Anarchic Consumer Protection

The change in geometry that the net produced allowed users to load videos, and for others to view, to share, and to respond to them both in comments and with other videos. This public discourse, however, has been polluted by the inevitable participation of commercial organizations, which conduct stealth marketing campaigns to misinform and deceive the public.

Obviously, these campaigns are nothing new. Even in traditional media, advertisers bribe media institutions and scheme to mislead the public. The difference between that corruption and this new perversion is that users are less likely to anticipate the corruption and, therefore, are more likely to accept the deception.

Over the last year, we have seen several such marketing campaigns, including Levi’s Jeans, Ray-Ban Sunglasses, and the movie Wanted. There was also a Nike campaign for sneakers, but unlike the others, it was fairly obvious that these videos were advertisements because the shoe was prominently displayed out of context at the video’s beginning and/or end.

One promotion depicted different groups popping popcorn by setting several cell phones next to the kernels. The campaign, paid for by Cardo Wireless, was an attempt to market their cell phone headsets. While the company claims that the videos weren’t designed to scare people into believing cell phones were frying their brains and therefore they should use headsets, it is rather unlikely that Cardo didn’t realize the effect its videos would have on an unsuspecting user.

These marketing campaigns are fairly effective—since the inception of the Cardo campaign, their sales increased 100%—which makes sense given that pull media is more effective than push media, and that these provocative videos tap into the anarchic distribution system that works so well for non-functional zero-marginal cost goods.

So what’s the problem?

First, there is the understandable concern that people believe what they see. This is less of a concern with this particular video, because if cell phones could pop popcorn, they would also make your brain explode, which they don’t. However, this type of marketing is likely to become more subtle over time and raise far graver concerns. On the other hand, one could argue that as these videos proliferate, users will become more skeptical of the videos they see. However, as I later describe, such mass-skepticism is itself harmful to the discourse.

A second concern is that if the Internet is supposed to educate the masses in a way that they never have been before, having companies wage disinformation campaigns on the world is particularly troubling. In spite of this, these companies argue that as long as they are not saying anything false or misleading about their products, the consumers should be able to draw their own conclusions about the motivations of those depicted. However, the videos remain deceptive as to the source of their representations, and users would treat representations made by company employees differently and with more scrutiny than those that were not.

One solution would be to turn to the law, but current laws are ill-equipped. While the FTC Act prohibits false or deceptive advertising, it defines false advertising as those that are misleading in a material respect. FTC Act § 55(a). Therefore, advertisements that are not misleading and merely allow the audience to make inferences are not violations. Ellen Goodman provides a nice example:

As time was running out on the day's shooting, the director reportedly screamed at the crew, "'[G]o get my fucking Diet Dr. Pepper moment and get out of here."' According to the producer, "contestants [were] saying on mike--'I hate Dr. Pepper.' . . . I told them to just hold it in their hand. But then we were told we had to make sure they drank it too."

Stealth Marketing and Editorial Integrity, 85 Tex. L. Rev. 83, 109-110 (2006). If the product placement is subtle enough, it will leave a false impression, but will not materially misrepresent any fact. Goodman also points out that stealth marketing is not meant to defraud, but rather to “bypass audience resistance to promotional messages by giving an erroneous impression of source.”

Instead of using current laws, Congress could pass a new law that requires advertisers to disclose the source of their videos. Such a law would have the benefit of disclosure, and if the penalties were high enough, could act as a deterrence. Although some might argue that such a law would run up against the first amendment, the law I propose could mirror the requirements of §311 of the Bipartisan Campaign Reform Act: "a statement that identifies the [sponsoring company] and states that the [company] has approved the communication." It wouldn't even have to be verbal: "writing at the end of the communication in a clearly readable manner with a reasonable degree of color contrast between the background and the printed statement, for a period of at least 4 seconds," will be perfectly sufficient to give the public notice. Since political speech is closer to the heart of the first amendment, any claim that the proposed advertising law violated the first amendment would also need to invalidate the "stand by your ad" provisions, which have not yet been held unconstitutional. Furthermore, there is a difference in kind between a law requiring more information to be communicated (information that is purely factual and serves a substantial purpose) and one that attempts to stifle advertisers' free expression, and unlike political speech where anonymity is a virtue, there is no legitimate reason to advertise in secret.

Then again, stealth marketing is, well, stealthy. It may be difficult for regulators to tell the difference between a video created for fun and one created by advertisers. Additionally, only a limited number of minds would be able to work on the problem (likely one guy in a state attorney general’s office). Finally, given that none of the companies that pay for Congress’s political campaigns would be interested in a law inhibiting their marketing, it is unlikely that there would be sufficient political will to pass such a law.

Alternatively, consumers could be protected by anarchic truth distribution. During the popcorn campaign, people expressed skepticism from the beginning, and the community immediately began speculating that the video was a fake. Simultaneously, users around the world recreated the video to debunk it and posted their content on the same distribution networks where the original video was displayed. Exposing the video anarchically had several benefits: like the initial distribution it could be done at zero marginal cost and in the same medium, and it allowed many minds to work together on the problem. Conversely, relying on other users leaves detection of these campaigns to the level of doubt the campaigns engender in their viewers after the video is initially distributed. This is troubling because for maximum protection, users would need to be skeptical of everything they observe in every medium, which would itself damage public discourse. Additionally, once the truth is discovered, promoters are rewarded with a second distribution by those posting that it was a fake. However, given the lack of political will to punish advertisers and the companies that hire them, anarchic truth distribution is likely the best approach available.

Further Reading

• It's not exactly on this topic, but the Center for American Progress and the Center for Democracy & Technology released a report about online fraud and the role of state attorneys general.

Comments

Could the one guy in the AG's office engage anarchy by offering a $ reward for information leading to the successful prosecution of false advertisers? (After all, anarchy is growing ALONGSIDE government, not necessarily against it. As a result, government might benefit by encouraging more $ rewards for information or private rights of action, although that raises the risk of false positives.) -- AndrewGradman - 19 Oct 2008

• I'm not sure about offering a reward. First, the government doesn't have that much money to begin with; if it did, we would see rewards for everything, because it is a lot cheaper to have your neighbors turn you in than to pay law enforcement to conduct an investigation. Second, the false positives and shear amount of participation may prove difficult to manage, because you would be trying to filter all of the anarchic distribution through a small number of (underpaid) government lawyers. The private actions might be viable, but who would be paying to bring all of these cases? Maybe they would operate like qui tam suits, and if the government intervenes on the private action, the original plaintiff can split any reward the government garners. -- JoshS - 27 Oct 2008

I'd be more convinced if you'd rewrite to include a response to the obvious free speech concerns. The FTC jurisdiction is limited not by the accident of legislation but by constitutional requirement. So false advertising in connection with sale of goods in interstate commerce could be regulated regardless of whether the source is disclosed, and risk-averse businesses will avoid coming near the limit of liability if they believe there is any possibility of interference, which is why exemplary enforcement largely works. Fifty state attorneys-general plus the FTC plus the varieties of private enforcement (like the false advertising rule wrt drugs) is not trivial given the past record of exemplary enforcement.

So the issue is the relevance of the past to the future given the present, which is what our issue usually is. But you take us instead into the inquiry of whether we ought to loosen the false advertising principle without inquiring first into whether we can. Opinion is constitutionally protected, and this applies to liability regimes beyond defamation. The rational relation calculus of regulatory intervention seems inappropriate. And none of your logic is capable of surviving the exacting scrutiny of interference with fundamental right. Seems to me you have not carried a basic burden of your argument.

Perhaps you can. Whether or no, it seems to me you might well have chosen instead to apply yourself to what is essentially a rule-skeptic's question: if exemplary enforcements against fraudulence and more-speech remedies under community control in the age of free communication against bogosity which is annoying but not fraudulent aren't sufficient to keep the problem more or less unstably at bay, why aren't they? And why would some administrative scheme of dubious constitutionality perform any better?

-- EbenMoglen - 15 Nov 2008