As I noted yesterday, the Federal Trade Commission now punishes individuals who publish comments online about products for sale without disclosing their own “material interest” in the product. The FTC’s complaint said that it violates federal law to deprive consumers of facts that “would have been material” to their purchasing decision — even if there’s no evidence the failure to disclose actually impacted any consumer’s behavior.
That being said, I have a simple question: How come it violates FTC rules when a public-relations firm posts favorable reviews of its client’s products without disclosing the firm’s relationship with the product’s manufacturer, but it’s perfectly acceptable for major newspapers to publish stories that intentionally withhold the identities of key sources? If deliberately failing to disclose “material” information is the standard for condemning a business act as fraudulent — as the FTC and its supporters say it must be — then I don’t see how, say, the Washington Post can routinely publish articles that cite “unidentified” sources without running afoul of the Federal Trade Commission Act.
Failure to disclose journalistic sources does far more harm to consumers than some PR firm posting fake reviews of a video game. Newspapers essentially ask their readers to accept their reporting as truthful on faith without all the necessary facts. And don’t give me that “First Amendment” crap. The antitrust laws, including the FTC Act, overrule the First Amendment. I know because the antitrust regulators have told me so.
Certainly, supporters of the regulatory state would never tolerate a food manufacturer that refused to disclose key ingredients. There’s no reason the New York Times should be held to a lower standard. If the federal government doesn’t directly control the flow of information to consumers, the market simply cannot function. Right?
All kidding aside, my point here is to refute the mistaken belief that “deception” is the same thing as “fraud.” I’ve read few defenses of the FTC’s actions as nothing more than a legitimate act of punishing “fraud.” But the standard of fraud is not failing to disclose any information that might be relevant to a potential customer. That would render virtually every act of commerce susceptible to “fraud,” since a customer rarely possesses perfect information about a product.
Fraud — at least, the libertarian definition of fraud — requires proof that the customer failed to consent to a transaction because of the seller’s misrepresentations. It’s hard to see how the FTC’s case against the PR firm could meet this standard. The FTC never alleged any specific customer was misled into buying the product — and, incidentally, the FTC still hasn’t identified what the product was — so there are no victims. Yet fraud is not a victimless crime. And the hypothetical argument that some customer might have decided to buy the product because of misleading reviews is no substitute for presenting an actual victim.
If you accept the FTC’s argument in this case, then you must also accept my argument that newspapers commit “fraud” whenever they fail to properly source their articles. After all, people supposedly took the iTunes reviews at face value — without knowing their true source — and according to the FTC made irrational purchasing decisions based on these reviews. What’s good for a small PR firm is good for the largest newspapers in the country.
{ 8 comments }
as always a great read, thank you!
On a lighter note, I immediately thought of this : http://www.youtube.com/watch?v=T-jXe0x4YdM
I doubt the employees could overwhelm the general buying audience.
I think this was more aimed at bloggers or vloggers who, through endorsements would mention products in their posts. It would seem deceptive to a person if your favorite blogger mentioned a product they like to use and you not know they are getting payed to do so.
Are you agreeing or disagreeing with the FTC doing this?
Deception is everywhere. Are you saying it should be illegal in any circumstance, not just during a transaction?
Even assuming this…so what?
If people then buy the product and it turns out to be a piece of crap, the blogger is harmed because he has hurt his reputation.
if the people LIKE the product, then the blogger performed a socially useful function by aligning a consumer with something he valued.
In any case we sure as hell do not need a monolithic organization with no checks to ensure that customers are being “protected”.
Someone needs to make a poster of Mr. Oliva wielding a hammer against a FTC building.
A far more accurate image would be one of a shirtless Oliva strangling giant bears wearing lawyer suits.
With his bare hands.
Comments on this entry are closed.