FTC Controls the Blogosphere

The FTC, an agency of the US federal government in charge of asserting power over business and media, in October 2009 extended its rules about product endorsements in advertising into the blog world. If you write a product in your blog, you must--not as a moral or business obligation, but by government rule--mention if you received any compensation from the product maker, including receiving the product for free (as is common in product reviews in many markets).

Note that these rules do not apply to anything appearing in a conventional print newspaper or other print periodical.

As you would expect, the blogosphere--you should forgive the expression--is abuzz, and part of that buzz is coming up with examples of ridiculous corner cases.

And also ridiculous examples of noncorner cases, such as the argument that software sent to a tech reviewer is worthless after the package is opened; or that hardware the vendor refuses to accept back (a common type of bribe-like object) should not be included; or when vendors who offer to sell the product to the reviewer after the review is published, for a special low price, that shouldn't be considered compensation; or galley proofs of books sent for review, which proofs are not really marketable, should not be considered compensation. Well, no: If you accept the FTC's right to rule in this environment, then the above examples are exactly what the FTC means.

The whole problem is easily resolved for most bloggers, on the face of it, by simple boilerplate, as one writer has already done, along the lines of "Software/hardware/books reviewed in this space are in most cases sent to the reviewer free in hopes of being reviewed. When the review is finished, some materials are returned, some donated, some retained by the reviewer. The reviewer makes no representation to the vendors that products will be reviewed, or reviewed favorably."

IN specific cases, one can say, "The latest model of the iPhone, sent to us by Apple for review..." And then at the end of the review, "The device will be returned to Apple in six weeks (to allow for the possibility of corrections)." If you are reluctant to explain to the reader that you are keeping the product, free, or buying it at a "reviewer's discount," then you are obviously engaging in a conflict of interest.

And so on. But that's not the core issue here, not at all.

As a libertarian, I take the First Amendment more seriously than the FTC does, and so find no authorization in the Constitution for an exception to that amendment that grants a government agency authority to control the press, not even if it would be a really, really good idea and the poor dumb populace isn't capable of noticing whether an endorser is paid, and not even if it really is a good idea for the writers to acknowledge conflicts of interest.

The government and the courts have for a long time taken the basic position that the 1st Amendment's highlighting of the limits of government power apply only to daily and weekly and monthly newspapers; not to radio or TV and not to any less formal publications, and certainly not to anything in the advertising field. If it's not a newspaper, it's up for grabs. The Constitution doesn't say anything about this, of course, but when has that ever stopped anybody?

I think that's idiotic. No, I think it's abuse of government power, and this instinct to assert power in the teeth of Constitutional restrictions isn't just applied to the press and speech; Bush II should have been an object lesson in why we must stop government assumption of nonconstitutional power in every area. Because abuse of power knows no limits.

The government has no authority under the Constitution to make laws or rules or regulations about what people write or say, regardless of the venue, the medium, or the purpose. If you, as a public-spirited citizen, want to protect the public from bad words, bad opinions, misleading assertions and offers, you will have to find another method. Force, the threat of the use of force, fraud, and breaking of contract are all appropriate areas for laws; beyond this, no.

Insurance Company Contract Abuse

Which, as an aside, is something that puzzles me about the current healthcare debate. One obvious-seeming abuse of contract cited regularly is insurance companies that cancel policies when the insured becomes ill with a covered illness -- this seems like a straightforward violation of the contract. All we would need would be the government to assert that it will treat such violations of contract seriously, maybe setting up an agency to focus on this abuse.

Another example is the insurance company waiting until you have an expensive covered illness, then going back over your original application (filled out decades ago, perhaps) looking for technical inaccuracies that are not material to the insurance underwriting or to the present case.

A law could simply clarify that in this area, as in many others, minor, nonmaterial, and honest errors on applications cannot be used to deny later fulfillment of the insurance contract; and that after a given period of time has passed, the application shall be considered good on its face, thus forcing the insurance companies to check the applications for errors at the time they are submitted. The companies currently don't bother checking for errors or clarifications, knowing that if an expensive procedure arises, they can go back over the original app with a fine-toothed comb and any errors they find - no matter how innocent - can be used to deny payment.

This is a simple clarification of a contract law, one that would clear up a lot of things without requiring the government to engage in idiocies (such as requiring coverage at favorable rates regardless of preexisting conditions, which is crazy). Note that this kind of "after x period, everything here is accepted as true" provision is commonly written into contracts by businesses; of course, since we sign their contracts, and they are nonnegotiable, we don't get commonsense provisions like that.

"More Government Won't Help," Ron Paul

Ron Paul made this speech in the United States House of Representatives, September 23, 2009.

He begins, "Government has been mismanaging medical care for more than 45 years; for every problem it has created it has responded by exponentially expanding the role of government." He goes on to list 16 specific points, some examples of how the government has screwed up or set up for failure the medical care system, and other points suggesting better paths for us to follow to improve health care in the US.

The thing that amazes me in this debate is one simple example of the perversity of our political system: The government (including the president) assert that more competition is the key to a better healthcare system. They might be right. But one big reason we don't have more competition is government regulations forbidding it in some areas: Every state controls its own insurance companies, and forbids, by statute, selling insurance policies across state lines.

So you can't, as a Californian, decide that an insurance company operating in Arizona offers better coverage or better rates, and buy a policy there. It's against the law, in almost every state in the Union.

Recently, Republicans have suggested allowing cross-state-line competition in insurance, only to be roundly ignored. There are two reasons: First, state insurance commissions don't want to give up their regulatory power, which they can't exercise across state lines. And second, those who believe in government goodness are happy to list many reasons why it's better to exercise this control over insurance companies, who would otherwise do bad things. To control insurance-company abuse, they've set up 50 regulatory bodies, one in each state.

And when that doesn't work -- and insurance-company abuse of its customers is rampant, despite this supposedly noble political and bureaucratic control over them -- the solution offered is *never* to rethink the whole thing; no, it is to add more control. Always. There is, you see, no such thing as government failure that should lead to the government retreating from an area; only market failure that leads to government intervention.

Another level of irony is that the main forms of outrageous abuse insurance companies engage in could, in fact, easily be managed by the insurance commissioners doing their jobs better, and a few simple inexpensive laws being passed. Yes, laws.

For example: Insurance companies violate contract with customers by ending their coverage as soon as they catch an expensive disease. They do this by combing through the insurance application, which may have been filled out thirty years ago, to find apparent errors, to justify cancelling the policy. This is acting in bad faith, from a contract-law perspective, and a simple adjustment of contract law in each state would suffice to end this abuse. It's a contract-law issue, and shouldn't be used to justify government takeover of medical insurance. In most contract situations, simple rules say that if a contract is entered into in good faith, and a nonfraudulent error is not found within a reasonable time by the other party, then the error is considered nonmaterial and cannot be used to cancel the contract. For ordinary contracts, for example, if I make a spelling error in the name of my street or my house address, that is not fraudulently intended, then this cannot be made the basis for cancelling the contract twenty years later. Only in insurance contracts is this reasonable limitation not enforced. Our state insurance commissioners -- the ones whose campaigns for reelection are heavily funded by insurance companies -- should take care of this problem. They could. They won't. Their job isn't to solve problems; their job is to get reelected, which they do by demonizing their subjects and passing abusive laws that cause more problems.

How long will you continue to believe that this politicized system is a good way to solve social problems, in the teeth of the evidence to the contrary?