Thursday, September 25, 2014
Ben-Shahar & Schneider Symposium Part XI B: David Vladeck, Living in a Post-Disclosure World, Part B
This is the eleventh in a series of posts that are part of a virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure. Biographies for the second week's contributors can be found here. The authors' introduction to the symposium can be found here.
David C. Vladeck is a Professor of Law at Georgetown University Law Center, where he teaches federal courts, civil procedure, administrative law, and a seminar on First Amendment litigation. Professor Vladeck recently returned to the law school after serving for nearly four years as the Director of the Federal Trade Commission’s Bureau of Consumer Protection.
This is the second of a two-part post. The first can be found here.
My commentary on More Than You Needed to Know picks up where Ben-Shahar and Schneider’s critique of mandatory disclosure leaves off; that is, how to reform the process to move to less bad disclosure regimes.
I have three modest points: In yesterday’s post, I argued that there are disclosure regimes that work. We should explore them to see why. In today’s post, I will argue that there are tools that can be used to address some of the flaws that Omri and Carl rightly identify and criticize. They must be employed. Finally, my tenure at the FTC taught me that mandatory disclosures are often an effective way to ensure accountability. That virtue is worth exploiting.
2. Fix disclosures. As Omri and Carl point out, disclosures often fail because they are designed to fail. True, but that state of affairs is not inevitable. Legislatures and regulatory agencies can mandate that disclosures do just that: Convey important information to consumers concisely, in plain English, and at the right moment, and nothing more.
Let’s do a thought experiment with privacy policies, which are rightly the poster child for disclosures that go unread. Let’s assume that companies were forced to abide by the following simple rules:
(2) Tell consumers what they need to know and nothing else. Next, imagine that the policies stated clearly and concisely the uses to which one’s personal data would be put. No other statement would be permitted, especially the long prefatory comments about how much the company really “cares” about your privacy. And no prevarication would be permitted. If the data will be given or sold to a third party, that fact – along with the identity of the third parties (and affiliates) and the uses the third party would put the data – would have to be disclosed. If the company wants to reserve the right to sell the data as it sees fit, the company would have to disclose in bold letters: “We reserve the right to sell your personal data to whomever we want!”
(3) Make the legal disclaimers and boilerplate a separate “disclosure”. Most privacy policies are incomprehensible because they are written by lawyers expert in what Senator Elizabeth Warren calls the art of “wordbarf” (her term, not mine) and focus mainly on disclaiming legal liability, not on “disclosing” the key information.
(5) Make sure that there is a robust default. Disclosure regimes are too often stand-alone efforts to regulate, employed as a sop to beat back efforts to impose more stringent regulation. Default rules are often needed so that if the disclosure fails, the presumption should be that the default rule remains in place.
I could go on. But you see my point. Today most disclosures are carefully engineered by lawyers and experts on human behavior not to be read, or to be discounted because of other claims more prominently displayed. If you want to see how sophisticated these obfuscation efforts can be, take a look at FTC v. Commerce Planet, Inc., 878 F. Supp. 2d 1048, 1068-72 (C.D. Cal. 2012), a fraud case involving the adequacy of buried disclosures that were contradicted by other far more prominent claims.
If we are going to reclaim disclosures, those techniques will have to be reined in by more than enforcement cases by the FTC and state agencies. More important, we must focus on making disclosures comprehensible and addressing the “indifference” problem that Omni and Carl describe. Professor Oren Bar-Gill’s book, Seduction by Contract, argues that more effective disclosures could be designed to enhance consumer welfare. And the FTC’s work on disclosures holds some promise. Look at, for example, the FTC’s work on Dot.Com disclosures available here.
3. Disclosures to ensure accountability. There is a long history of mandatory disclosures in the United States. For instance, even before there was an FDA, Congress mandated that food labels identify the name of the food, the food’s ingredients, the net weight of the food, and the name and address of the manufacturer. The requirement was intended to aid consumers in making purchasing decisions. But more than that, the requirement was intended to give law enforcement agencies a hook to bring enforcement cases in the event that the food was misbranded. When Congress passed the Food, Drug and Cosmetic Act in 1938, it carried forward these requirements, and they remain in force today.
The same of course is true with the Federal Trade Commission Act’s longstanding prohibition on deceptive acts and practices. Without disclosure regimes, many mandated by law, the FTC’s enforcement authority would be a shell of what it is today, as would be the case for State Unfair and Deceptive Acts and Practices statutes.
My point here isn’t to claim that disclosure regimes should ordinarily be imposed to serve only as accountability mechanisms. How to inject greater accountability into the marketplace is an issue that extends far beyond the scope of Omri and Carl’s wonderful book. Instead, it is to make the more modest claim that even if, as Omri and Carl demonstrate, disclosure regimes generally fail to inform, they often serve the collateral purpose of enabling law enforcement agencies, and at times private parties, to hold sellers accountable for their claims.
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Let me end where I began. The Failure of Mandated Disclosure is a must-read book for anyone who cares about consumer protection, contract law, and an informed marketplace. To me, the book throws down the gauntlet to anyone who is willing to defend the status quo. I doubt that anyone will pick that gauntlet up. But if we agree that the status quo is indefensible, we need to figure how either to live in a post-disclosure world or how to improve disclosures to the point that some of Omri and Carl’s criticisms no longer stick. That is our challenge. I for one am not ready to surrender to a post-disclosure marketplace, especially when we have not yet really focused on designing and enforcing effective disclosure mandates.