Consumer Speech and the Constitutional Limits of FTC Regulations of New Media

Abstract

This Note discusses the recent debate that has been flourishing throughout the blogosphere, relating to the FTC’s recent clarification that its “Endorsement” disclosure requirements must be followed, even when the endorser is writing on an internet website, such as a blog or as a Facebook post. The endorsement requirement states that an individual who endorses a product—regardless of whether the circumstances involve commercial or non-commercial speech—must disclose any substantial benefit that he has received from the endorsee. In other words, as the Note explains, a “tech-blogger” who receives a product for free from the manufacturer, for the purposes of his use and evaluation on his blog, must disclose the receipt of such a benefit at the time that the endorsement is made.

The problem with this action by the FTC is that it possibly encroaches on the protected right of freedom of speech, as secured by the First Amendment to the Constitution. The FTC countered the outcry by assuring the internet community that it planned to use its enforcement procedures scarcely, and only in the appropriate situations—i.e., where the circumstances indicate that the action taken by the internet endorser falls within a clearly enumerated exception to the First Amendment, such as commercial activity. But many argued that selective enforcement, as the FTC is intending to employ, as well as the sheer over breadth of the actual regulation, are problems that are, in themselves, unconstitutional.

The Note reviews the FTC’s own explanations of the circumstances under which its endorsement disclosure requirements are applicable, and then proceeds to determine which test is applicable to this regulation. After determining that the “strict scrutiny” constitutional analysis is applicable—which is the test that is used whenever a governmental actor intends to restrict a Constitutionally protected interest from its citizens, which freedom of speech most certainly is—the author concludes that, under this test, the regulation would fail constitutional scrutiny, as it could be applied in circumstances not involving commercial activity.

Finally, the Note proposes an alternative under which the FTC could achieve its stated objectives, while not running afoul of the Constitution. The author argues that this could be achieved if three steps are followed: (1) The FTC should limit the scope of its regulation to cover only commercial speech; (2) the regulation should only mandate disclosure of information if the endorser is economically motivated to endorse the product or service; and (3) employers should not be required to monitor the internet activities of their employees to ensure compliance (i.e., they should not be held liable for the transgression of the regulation by one of its employees, unless they are aware of it). With these recommendations being followed, the FTC could successfully regulate commercial endorsement of products, thereby ensuring that the average consumer is not swayed by an endorsement made by someone whose opinion may have been biased based on the benefit he received by the owner of the endorsed product.