The FTC, Adware Advertising and Badges of Shame

By Eric Goldman

New FTC Commissioner Jon Leibowitz has embraced one of the favorite causes of the anti-adware grumblers: dry up adware funding by making adware advertisers feel some pain. According to AdAge, he recently said that the FTC might publicly announce the companies who ran advertisements on adware that the FTC tries to bust, saying “The FTC could consider that when it brings adware cases, listing all the advertisers whose content was delivered without notice of consent.” The idea is (I think)–if the FTC can’t legally bust the advertisers, maybe it can pin a badge of shame on them.

There are some obvious flaws with Leibowitz’s thinking. First, and foremost, the money trail is already well-documented by Ben Edelman and his compadres. What does the FTC bring to the party? Maybe better PR muscle than Ben? (I wouldn’t bet on it!)

Second, because advertising money often flows through multiple layers of agencies and affiliates, an advertiser’s decision to spend money can be fairly attenuated from the selection of a venue to run the ad. Therefore, characterizing the advertiser’s role precisely will require the FTC to pick its words carefully. It’s one thing for the FTC to say that X’s ad was displayed by someone via a pop-up ad; it’s another thing to say that X displayed the ad if the decision was made by ad agencies or affiliates downstream from X. Maybe the FTC will need a grammar lesson before it engages in its shaming campaign.

To be clear, I have no problem with the accurate flow of information. Advertisers should be accountable for the choices they make. But these corrective mechanisms will fail if tainted by grammatical sloppiness.

Third, from my perspective, it’s a potentially serious abuse of governmental power for the government to get into the business of shaming people for activity that is legal. If the activity is illegal, the FTC should enforce the law (and explain why advertising via adware is illegal–something that Spitzer has conveniently avoided). If the activity is legal but the FTC thinks it should be illegal, the FTC should petition Congress to make it illegal or promulgate a rule under its delegated powers. But a government actor’s use of shaming as a law-substitute is, in my opinion, way out of bounds.

Though Leibowitz may not have thought out his ideas very thoroughly, I do think he is part of a general movement towards regulating advertiser decisions about where to run advertising. CAN-SPAM was the first modern iteration in this process, but I doubt it’s the last. I expect that, over time, every advertising placement decision will be fraught with legal peril. Personally, I think this regulatory regime will significantly distort social information flows, in many cases for the worse, but it may be unavoidable nonetheless.

Ironically, Claria and DirectRevenue have recently announced that they are migrating away from pop-up ads. So, as usual in the technology arena, the marketplace is already making progress at correcting some of its worst abuses before the government can even fire up its propaganda machine.

(Thanks to Chris Hoofnagle for calling my attention to the AdAge article).