Regulating “Stealth” Marketing

By Eric Goldman

I’ve never understood the legal distinctions between “editorial content” and “marketing.” To me, content is content. Certainly, content can have problematic/harmful attributes, such as false content. And often I want to know more about the identity of the content’s source so I can identify potential biases and adjust my credibility assessment of the content. However, issues such as falsity and bias can apply to editorial content and marketing equally. For example, I am just as susceptible to newspaper editors trying to manipulate my opinion as I am a marketer trying to extract some cash out of my wallet.

Having said that, I think there’s a pervasive assumption that marketing is more susceptible to bad behavior than editorial content, if for no other reason than marketers can get a financial payoff for their manipulations. And these assumptions have led to the development of an extensive regulatory framework governing marketing, ranging from substantive restrictions to limits on the medium used to deliver it. This regulatory structure vastly exceeds the regulation of editorial content.

This editorial content/marketing dichotomy has been under substantial pressure for some time. Some of this reflects the inherent illogic of the dichotomy, but technological developments have exacerbated the problems. The rise of the Internet has empowered consumers to speak up about marketplace offerings, and this content can be enormously valuable in shaping consumer perceptions and increasing producer accountability. At the same time, profit-seeking marketers have sought to surreptitiously steer consumer opinions about their offerings, leading to phenomena like shill reviews and marketer-financed blog buzz.

Ellen Goodman discussed this problem in a recent Texas Law Review article called “Stealth Marketing and Editorial Integrity.” She thinks that shill Internet editorial content harms social discourse by reducing consumers’ abilities to trust content. Therefore, she favors extending sponsorship disclosure laws (like the anti-payola laws) to the Internet. (On that front, see the recent EU directive to criminalize “falsely representing oneself as a consumer.”)

Ellen’s abstract:

Stealth Marketing and Editorial Integrity is the first article in the legal literature to address the normative implications of covert marketing in mass media. For business, technological, and cultural reasons, advertisers and propagandists are increasingly using editors to pass off promotional messages as editorial content. This integration of sponsorship allows marketers to cut through communications clutter and audience resistance to marketing. In this way, the practices of payola, product placement, and sponsored journalism are proliferating and spreading into newer media forms like blogs and video games. A federal sponsorship disclosure law has proscribed these practices in broadcasting for nearly a century. Despite high-profile recent controversies about the practices, the legal literature is devoid of any systematic analysis of the problem that stealth marketing presents or the values that sponsorship disclosure might serve, whether in broadcasting or other media. This Article fills that void by providing a normative theory of sponsorship disclosure law informed by the First Amendment, bribery law, and information theory more generally.

For another exposition of her theory, see Rebecca’s summary of Ellen Goodman’s presentation at a conference.

The Texas Law Review recently launched an online counterpart called See Also, and the first installment published three critiques of Ellen’s article, including my critique entitled “Stealth Risks of Regulating Stealth Marketing.” My abstract:

In this response piece, Professor Goldman explores the potential adverse consequences of Professor Goodman’s proposal for sponsorship disclosure laws. More specifically, Goldman argues that any deliberation on such disclosure laws must consider: (i) why consumers desire to know the source of content; (ii) whether consumer distrust of marketing wrongly affects consumers’ evaluation of content; and (iii) the adverse effects of “noisy” disclosures.

Check out my entire comment, which does an efficient job laying out my main gripes with regulatory efforts to distinguish editorial content and marketing. (It’s relatively brief—about 2,000 words).

To keep that piece brief, I omitted two other critiques:

1) Ellen’s article doesn’t try to define “stealth marketing” with any precision. This gets her into trouble when she talks about blogs, where she struggles to define the border cases. This gets back to my first main critique in the posted response–why do we care about the distinction between editorial content and marketing? Without having a clearer understanding of that, there’s little chance that we can adequately resolve the border cases.

2) Sponsorship disclosure laws have been on the books for four decades. Yet, I haven’t seen any academic literature analyzing their efficacy. Is this right? This well-known and popular law has never been studied by academics? If it has been studied, what do those studies reveal about the efficacy of sponsorship disclosure–does it accomplish its goals? As my critique indicates, we have plenty of evidence that people say they want to know when content is marketing, yet there is also some evidence that such disclosures degrade consumer decision-making. So I’d love to see a recap of what we’ve learned in the past 40+ years. From my perspective, it seems odd to advocate extending the model without any evidence that the existing model actually works.

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