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Where Did You Get That Keychain?
New guidelines on freebies target bloggers but go easy on traditional outlets.
16 October 2009

If there was any doubt that sweeping regulation—big, shoot-for-the-moon regulation—was back in favor in Washington, it was laid to rest on October 5, when the Federal Trade Commission published 81 pages of new guidelines asserting authority over product endorsements and testimonials, particularly those published in blogs, Facebook, Twitter, and other social media. From the early coverage, you might have thought the guidelines were mostly of concern to the calculating Madison Avenue types who send baby-product and cosmetics swag to mommy-bloggers as part of nefarious “buzz marketing” campaigns. But the new guidelines are much broader than that. They lay out potential theories of liability for many bloggers and online commentators with more traditional literary, political, or journalistic profiles. And early discussion of the rules has barely begun to sketch the dangers they hold for the principles of free expression.

There’s nothing in itself new in the FTC’s attempts to regulate marketers’ use of paid product endorsers (in the jargon, “compensated spokespersons”). Under existing rules, celebrities and others who get paid to say nice things about a product must disclose that relationship, and both they and the product maker are liable if their praise is found misleading (even if meant sincerely) or not “substantiated” (even if not shown to be false). But there have long been gray areas in the concepts of “compensation” and “endorsement,” as with the tolerated and near-universal practice of offering free samples and performance access to media critics and reviewers. If the theater manager gives the local newspaper’s arts editor a free ticket to the play he is going to review, is that a form of compensation? If the resulting review is a rave, is that an endorsement?

The FTC began examining those gray areas more closely in November 2008, when it proposed to expand its authority more explicitly into social and user-generated media. It expressed interest in requiring broader disclosure of affiliate-store arrangements popular with bloggers, in which the blogger collects a commission if users follow a link to Amazon or another online seller and subsequently buy the mentioned book or another product. And it wondered whether online commentators were being swayed in their product mentions and endorsements by either the hope of attracting advertising or the possibility of receiving freebies and other benefits.

During the ensuing comments period, many wrote to the FTC to express concern that a heavy regulatory hand might chill the development of independent and individual media. To no avail: the rules that have just been published (to be precise, “guidelines” backed by government lawyers with enforcement powers) come down hard. Bloggers and others who fail to disclose relationships with outside entities whose goods they write about—relationships based on “material connections”—face fines ranging up to $16,000, as well as other forms of legal action. And the commission makes clear that a relationship need not be founded on any sort of cash payment; the receipt of free samples, or the expectation of future ones, can be enough.

What might this mean for political, literary, or journalistic bloggers? Like traditional print writers, successful bloggers routinely receive review copies of new books. Makers of controversial documentaries invite them to advance screenings in hopes of getting coverage. Conference organizers offer them passes. Promoters of causes send them T-shirts, paperweights, and keychains. At what point do these offerings establish a relationship based on “material connections”? To be sure, the FTC guidelines state that nondisclosure of a single minor freebie will not in itself suffice to trigger scrutiny; instead, it will be counted “among several factors to be weighed” in evaluating bloggers’ behavior on a “case by case basis.” FTC enforcers will engage in their own fact-specific, and inevitably subjective, balancing before deciding whether to press for fines or other penalties. In other words, instead of knowing whether you’re legally vulnerable, you have to guess.

Like most authors I know, I wind up donating most of the review copies of books I receive to local library sales or other charities. (As others have noted, the accumulation of review copies for disposal quickly becomes a burden, which is why I spend much more time trying politely to talk publishers out of sending me copies than trying to talk them into it.) But in a truly surreal interview, the FTC’s point man on the rules, assistant director Richard Cleland, suggests that bloggers who review books should return review copies to the publishers—who don’t even want them back!—after perusing them.

Now, it might be thought no great burden to disclose that you got a review copy of the book that you’re writing about. But the guidelines go far beyond that. They suggest that after some ill-defined point at which acceptance of freebies creates a relationship, bloggers have the obligation to disclose that relationship whenever writing about the institution in question. In other words, suppose New York University (to name a random nonprofit institution) knows that I follow the work of a few of its scholars, periodically sends me those scholars’ new books, and invites me to conferences showcasing their work. Not only should I mention the free publications and conference passes if I relay the particular insights I have learned from them, but—assuming the benefits are valuable enough to trigger the FTC’s attention—I’d better mention them again three months later when citing an entirely different NYU paper or scholar in an unrelated area.

All of this is bad enough, but what crowns it is that the FTC is proposing in several respects to regulate social media more stringently than it does traditional media. Here’s an analysis from the Harvard-affiliated Citizen Media Law Project:

A particularly remarkable feature of the “material connections” disclosure requirement is that it apparently does not apply to traditional media to the same extent that it does to online media.
The FTC’s justifications for this distinction are not entirely clear, but they appear to rely on two assumptions. First, the FTC assumes that traditional media exercises “independent editorial responsibility” in writing reviews and that bloggers and social media users may not. The FTC even suggests that reviews published on “an Internet news website with independent editorial responsibility” would be treated like those published in a traditional brick-and-mortar periodical. . . . Second, the FTC seems to assume that freebies for traditional news reporters are “reasonably expected by the audience,” whereas freebies for bloggers and influential Twitterers are not. These assumptions may be justified when the comparison is between sleazy buzz marketers and much of the traditional press, but they’re less convincing when the comparison is between serious online commentators and the offline press.

Absent any explicit safe harbor, is it safe to assume that any particular level of freebie distribution will pass without scrutiny? Recall the high-profile campaign against drug-company freebies for doctors, which began with publicity over sometimes lucrative inducements but then quickly extended to less grand courtesies as well. At this year’s assembly of the American College of Emergency Physicians, medical blogger White Coat snapped a picture of a sign from pharmaceutical company Schering-Plough that read as follows: IF YOU ARE A HEALTH CARE PRACTITIONER THAT IS LICENSED IN MINNESOTA, VERMONT, OR MASSACHUSETTS, PLEASE REFRAIN FROM CONSUMING THE FOOD AND/OR BEVERAGES AVAILABLE AT THIS EXHIBIT. WE APPRECIATE YOUR UNDERSTANDING OF THIS POLICY CHANGE AND APOLOGIZE FOR ANY INCONVENIENCE THIS MAY CAUSE. Blogger Coyote offers an example from another field: “When I interview high school students for Princeton, I have to be careful not to buy them lunch or coffee on the off-chance they turn out to be athletes where such a purchase could trigger a recruiting violation.”

The FTC’s Cleland says that the commission intends to aim its enforcement at the marketers, publishers, or others who dispense the freebies, rather than at the bloggers or Twitter users who receive them. But of course the result will be to give the marketers new incentives to protect themselves by placing controls on distribution, as Schering-Plough was doing with the sign above. Something to look forward to, no doubt, in the exhibit hall at future conventions: IF YOU ARE A BLOGGER OR OTHER SOCIAL MEDIA USER, PLEASE REFRAIN FROM TAKING ANY OF THE FREE MAGAZINES, SUN VISORS, OR WRAPPED HARD CANDIES IN THIS DISPLAY.

Least reassuring of all are the noises from the commission about how it will use its interpretive discretion to avoid unreasonable enforcement. Wisconsin law professor and popular blogger Ann Althouse has the answer to that one. “The FTC is trying to make it okay by assuring us that they will be selective in deciding which writers on the internet to pursue,” Althouse writes. “That is, they’ve deliberately made a grotesquely overbroad rule, enough to sweep so many of us into technical violations, but we’re supposed to feel soothed by the knowledge that government agents will decide who among us gets fined. No, no, no. Overbreadth itself is a problem. And so is selective enforcement.”

Walter Olson, a senior fellow at the Manhattan Institute, blogs at Overlawyered.com and PointofLaw.com and is the author of several books, including The Rule of Lawyers.

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