Do the FTC's New Advertising Guidelines Run Afoul of Section 230?

by Paul Alan Levy

Since Eric Goldman is our leading scholar on the issue of section 230 immunity, I hesitate to question the soundness of anything he says on the subject.  But I have qualms about his recent posts here and, with greater detail, here, arguing that the FTC has overstepped the bounds of section 230 immunity in one of the examples it gives in its new Guides Concerning the Use of Endorsements and Testimonials in Advertising. 

Professor Goldman questions example 5, in which the advertiser pays for a blog advertising service that

matches up advertisers with bloggers who will promote the advertiser’s products on their
personal blogs. The advertiser requests that a blogger try a new body lotion and write a
review of the product on her blog. Although the advertiser does not make any specific
claims about the lotion’s ability to cure skin conditions and the blogger does not ask
the advertiser whether there is substantiation for the claim, in her review the blogger
writes that the lotion cures eczema and recommends the product to her blog readers
who suffer from this condition. The advertiser is subject to liability for misleading
or unsubstantiated representations made through the blogger’s endorsement.

Professor Goldman argues that such liability would be subject to section 230 immunity, because both the company and the blogger are “users” of the advertising service’s interactive computer service.

However, it seems to me that Professor Goldman has not taken adequate account of the fact that the FTC is regulating the advertiser, not in its capacity as the provider or user of an interactive computer service, but in its capacity as the employer (in a larger sense) of the blogger.

He implicitly acknowledges that if the blogger were actually the in-house employee of the advertiser, action could be taken against the advertiser under the doctrine of respondeat superior, so long as the blog post was written within the scope of the blogger’s employment.  That is what the court said in the Delfino case that Professor Goldman mentions (Delfino v. Agilent Technologies, 145 Cal. App.4th 790, 52 Cal. Rptr.3d 376 (Cal. App. 6 Dist. 2006), although the court found that the posts in question there were outside the scope of employment.  That the doctrine of respondeat superior applies notwithstanding section 230 is at the heart of several of the Ripoff Report cases denying motions to dismiss based on the allegation that employees of Ripoff Report had themselves written defamatory content about the plaintiff (for example, Whitney Information Network v. Xcentric Venture, 199 Fed.Appx. 738 (11th Cir.  2006)).   (As I have previously noted, though, these cases against Ripoff Report always founder at the summary judgment stage, however.) By the same token, if a reporter for the New York Times were to include defamatory matter in a story that appeared only online, the Times could not escape liability for defamation by arguing that its employee was the one who posted the story to the Times’ web site.

Once it is conceded that respondeat superior survives section 230, because it regulates the offline relationship between the blog poster and the employer, the FTC’s guideline example survives section 230 as well.  After all, given the FTC’s broad regulatory authority, the FTC is not obligated to accept the “scope of employment” limitation of respondeat superior, and it is not required to accept the limitation of respondeat superior to the actions of “employees.”  Its advertising guidelines have long held companies responsible for misleading advertisements published by independent contractors, and by the same token the FTC is not required to agree that a company can insulate itself from responsibility for the advertising that it purchases by contracting with one company that in turn contracts with an individual who publishes the misleading content.

Professor Goldman’s best argument for a contrary result is Blumenthal v Drudge, 992 F. Supp. 44, 49-53 (D.D.C. 1998), where section 230 was held to immunize AOL against a suit for defamatory content placed on its service by Matt Drudge, even though AOL had paid Drudge for his content.  The difference, though, is that AOL was sued only as the publisher of content on its own interactive computer service, and Blumenthal had brought a defamation claim under a local law regime that presumably accepts the limits of respondeat superior-type liability to employers and employees.  Admittedly, though, Blumenthal v. Drudge did not discuss the lack of liability in those terms.

A number of issues have been raised elsewhere about how the FTC's rules would apply to the liability of bloggers themselves, but as I see it, section 230 is no obstacle to this one example of potential liability for the advertised company itself.

Comments

[David hogard]

hanks for thoughtful topic I think it's definitely arguable that actively soliciting bloggers to submarine product placement does not make the advertiser an "interactive service provider" under the meaning of the statute ("any information service, system, or access software provider that provides or enables computer access by multiple users .

[note: spam commercial links deleted]

[Hayden Frost]

I absolutely agree with Paul -- 230 provides no immunity from the FTC imposing this kind of liability. 230 was intended to limit vicarious liability so that service providers wouldn't get pummeled when their users did something the provider had little or no control over. But that's not what is happening here.

First, defendant's counsel would have to successfully argue that the ad agency is an "interactive service provider" under the CDA. While banner ads themselves might qualify, I think it's definitely arguable that actively soliciting bloggers to submarine product placement does not make the advertiser an "interactive service provider" under the meaning of the statute ("any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server").

But even then, 230 does not actually create "immunity" -- it merely states that the service provider is not treated as the publisher. The "immunity" is just an implied byproduct. When Joe Anonymous randomly makes a defamatory comment on X-Site, 230 obviously applies. Assuming the ad agency is a service provider under the CDA, when the agency actively seeks out a blogger to submarine some product placement, it's a joke to argue that 230 somehow negates respondeat superior entirely. After all, if Eric's argument was correct, an entity could easily go out and pay users to commit other torts (lets say defamation for example), and under Eric's rationale, 230 immunizes this entity. Not only is that irrational, I don't think 230 nullifies respondeat superior entirely -- it just means there must be more action than merely opening the doors for people to use the service.

At the same time, I will make a concession to Eric's argument. If an ad agency was to set up a system where random people could indiscriminately get paid 3 cents to tweet "I love my Brand-X widget", it would be much harder to argue that's NOT an interactive service provider (under the intent of the statute), than if the agency actively sought out 10 bloggers and solicited product placement deals.

[Eric Goldman]

Thanks for the thoughtful response, Paul. As I indicated in my second blog post, I don't see how the advertiser-blogger relationship could possibly fit any traditional characterization of respondeat superior. And to the extent the FTC wants to manufacture a "new" basis to impose respondeat superior to online content publication(i.e., something beyond traditional agency law), I think Congress' enactment of 230 plainly precludes the FTC from doing so. Eric.

[Paul Levy]

Peter, I think you have misread what the FTC has said. What I have seen is the FTC saying that it is not going to go looking for bloggers against whom to take enforcement actions, and indeed that its enforcement emphasis is not the bloggers but rather the companies that are paying for misleading blog posts in lieu of advertising. For example, http://legaltimes.typepad.com/blt/2009/10/ftc-.html

[Peter Jones]

Who cares anyway? The FTC has just stated basically that the new guidelines won't be used to go after bloggers and don't have the force of law. That's the FTC saying that it doesn't want deference for its own guidelines. Talk about wimpy regulation!