FTC to Crack Down on Paid Celebrity Posts That Aren’t Clear Ads
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I think one of the most bizarre applications to date is the Martha Stewart case. During her insider trading case, she actually picked up new charges for securities fraud because throughout the insider trading case she continually proclaimed her innocence. Now I think if Free Speech protects anything, it should protect our ability to proclaim our innocence publicly when the government charges us with a crime; however, the new charges alleged she proclaimed her innocence with the specific intent of artificially and fraudulently propping up the stock of the Martha Stewart company. These new charges carried up to 20 years, but ultimately the prosecutors dismissed them when she was found guilty and sentenced for the insider trading charges. It would have been a very interesting case from a legal perspective.
1- If your company had an asset (Martha Stewart's brand) that you know is about to become a lot less valuable, saying "the asset will not become less valuable", when you know that to be a lie, should be considered fraud.
2- clearly, if charged with a crime, you have a right to speak out and proclaim your innocence.
Two fundamental things that are opposed to each other. Which should win out?
This isn't so clear. You have a right to not proclaim your guilt, but you exercise that right by not speaking. The right against self-incrimination does not permit lying.
The law has long recognized certain situations in which you're not allowed to lie - while making sworn testimony, while being interviewed by federal investigators, etc. People can and do go to jail for lying to the effect of "I didn't do it" even if the trial on the original charge doesn't result in a conviction.
Speaking to the public in a way that influences securities prices is another one of those situations where lying is illegal.
[1] https://en.wikipedia.org/wiki/Scooter_Libby#Criticism_of_inv...
That description has got to be one of the worst politically-motivated distortions of reality in recent memory. At worst, the Libby prosecution was one of the worst cases of prosecutorial overreach targeting a wealthy and politically-connected white male by a prosecutor of the same political party in recent memory. Without all those restrictions, its a pretty routine display of how prosecutors go after suspected participants in organized criminal activity who they believe are protecting bigger targets.
3 of the 4 charges Martha Stewart was found guilty of were for "I didn't do it" + a conspiracy charge.
That is two counts of making false statements to a federal officer and one count of obstruction of justice.
All together she was guilty of planning to do something, lying about doing it (x2), and making it difficult to prosecute her. She wasn't found guilty of doing the actual thing (which if she had been truthful to the SEC likely would have only resulted in financial penalties).
But most of us, the overwhelming majority of the time, want to see law enforcement succeed and have nothing to conceal. If there's a robbery next door, I'm going to very happily tell the cops absolutely everything I saw and heard.
Edit: I'm surprised that this post is unpopular. Do you really want to live in a world where people don't help law enforcement find violent criminals?
The problem is more to do with the "average", and the system as a whole. We have a prison industry, terrible public defense, increasingly permissive treatment of fairly shady information gathering, and increasing militarization in urban areas.
The other issue is that Officer Friendly might not shake you down, beat you up, or screw you over. He might shut up and look the other way when Officer Hairy F. Knuckle does though. Blue Wall and all. That's hard to prove or even discuss, but it's painfully real.
1.) Traffic stops and accidents.
2.) "Public order" issues (protests, large events, etc)
3.) As victims or perpetrators of a violent crime.
Most of us won't be either side of the equation in #3, virtually all of us will experience #1, and a large proportion will experience #2.
It's also possible that some of us understand that while many good LEO's exist, the bad ones are too damned dangerous and protected by the silence of the good ones. There are also competence, "War on Drugs" and other issues.
edit: Also, just ask literally any attorney what you should say, including those who have nothing at all to do with criminal defense. Then ask them why they all give the same answer as my original post...
An attorney is going to tell you what's 100% in your legal interests, since that's their duty. There's always a chance that you say something that incriminates you or reveals that you committed some other crime or similar.
But that's not the only consideration. There's also concern for the well-being of your community, a desire to make it safe for your children, etc. Acting on those interests can supersede the tiny risk that a law abiding citizen takes when speaking to law enforcement.
Remember, the person I responded to was talking about a home robbery, and so was I. Obviously you have to use your own judgement, and if it's the local PD asking about a missing person or a domestic incident, etc, don't be a dick.
The FBI agents then told me they'd be calling the DA to press charges and have me arrested for lying to a federal agent unless I completely cooperated with them in an investigation and offered them full access to my phones, my home and all my computers.
It is very likely in your best interest to avoid speaking with law enforcement.
Your point is well received, and I am going to be a little pedantic only because I find the topic so interesting to flush out...
Defendants have an absolute right to plead "Not Guilty" in a court of law to charges against them (e.g. they can't remain silent as to how they plead to the charges). So let me just acknowledge I am being pedantic, because you are referencing testifying which is separate from a defendant's plea which I am referencing. But it is still an open expression of Not Guilty in the Court, but it just doesn't waive ones right to not testify or otherwise open up a defendant for cross-examination. Further, it goes without saying we don't tack on additional charges of perjury/obstruction of justice when a defendant pleads Not Guilty to a crime for which they are later found guilty.
Separately, a Defendant charged with a crime can 100% maintain their right not to testify(right against self-incrimination) with investigators and in the courts...all while simultaneously defending themselves in public without giving up those rights (though those statements could be used in the case).
I think Stewart's speech was somewhat limited more than a typical shareholder/officer/director of a company facing a criminal charge. Normally being in such a corporate capacity still wouldn't trigger securities fraud for public deceleration of innocence against criminal charges. I just think in her case, as someone else mentioned, Stewart the individual is essentially the brand/value of the company. For example, Stewart likely was shareholder/board member in a number of corporations at that time but her public comments only triggered securities charges as to the one corporation synonymous with Martha Stewart when her statements of innocence really were entirely unrelated to the company (it's not like she said don't sell stock in the Martha Stewart company because I am innocent).
You said it best, "this just isn't so clear".
Legality isn't equivalent to morality, and that principle stands whether discussing something direct like drug persecution or emergent like this particular contradiction.
If such a case were decided in a way that constrained the government, the government would simply try again later with a slightly modified argument. Eventually, they would get a judge that wrote them a justification.
Given the government's propensity to gradually erode rights in this manner, the Bill of Rights is best thought of as a bunch of unit tests to help determine whether the government is still legitimate. I personally think it jumped the shark a while ago, but it's your job to come to your own decision.
Unfortunately, precedent-based law purports that its precedents carry the status of universal truths, rather than just the somewhat arbitrary decisions they were. So after the current contradictory system has fallen apart, many of the justifications that broke it will soon find themselves adopted by its fresh replacement.
No doubt it is far from perfect in practice, but which one(s) is(are) and why?
For example, I don't know if Common Law is any better or worse in practice (not even sure how that would really be measured) than the Civil Law system, but I always thought it is a little overly ambitious to think we could codify a rule to be applied to every possible factual situation before they occur in a statute, whereas the Common Law system assumes that we can't do that, so it acknowledges there will be cases of first impression (sets of facts we haven't applied to the law before) which will create new law (precedent) to be applied to future cases with similar facts. I do know Louisiana is the only State to have a hybrid of Common/Civil Law (due to French influence), honestly I don't know a thing about it in practice, but no other State has been convinced to adopt it and they haven't been convinced to drop it either.
>So after the current contradictory system has fallen apart
Our Common Law system is based on the old English Common Law system, so it goes back to the Norman Viking Conquests (~1100). Since the start, we have obviously developed an extensive body of case law and for the most part we rarely cite the old English Common Law cases any more, but it is still a 1,000 year old legal system. It is another very interesting question, can a legal system even change from Civil Law to something else without a full change in Government? For example, could Louisiana even drop its Common Law/Civil Law hybrid and join the 49 other States, or could another State drop their Common Law system for Louisiana's hybrid, and if so what does that transition look like? Just reading your sentence, I have to say it sounds ominous, as in system fall apart doesn't mean Common Law legal system but the entire rule of law (US Government, Bill of Rights, etc...), admittedly I am reading into what you meant and maybe it would be no difficult task to just move away from Common Law and maintain continuity of everything else.
http://money.cnn.com/2004/03/05/news/companies/martha_verdic...
I may have subconsciously done that because the counts she was convicted of blur with new charge and I wanted to distinguish the underlying case/charges with the new charge which was triggered by claiming innocence of the underlying case.
GI JOE SKY STRIKER JET DOES NOT ACTUALLY FLY
Personally I like to know when somebody is acting as a paid shill. In that vein I feel my endorsements - at this time uncompensated in any fashion (DistroKid, Ernie Ball strings, Agile Guitars) - have value. I speak from personal authority, not because somebody cut me a check or sent freebies.
I'm not a big spender, so I try to treat my public endorsements as genuinely worth something because if I'm willing to pay for it myself, and I believe in the product, then that's what the point of talking about things is in word-of-mouth business! If I get an opportunity to "test" something without paying, I'm going to disclose that right away. It just feels...ethical...Every once and a while I watch the Aqua Teen Hunger Force episode "Boost Mobile" and soak in the delicious mockery of celebrity endorsements. YMMV.
Or, for any who think the FTC is maybe over-stepping a bit, let's consider the other avenue that gets talked about as a "First Amendment" adjacent issue: Astroturfing.
What if then a new guitar brand asks to you to use their guitars? And they're amazing. You'd use them for free anyway... Etc.
I think the lines are blurry. But I agree - the celebrity promoting the teeth whitening rebill to eager teens probably needs to point out their teeth are white for a different reason.
The second scenario is one that again I'd draw the line at my own accounts. If I like the brand and they give them to me for free, then I'll disclose it because, well, it's a sponsorship by them. The "would've bought it anyway" kind of feels like a rationalization to me. A lot of things I like I can't afford, so posturing it as such wouldn't be honest in my book.
I think an analogy might be like how NASCAR drivers have a ton of sponsor patches on their racing uniforms.
So, Jeff Gordon for instance - if he makes an IG post where he's changing the oil in his personal car, not wearing his racing outfit, but acting like "Just a normal dude like you!" and prominently holding a quart of Valvoline, I think that should get a tag because it's a grey area. Not everybody knows his race team and his career is sponsored by Valvoline, but if he shows that his sponsorship extends to his "personal life" then yeah, put the tag on there.
I'll definitely agree that the imperfect system / blurry distinctions take some discussion, but I'm glad to have a chance to hash this kind of logic out.
Having a company rule where staff can't accept free lunches from other companies is surprisingly valuable. 'Free' things are often really expensive.
The point here is to give people true information to make an educated buying decision. People can look back and see that you used Ernie Ball strings when it wasn't part of a contract. And now that you have a contract with Ernie Ball, they can make an educated decision whether they believe that you're still using the product because you like it or whether you are just using it now because you are paid to.
This creates an incentive for companies to create a good product that people will promote on their own, rather than creating a bad product and paying people to promote it.
I don't really see any ambiguity here. Just ask, "Would I want to know about this if the celebrity's actions were a factor in my purchase?"
The Swedish tax authority has several documents on how they judge such cases, and in general, a company doing this is unlikely to be seen as a "no strings attached" gift. If it comes from an advertisement budget, someone somewhere is expecting a return on investment.
The league - his employer - reminded him of the conditions of his employment. There was nothing preventing him from wearing Adidas from HEAD TO TOE as long as it wasn't in a direct situation sponsored by his employer. Thus, he actually had TWO sponsorships in some terms.
He wanted to wear his Adidas on the field, but was not allowed, even though it was completely above the board. So, where do you draw the line? Can your employer tell you what brand of clothing to wear? If he got the shoes for free, should RGIII be allowed to undermine the other contract?
My perspective is that the line of reasoning you present is inherently flawed. Are you not aware that Nike essentially got its foothold (pun intended) by giving away shoes to college basketball programs and people who probably couldn't afford to buy them? It was covered in an ESPN 30 for 30 so there's the citation.
From your context it sounds like you believe - maybe it's my interpretation - that things given to celebrities for free are "no strings attached" and I think that's been proven wrong time and again. Contracts, handshake deals, they don't work that way. There's either an explicit (preferred) or implied (bad) debt to be paid. It takes time to learn how these systems work, and woe to those who might minimize their practical implementations.
Oh, and a Youtuber who receives free stuff better disclose it, because if they're in the US, then they have the IRS to deal with. The IRS doesn't screw around with compensation. Dollars or donuts, keep the receipts[1]!
[1] Excluding Mitch Hedberg, who accurately pointed out a donut in regular guy life does not need a receipt.
Fast speaking car commercial voice (quietly in background): Paid for by Mister Clean enterprises inc, the views in this song do not represent Mister Clean.
Me not working hard?
Yeah, right! Picture that with a Kodak
Or, better yet, go to Times Square
Take a picture of me with a Kodak
See other possible endorsements here: http://genius.com/rapstats?q=Michael%20Kors%2C%20Gucci%2C%20...
Not sure where to draw the line for Gucci though since a rapper is called Gucci Mane and it means something else to say "I'm Gucci"
Me not working hard?
Yeah, right! Picture that with a Kodak
Or, better yet, go to Times Square
Take a picture of me with some CognacArguably, such labeling would also defeat the purpose or diminish the entirety of such advertisements, which infringes on the speech of the advertiser AND of the celebrity.
Devils advocate says that FDA mandates labels on food...which is also compelled speech that may be disadvantageous to producers. How is this different?
We already have plenty of restrictions on speech (the most well-known ones being slander and libel, but also plenty of regulations around speech that comes in the form of advertising specifically).
In this case, you still have two options:
a) make the post, but also reveal that it was paid for, or
b) don't make the post
It's not really forced speech when you still have two options, and one of them includes 'not saying anything'. It's also a pretty reasonable argument to make that making the paid post but not disclosing it is misleading, and there are already all sorts of laws restricting misleading speech in advertising.
Also, this only kicks in if the post is commercial - ie, if money changes hands. To give a "bright line" counterexample, it doesn't restrict celebrities from making posts about their favorite products if they have had no communication with the company at all.
c) Don't get paid for the post and simply support the product because you believe in it.
Luckily, the courts do not construe the 1st amendment so narrowly.
The appropriate analogy isn't a choice between being able to say "Hillary Is Great" or nothing at all, it's a choice between having to say "paid for by Super PAC for Issue" if accepting their cash to broadcast their view on Hillary, or not accepting the cash and saying whatever you like about Hillary.
As for the comparison with FDA labels--you can't look at just the fact that its "compelled speech" in the abstract. The back of a product box and a celebrity's instragram are very different venues in terms of expression.
In many cases I've heard them advocate as if they've used the product or service personally and got a good deal and there's never a "paid ad" or "promoted content" disclaimer (or maybe it runs at 3 AM?).
FDA labeling is generally fine, but would we force an artist doing a large edible art installation to slap nutrition labels on it?
Personally, I don't really see what the big deal is. Consumers shouldn't be naive enough to buy something just because a celebrity likes it, but then again I've never understood the appeal of celebrities in the first place.
Celebrity isn't so easily defined. What if Bruce Schneier, who you could consider a "celebrity" of sorts in the security community, started (subtly) promoting Signal Messenger in his tweets and blog posts. Wouldn't you want to know if he was being paid to do that?
This is essentially what is happening when PewDiePie promoted a video game.
It's that simple. When our founding fathers established the 1st Amendment, they were not setting out to protect liars but those who speak the truth.
The 1st Amendment was specifically designed to protect both truths and falsehoods so they could both enter the marketplace of ideas in order to allow the people to determine what is truth and the best ideas.
Moreover, the Founding Father's were keenly aware of people in power suppressing ideas commonly held to be false, but ultimately turned out to be true (i.e. the earth is not the center of the universe).
Galileo's troubles as you call them, was an example of false speech the new Government wanted to protect and be allowed to enter the marketplace of ideas. Moreover, I was not suggesting Galileo was the reason for the 1st Amendment.
Also, I am not exactly sure what the distance of the Civil War to today has to do with the distance of time from the drafting of the Constitution and Galileo. Seeing as the Founding Father's modeled the new Government off of the Roman Republic (509BC-27BC), they were more than capable of applying more modern history lessons taught by the Catholic Church and Royal Crown which they wished to avoid repeating.
There's a brief article on the particulars here:
http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=... (PDF)
There's a longer treatment in Thomas Healy's The Great Dissent.
http://www.worldcat.org/title/great-dissent-how-oliver-wende...
The concepts are curiously intermingled with much of the reformulation and representation of Adam Smith's ideas which took place over the 20th century, also generally misunderstood by the lay public thanks to an aggressive 60+ year marketing campaign by the Mont Pelerin Society and Atlas Network. But that's another rant.
Sure there is. If they're taking money, they're not free to endorse without the requirement that they also disclose the payment.
That said, while we can certainly argue about what's reasonable at the margins, the government has a well-established (qualified) power to regulate commercial speech in particular--first amendment notwithstanding. You can't knowingly make false statements of fact in an ad.
There also already exist a variety of disclosure rules although these get into a much more gray area, especially given that you have everything from outright pay-for-play celebrity endorsement deals to giving bloggers free stuff to review. And, in general I agree that disclosure of things that could lead to conflicts of interest is very reasonable and not overly burdensome.
Consider puffery: https://en.wikipedia.org/wiki/Puffery
IANAL. Obviously. But that's my layman's take on it.
(A comedy advert, like the Terry Tate: Office Linebacker campaign, seems closer to puffery)
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.
[0]https://www.aclu.org/issues/criminal-law-reform/reforming-po...
[1]https://www.thefire.org/college-students-protest-against-so-...
[2]https://en.wikipedia.org/wiki/Federal_Assault_Weapons_Ban
[3]https://en.wikipedia.org/wiki/Internment_of_Japanese_America...
[4]https://en.wikipedia.org/wiki/PRISM_%28surveillance_program%...
So is this legal?
I would think the FTC's action is substantially over that line.
Companies are made of people, and people have human rights. However, in order to have any market regulations at all, we need to limit what companies can say and do. As such we normally separate what people do in the name of a company, and what people do as a private citizen. For example, we expect police to speak and act in a specific way when acting as policemen, but they are completely free to write and say anything under the 1st Amendment when not on duty and representing the police force.
Companies are a fictitious, they are not natural, they don't exist without people or laws and they exist only to serve the betterment of society. Just because humans have right does not mean companies do.
> For example, we expect police to speak and act in a specific way when acting as policemen, but they are completely free to write and say anything under the 1st Amendment when not on duty and representing the police force.
Poor example. Police are public servants and don't work for companies, they work for society and all of society and how they behave off duty is an excellent reflection of how they would behave on duty. If a police officer posts racist Facebook posts, they can and should be fired.
The first amendment is not a license to do or say anything for any reason.
> A character on a sitcom drinking a Diet Pepsi isn’t giving their personal opinion about the soda, and the actor is playing a character.
A celebrity is also playing a character. Also, if they're filtering the choices of what to endorse based on their personal views (as many of the influencers are), doesn't that make it less of an ad?
I also don't see why a "#sponsored" hash tag is not enough. Anyone who cares can understand hash tags.
A distinction is useful because it allows people to categorize for themselves what they think is a worthwhile sponsership. It's adding information to the market which wasn't present (or was hard to acquire) beforehand, which is always useful.
For a simple example, imagine an endorsement of makeup by Kim Kardashian, and a shop tool by Adam Savage. Initially you believe they are using the products because they like them and think they work well. Now you learn they were paid endorsements. Do you provide the same level of confidence to the suggestions of these two people based on paid endorsements that you do if they are not paid for those endorsements? I don't. One of them I trust to care about their integrity and reputation with respect to this, the other I do not.
> I also don't see why a "#sponsored" hash tag is not enough. Anyone who cares can understand hash tags.
Because the whole world isn't twitter, and hash tags don't always make sense. how do you hash tag a segment of a podcast?
For me at least, this is largely self-policing. The people and sites who I would actually trust in purchasing decisions would take pains to disclose any compensation regardless of whether the FTC mandates it. Trust is a market.
> Because the whole world isn't twitter, and hash tags don't always make sense. how do you hash tag a segment of a podcast?
Obviously you should use a medium-appropriate disclosure. My issue is that the FTC seems to believe that "#sponsored" isn't even appropriate for platforms where hashtags are used (like Instagram).
The argument that a hashtag should qualify as proper disclosure is without merit IMO.
Posts on social media are covered in hashtags, sometimes more than twenty hashtags are used on Instagram.
A well-hidden #sponsored hashtag buried in between, or even under, several variations of #YOLOSWAG and #drinksprite sounds nothing like proper disclosure.
In a video, they're probably going to be somewhere in small print in the credit roll at the end. For example it's pretty standard practice to have a standard disclaimer related to product placement.
And even when journalists and others have a link to a detailed disclosure statement, how many people actually click through to read that.
I generally favor transparency but the reality is that most disclosures are always going to be effectively footnotes and 99% of the time people won't notice them or will just ignore them.
When you have small print in a video, I think that itself is a good indication of how commercial it is, so I don't really think that's a problem. If celebrities end up having to include small print in posted images, well, I think we'll understand pretty quickly how commercial and sponsered it is.
> And even when journalists and others have a link to a detailed disclosure statement, how many people actually click through to read that.
Generally I see them as a postscript on the article, not as links (unless the link is to give more detailed information).
> I generally favor transparency but the reality is that most disclosures are always going to be effectively footnotes and 99% of the time people won't notice them or will just ignore them.
That presumes that the only benefit of this is in that people immediately notice the sponsorship. There are other benefits though, which is that other people and notice the sponsorship and disseminate the information more prominently.
I didn't see any complaint in the article about a "#sponsored" tag. I did see complaints about "#sp" and "#spon", which are opaque if the reader is not already familiar with what they mean.
> The FTC thinks #ad is okay if it's at the beginning of a post, but #sp and #spon aren't.