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Monday, September 18, 2006

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buy wholesale

Often we forget the little guy, the SMB, in our discussions of the comings and goings of the Internet marketing industry. Sure there are times like this when a report surfaces talking about their issues and concerns but

Chris Hoofnagle

David, an ad hominem and then a straw man.

You're proving my point with your reaction--the emotion, the unwillingness to address the question: what regulation produces the best consumer outcomes? Maximum protections for commercial speech would wipe out a lot of good consumer protection law. Minimum protections would be excessively restrictive (and I agree that the NY law is too much!).

Different generations have different atttitudes and savy towards advertising. In my field, consumer privacy, younger consumers are more likely than not to falsify their personal information when it is solicited by a marketer. Boomers are more likely to tell the truth.

Attitudes towards advertising have changed radically in the last century, in part because of PR campaigns that the industry started to improve the look and professionalism of advertisers. The Ad Council is one example of their efforts. They equated advertising with enterprise and freedom; they lobbied against consumer protection in favor of consumer education. And now, their PR is pretty much parroted by people who never knew that the campaign ever existed.

So, what's your evidence that consumer education works? We have more educational material available for consumers than ever in history. But consumer fraud, both complex and simple, is rampant. What interventions would be more effective? More education? Free Consumer Reports? :) I'd like that.

Paternalism is an interesting label. Take drug regulation, for instance. Pretty pateralistic, right? The government requires you to prove that your drug is both safe and effective before you market it. Would you want it any other way? (You do have it the other way w/ respect to nutritional supplements, and just look at the result. Ineffective products, wasted money, and real consumer harm.)

Consumer law is often labeled paternalistic. Oh well. Inject speech elements and people seem to stop thinking about what protects consumers best, and they switch to a form of exceptionalism that's very strongly-held. I think that's worth thinking about.

david giacalone

Chris, Your paternalism (socialism?) is an insult both to consumers and the First Amendment. (And, your brainwashed-baby-boomer theory is too silly to be insulting -- we're mostly pretty cynical about advertising.)

Where the kind of advertising you support works, advertisers use it. [By the way, where I live, the wireless phone ads are all about coverage and price.]

What we as a society need to do is to educate consumers to want relevant and material information -- then, advertisers who try to use fluff and image to sell products will be at a disadvantage, and those who provide the desired information will thrive. Also, for big-ticket items and necessities, we should help ensure that "relevant" information exists. For example, Consumer's Union does that, and consumers who care about such things (mostly those brainwashed baby boomers you deride) consult the data religiously.

Of course, for many products, and for many consumers, "image" is the utility/value that is most important. Until you change human nature, trying to force advertising that fits your notion of proper is just heavy-handed governmental intervention and nannyism that will produce little or no improvement in the workings of the marketplace.

I can't wait to see your proposal to get all that irrelevant and demeaning speech out of the political sphere and all those tacky and anti-intellectual books off library and bookstore shelves.

p.s. Back to lawyer advertising: Very few lawyers ever advertise price and most lawyers very much like that situation. [e.g. you virtually never see price mentioned in personal injury ads, and thus we still have the economically miraculous "standard contingency fee" -- http://blogs.law.harvard.edu/ethicalesq/contingency-fees-pt-3-do-standard-fees-exist/ ] Any regulation that makes it harder to advertise on the basis of price is indeed doing a disservice to consumers. See, for example, the newly revamped Ohio ethics rules, which have a Comment that declares all "discount" advertising to be "misleading". http://www.supremecourtofohio.gov/Atty-Svcs/ProfConduct/rules/default.asp#Rule7_1 ] True consumer advocates will be on guard against any regulation that stifles fee competition, even if done indirectly.

Chris Hoofnagle

Oh, there's no doubt that these proposed rules are overbroad and unfair. But the point I'm making is that commercial speech can stifle competition, and focuses consumers on questions immaterial to smart decisions. A prime example is in wireless phone advertising, where much of the advertising is devoted to celebrity endorsements, and the real quality data on coverage and service availability (which is independently tested and verifiable) is completely unavailable to consumers and regulators. So, decisions in a competitive field are made in the dark, and consumer protection intervenes in the form of 14-day return policies (rather than just giving consumers the independent coverage data upfront).

I think the question that consumer attorneys need to explore is what form of regulation is most likely to produce truthful, non-misleading, and material claims about products. Simply increasing protections for commercial speech may frustrate all of these goals, and make unlawful the compelled disclosures that the law so often imposes on certain industries.

And as far as paternalism goes...yes, consumer law often engages in assymetric paternalism. If that's our objection, we might have to reevaluate a lot of pro-consumer positions. I guess what I'm saying here is that First Amendment considerations are so bound up by emotion, personal values, and falsifiable assumptions (the rational consumer with perfect information, etc).

Some of it is generational (the advertising industry engaged in a massive PR campaign that strongly affected the Baby Boom generation's attiutudes). I think it's helpful to put one's strongly-held views on the FA aside for a moment, and think about how First Amendment exceptionalism affects consumers. It doesn't always promote consumers' interests.

Greg

Thanks everyone for the comments. You are probably right, Chris, that most of the stuff you see in advertisements is of little informational value to consumers. My concern is not so much that consumers will gain useful information from seeing actors portraying lawyers and judges, but that, by making it very difficult for lawyers to advertise, New York will make it harder for newcomers to break into the market. Advertising rules tend to give an unfair advantage to entrenched firms, which depend primarily on referrals and word of mouth to find clients, over new firms, which depend heavily on advertising to get their message out. When competition is reduced, prices tend to go up and consumers suffer.

In addition, I worry that making it difficult for lawyers to advertise makes it less likely that injured consumers will learn about their rights. The rules do seem targeted primarily at plaintiffs' lawyers--for example, they prohibit an attorney from contacting injured victims for thirty days after an accident, during a period when the victims might be pressured into a settlement by their insurance companies.

Of course, any analogy between lawyers and shoes will be imperfect. But, to the extent there are differences, don't you think a consumer's choice of an attorney will be much more deliberate and less likely to be swayed by advertising gimmicks than the same consumer's choice of shoes? I think the proposed rules show a paternalism and disrespect for the First Amendment that consumers don't need.

Chris Hoofnagle

I find this discussion interesting because I've never fully bought the argument that commercial speech helps consumers. So much advertising contains no real information (price, quality, comparisons), and is instead used to promote brands. In these situations (so called "parity advertising"), artificial distinctions between products are created that cause people to waste money because they are focused on brands rather than the actual product (i.e. generic bleach versus Clorox bleach, same product, branded is more expensive).

If shoe advertising were restrained in the ways specified above (except where the metaphor breaks down because shoes are different than lawyers :) ), what types of communications would it encourage? Perhaps exactly the type that would most benefit consumers--substantiated claims on quality, price, etc. That would be great. B/c celebrity product endorsement, hyperbole, etc, doesn't help consumers make smart choices on products.

NBlack

Ahem. Should be "effect".

NBlack

It's great to see other law bloggers paying attention to these issues. I've been blogging ( see, for eg: http://nylawblog.typepad.com/suigeneris/2006/08/more_on_the_pro.html )about the proposed rules for some time now and am extremely concerned about their affect upon my own blog,if they're enacted as is.

I understand that at the very least, they plan to tweak the definitions of advertising and soliciting, so that's a start, I suppose....

david giacalone

Greg, Thank you for giving this topic additional coverage. I'm a bit worried, however, that the U.S. Supreme Court may not be willing to protect the commercial speech of lawyers (and therefore the related rights of consumers). When the Court refused certiorari last March in the Pape v. Florida Bar case [the "1-800-PIT-BULL" case], it let stand a decision by the Florida Supreme Court that put professional "dignity" above free speech and competition policy. See our discussion at http://blogs.law.harvard.edu/ethicalesq/2006/03/27/supreme-court-rejects-pit-bull-appeal/, and the many links.

Consumer and 1st Amendment advocates were shocked when the Florida Supreme Court upheld the State Bar's ban on using an innocuous image of a pit bull, and the Pit Bull 800 Number, by two lawyers who specialized in motorcycle injury cases. The Florida Court concluded that "These devices, which invoke the breed of dog known as the pit bull, demean all lawyers and thereby harm both the legal profession and the public’s trust and confidence in our system of justice." Unlike the case of athletic shoes, such interests were deemed to be strong enough to override speech and competition issues.

The Supreme Court has always indicated that lawyer speech could be limited more than advertising for non-professional services and consumer products. We may soon find out that those limitations are greater than we ever envisioned -- because this Supreme Court is willing to defer to "states' rights" and itself buys into the lawyer dignity conceit.

Lawyers who care about these issues need to be actively vigilant on the state level. And, they need to be aware that a large portion of the bar would love to stifle competition and boost their "dignified" self-image by preventing as much lawyer advertising as possible.

Perhaps I'm jaded by my formative years at the FTC, dealing with antitrust issues related to the professions. But, I am not at all surprised when I see organized bar groups acting like guilds. For another aspect check out http://blogs.law.harvard.edu/shlep/2006/09/08/a-guide-or-a-guild-where-does-your-bar-group-stand/ .

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