would have been had the government not gotten involved at all.
Fines, penalties, government involvement. There is no justice involved in that.
And the reason the FTC is “withholding information” (the specific reviews or games involved) is probably because this is a settlement in lieu of process – that is, they’re doing this so they don’t have to “really” review the entire issue or get Reverb to admit that they used any “fraudulent, deceptive, or unfair business practices.”
Screw the FTC, great post. Come and get me.
Combined with the FCC, they’ll have y’all in nappies pretty soon screaming for your morning bottle: http://www.theaustralian.com.au/business/news/cuss-it-fcc-digs-in-over-swearing-on-tv-and-radio/story-e6frg90x-1225910787396
Family Guy did a FUCKING great show on these bozos – first episode of series 5, or maybe 6, where Peter founds his own tv network PTV, with such great segments as “Guess that side boob” and “I dare you to crap off o’ that”.
The FTC has truly become a dangerous organization–dangerous to business, progress, and freedom.
I don’t know if I trust the FTC to not come after me just for disagreeing with their actions. That seems to be a ‘just as likely modus’ for them as these phantom victim consumers the FTC is crusading for…
This is another great post letting us know what the FTC has been doing to damage free trade and a free market. It’s scarier than spiders…
The Federal Trade Commission can eat my shorts. I don’t care what they say, nor do I care what they do. If an agent of the FTC were dying in a fire, I would not urinate on him to save his life. If one came to the door, with a squad of SWAT, that would be one less squad of pigs in the world.
I’m not so sure Apple had no hand in this — they’ve come a long way from the once-hip company that named a system sound sosumi in response to an IP threat from the Beatles’ publisher to the one that now requires that AT&T, which is practically owned by the NSA, be the only carrier that can be used with their appliances (which, even when bought and paid for, remain their appliances).
I know it sounds crazy but this reminded me of Abraham Lincoln’s: “Everybody likes a compliment.”
I know it sounds crazy but this reminded me of Abraham Lincoln’s: “Everybody likes a compliment.”
It’s similar to what a Park Police Officer told me, “Congress didn’t pass a law; the NPS made a regulation.”
I agree to that.
The FTC needs to go away. Not go away angry, just go away.
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However, I found that I wasn’t quite in shape enough when p90x arrived to use it well. I went back and bought Tony Horton’s “Power Half Hour” and used that for a few weeks first – had to wake up some muscles I’ve let go dormant. I’ve been in good shape most of my life, but kind of got lazy lately – I needed to get a basic foundation before I could jump into the incredible workouts he provides.
http://www.p90xbuyonline.com/13dvd-fitness-guide-nutrition-plan-p-63.html
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If this doesn’t sound like a case of sour grapes somewhere up or down the chains, I don’t know what does. Reminds me of the “black list” days in Hollywood where people would phone in tips on “suspected communists” so they could be investigated by the government.
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I do not believe Japan and Korea films are far better than hollywood ones. Just my believed
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