How Do These FTC Regs Encourage Jobs, Economic Growth?

By October 20, 2009Economy, Regulations

Good commentary on the Federal Trade Commission’s plans to regulate the social media for conflicts of interest, implicit conflicts of interest, shadows of penumbras of conflicts, and did the publisher send you that review copy for free?

At issue is the FTC’s recent and now revised “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

Gordon Cravitz, Wall Street Journal,Bloggers Mugged by Regulators“:

There should be more disclosure, but the Web is different from earlier media in ways that make government regulation less relevant and practical. The Web has its own self-regulatory mechanisms. Failing to disclose interests sullies one’s reputation online, and reputation harm travels faster and lasts longer than it did before the Web.

There’s also greater need for caveat emptor online, because there is no practical way that any government agency can monitor the world’s bloggers and posters. There will always be people who post comments about products and services that are self-serving in one way or another, at least by someone’s definition.

The Manhattan Institute’s Walter Olson comments at Overlawyered.com, with a good roundup of links, as well. From “Where did you get that keychain?”

Meanwhile, on Wednesday, the FTC held a conference call for reporters to dismiss concerns as unfounded. “They are not rules and regulations, and they don’t have the force of law,” said Mary Engle, associate director for advertising practices at the FTC’s Bureau of Consumer Protection — which may be narrowly true but is hollow reassurance at best, since the guidelines plainly are meant to signal where the commission intends to aim its future enforcement efforts, and since not all bloggers will be willing to defy the guidelines on the assumption that courts will refuse to go along with the FTC’s interpretations.

Regulators expand their regulatory reach and enforcement to address a perceived need — the need as perceived by the regulators (or the “consumer activists” or trial lawyers, who are often just regulators-in-waiting). Did any of the lawmakers who voted for the Consumer Product Safety Improvement Act think the Consumer Product Safety Commission would launch a “Resale Roundup” enforcement regime targeting yard sales? But that’s what happened.

At a time when unemployment is nearing 10 percent,  the question regulators should ask themselves is whether these FTC guidelines in any way encourage economic growth and job creation. Theoretically, yes, transparency helps provide more information to the marketplace, enabling consumers to make better choices. But in this case any transparency is offset by vague guidelines and reassurances that leave users of social media uncertain what standards they should follow to avoid the FTC’s targeting. In the meantime, time, effort and dollars that could be better spent in the private sector are being wasted by the government.

So, is there a pressing need for new guidelines? No. Do these new guidelines encourage economic growth? No. Well then…

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