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Episode 304
May 19, 2023

Navigating Legal Landmines

Any business comes with risks, and there are many legal issues around advertising that can become major if a brand doesn’t have arms around what those are and how to avoid them. From differing terms of agreement to the variety of laws per state, there is a good deal to navigate, and it takes an expert to wade through. How do you realistically have a thriving enterprise or a business with these kinds of encumbrances? Listen now to our conversation with Robert Freund and his take on this changing environment and how it affects all of us! 

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Any business comes with risks, and there are many legal issues around advertising that can become major if a brand doesn’t have arms around what those are and how to avoid them. From differing terms of agreement to the variety of laws per state, there is a good deal to navigate, and it takes an expert to wade through. How do you realistically have a thriving enterprise or a business with these kinds of encumbrances? Listen now to our conversation with Robert Freund and his take on this changing environment and how it affects all of us! 

Applying Old Laws to New Situations

  • {00:08:05} The rules of disclosure, that were never really clear before, are undergoing scrutiny and clarification from the FTC for situations such as an influencer receiving product and then creating content about it and other examples that can really determine strategy
  • {00:13:22} “The FTC's rule is that the disclosure has to be clear and conspicuous, which effectively means your audience can't miss it.” - Robert
  • {00:16:45} “These old laws and rulings that are not effectively law become a tangled web that we have woven because of the heavy commercialization of the way that content has emerged.” - Phillip
  • {00:18:21} “There's always that sort of lag time between what the law says, what courts tell us the law means and what marketers are out there doing.” - Robert
  • {00:25:08} Legal problems, whether legitimate or not, have always been a part of running a business, but the time frame for encountering a legal problem is business is much shorter now
  • {00:30:58} As advertisers get more creative and competitors get more daring, there will continue to be more pushback from the FTC and more lawsuits filed against business owners that can even look back as much as three or four years, so it’s important to not fall prey to using those tactics to justify staying competitive
  • {00:38:05} Legal entanglements and risk associated with them influence the way businesses are built and also where they are being built now, which actually changes the way we think about global commerce and global eCommerce, and that’s not necessarily a good thing
  • {00:49:58} “As you go to try and do something more and further that stands out, of course, the top influencers are pushing legal boundaries. That's probably how they got there in the first place.” - Brian

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Brian: [00:01:02] Hello and welcome to Future Commerce, the podcast about the next generation of commerce. I'm Brian.

Phillip: [00:01:07] And I'm Phillip. And today, hey, the rules of the road for eCommerce are changing as they always have, but they're changing in unexpected ways. And here today to talk to us a little bit about the way that those are changing in the world from a legal standpoint or maybe from a case law standpoint and maybe to illuminate some of those challenges ahead, we have Robert Freund joining us. Welcome to the show, Robert.

Robert: [00:01:31] Thanks for having me.

Phillip: [00:01:32] What do you do? Tell us.

Robert: [00:01:34] I'm an advertising and eCommerce attorney, and I'd like to say that if you make money online, I help you keep it. And what I mean by that is I help brands, ad agencies, and sometimes individual creators understand what the risks are when you engage in online business and help avoid litigation. So rather than having to pay out some amount to a regulator or a competitor or a plaintiff's lawyer, I help you understand how to avoid some of the common traps and set yourself up for success.

Phillip: [00:02:07] What are some of those common traps that your clients are trying to avoid in 2023?

Robert: [00:02:13] Well, there's so much that's so many potential landmines you can step on in terms of eCommerce. But a lot of what I focus on is compliance with the FTC's rules, which have been changing more rapidly than normal in the last few years under the current FTC administration, and consumer class actions that are addressing issues that are sometimes similar to the rules the FTC has. Sometimes states will have their own sets of laws that either mirror what the FTC has or are more burdensome, whether it's something like just misleading claims in your ad copy or your subscription practices or it's kind of a big area that a bunch of states have different rules about, pricing issues, some data privacy stuff, using influencers and endorsers and making disclosures. That's sort of a sampling of the things that come up over and over again.

Phillip: [00:03:12] Oh, so you mean how people acquire customers in 2023 seems to be imperiled generally across the board? {laughter}

Brian: [00:03:19] {laughter}

Robert: [00:03:20] I mean, any kind of business has risk. There are new risks to be aware of all the time. There are crafty lawyers out there that are coming up with new theories of how to take your money from you, and I try to stay on top of that. And I like to say that you can't really do a risk assessment if you don't know what the risks are. So it's ultimately a business decision, how much risk you want to take on. But you have to have your arms around what those risks look like to make that assessment.

Brian: [00:03:51] Well, it's not just laws, right? It's like every platform has their own terms of service now. You have to be completely familiar with all the terms of service that are in every platform that you push content and offers and giveaways. You had this whole thread recently about Mr. Beast and his giveaway on Instagram and how it may have violated Instagram's terms of service. {laughter} This is the exciting part. I want to get into the good stuff up front.

Phillip: [00:04:23] Before we do that, because I will tease it. This is tantric content building. Robert, when we are thinking about things like terms of service, there's a lot of best practice advice on where to launch your business, how to promote your business, and being available on all of these social channels. Is it reasonable? I guess this is a question that I have. Is it reasonable as a small business operator to be up to speed on all of these clickwrap agreements and EULAs and things that can any one person really, truly understand the terms of service for all of these channels in which they have to operate in 2023?

Robert: [00:04:58] It's definitely a big undertaking if you're just one person to try to get your arms around the rules of every avenue through which you can advertise. It's a lot even if you have a team. So it's important to have someone on your team at least making a good faith effort to understand all of that. But, you know, not to toot my own horn, but it's not a bad idea to have a legal counsel either in-house or outside counsel or somebody, especially if you have a particular question as you review a certain set of terms or you have a question to sort of synthesize that for you and do that legwork for you so that you can focus on what you'd probably rather be doing, which is making sales and growing your business. So it's like I said at the beginning, it's important to understand what the rules are so you're not surprised by something after you've already made some kind of investment in a plan of action, and then you realize, "Oh, I either have to go back to the drawing board or significantly rework something," as the case might be. And you could have saved a lot of time and effort by engaging somebody or delegating the task of understanding the rules to someone on your team.

Brian: [00:06:11] Because not only are the rules complicated, but they also get updated all the time. So it's like you have to be aware of all of the rules that you have to follow, whether that's FTC or EULA or whatever it is. And then you have to be aware of when it's updated and what those updates are. For instance, the FTC recently updated its guidelines on advertising and endorsements. Maybe you could share some of those significant changes and how they might be impacting some of our listeners.

Robert: [00:06:42] Right. In terms of endorsements and the FTC, what is happening right now is that they're undergoing the process by which they're reviewing their current guides and they're proposing updates to them. So there's a public comment period. They sort of previewed what some of those changes are going to look like. And then sometime in the not-too-distant future, we'll have an official update and there will be additional and in some cases different guidance from what was set out before. So for a bit of context, the way the FTC's guides work is not everything that's written in an FTC guide has the force of law. What it is, is the FTC saying this is some insight and some examples of how we are going to interpret what constitutes a deceptive act or practice under the FTC Act so that if we see this in the marketplace that can be a predicate for some kind of enforcement action. So it's important to understand what those guides say so that you can anticipate what a risk is and how this federal agency might interpret what you're doing.

Phillip: [00:07:59] What are some of those revised updates that have come across recently?

Robert: [00:08:05] Right. So they're proposing to expand and modify the definition of what an endorsement is. They are revising, and in their opinion clarifying, the sorts of situations that require a disclosure. If you're using influencers or advertorials or something that looks like organic content when there's really a connection that needs to be disclosed. Things like that. They're adding examples, they're clarifying old examples. The guides currently set out a laundry list of hypotheticals that reflect what people do in advertising, like send free product to an influencer and they post about it. Does that need a disclosure? It arguably wasn't that clear before. There's going to be a little bit more clarity about that specific situation if their proposed changes to the guides stick when they finalize them. So I don't know if it's helpful. I mean, we can get into the rules of disclosure generally as it stands now and then...

Phillip: [00:09:15] I think the fun would be for us to kind of like for me to necro some old beef that I had on the Internet with some people.

Robert: [00:09:27] By all means.

Phillip: [00:09:27] I am pretty critical generally of the lax behavior, especially in the eCommerce community around B2B influencers. I'm using air quotes if you're not watching us on YouTube, but sort of the B2B influencer and creator space has been rife with folks who are either angel investors or early investors, or strategic advisors... They stand to benefit from the success of a company and they do not disclose, generally. What we have seen are very targeted and specific saturation campaigns where a particular software company will blanket the market and own and ort of co-opt the voice in the conversation of an entire ecosystem. In particular, let's say like direct to consumer Twitter, and buy out a number of folks as basically blanket ad space that appears as if it's organic. And I have thought to myself in the past, if it's not outright, if it's not flagrantly sort of violating those FTC guidelines, it's certainly flirting with violating the guidelines because it seems misleading on the face of it when you know what the structures are.

Brian: [00:10:45] Yeah. And it's so bad at this point. It's almost like people who are not sponsored have to be like, "You assumed that it's sponsored," and not the other way around.

Robert: [00:10:56] You're getting at sort of the heart of the logic behind the disclosure rules and what they're intended to do. The FTC's policy or one of their missions is to make sure that people understand when they're being advertised to. So the rule is, if you are endorsing some advertiser, whether it's as an influencer or an affiliate or an investor or what have you, if there is what the FTC calls a material connection between the person making the endorsement and the advertiser, and that connection is not otherwise obvious to your audience, then the audience needs to know about that connection because that would affect the weight or the credibility that the audience gives to that endorsement. So in like the simplest example, if some blogger is recommending a pair of shoes they were given for free in exchange for making that, that is something that I may want to take into consideration before I part with my money. And what constitutes a material connection is not just something as direct as paying an influencer to make a post. It can also be sending free product in exchange for a post. It can be giving some kind of discount. It can be an incentive like entry into a giveaway. It can be an employer/employee relationship. There have been cases where an ad agency wants to do an awareness campaign, and they're having the employees of the company tweet about how amazing this new product is. It's not obvious that those people making those tweets work for the company that they're promoting. The FTC says it needs to be made clear. It could also be a family relationship. If your spouse has a business and you go talking about how great it is, people would want to know that's your spouse. And to your point, if you're a significant investor, it probably wouldn't apply if you just owned shares of Google and then talk about how much I love Google. But if you're a significant investor in a business and you go touting it, then the FTC would tell you that your audience should know that. And so that's why we have things like hashtag ad and hashtag sponsored. There's different ways that you can make the disclosure. You don't have to use the hashtag. You don't have to use ad in every case. But [00:13:22] the FTC's rule is that the disclosure has to be clear and conspicuous, which effectively means your audience can't miss it. [00:13:28] So you can't, like, bury it in fine print somewhere. You can't make someone go search for it. And they get pretty particular about the manner of disclosure in the cases that they bring.

Brian: [00:13:40] Isn't it kind of tricky, though, especially like you said, send free products. So I'm going to like dive a little further down that rabbit hole and take it as an example for a bigger point. Doesn't it get really tricky about when the contract, if you will, ends? So like if someone sent me, let's say free Suja and I'm sure that anyone that's watched our YouTube knows that I drink a lot of Suja. Let's say that we have given a lot of airtime Suja, hashtag not sponsored. Not sponsored. {laughter} But let's say Suja did send me some free product and I drank it and I was on camera and I said, "Oh, Suja sent me this free product." I guess this is kind of sponsored ish. But then like two weeks later I'm drinking Suja on the podcast. And am I still technically incented? I've been incented to promote Suja. It's not the one that they sent me, but I am still promoting Suja and it may be construed that I am still being incented by that initial free product. And now I'm using this as an easy example. But how far do some of these unwritten contracts go is a question?

Robert: [00:15:02] So part of what is going to be addressed in the new rules or what they propose to address is a situation where you just sent free product and there's no expectation that you make any commitment. If something just arrives in the mail and you have no connection to that brand like a sort of typical seeding campaign or something like that, and you're not asked to do anything, it's just here it is. And if you choose to talk about it, then you can. The FTC's position on that is that you don't really need to make any disclosure because you don't have any connection to that business. If there's truly like no strings, it's just appeared, then you don't have any obligation to make a disclosure. If it is a situation where you have some kind of agreement where if you send me this, I'll talk about it on my show, then you would need to disclose that. And if you continue to talk about that product, it's pretty clear that you will continue to need to make that disclosure if you got that for free. It gets a little bit less clear if we're talking about, "Well, they sent me one box or one case and I talked about it and then years later, I'm a fan and I buy this stuff now, do I always have to say, "Hey, years ago they sent me a free package?'" Probably not.

Brian: [00:16:16] Or even like last week. Like last week they sent me a box. I buy Suja on a regular basis already.

Phillip: [00:16:24] I just want to make sure that that's clear because it doesn't seem very clear. This is one of the problems, isn't it? The modern economy, especially digital economies, is so complicated. And the way that we've commercialized human interaction and content on the Internet is so complicated. Is it not a challenge that [00:16:45] these old laws and these rulings that are not effectively law become sort of a tangled web that we have woven because of the heavy commercialization of the way that content has emerged [00:16:57]? I'd love some thoughts about that.

Robert: [00:16:59] That's spot on. I mean, the [00:17:02] challenge is applying old laws to new situations. [00:17:07] Innovators are really creative. Legislators are not as creative. And so there's always some kind of some amount of lag time between, "All right, we have a law or we have some rule and there's a new way of selling something that we may address." And so then there's a period of time where we have to wait for certain courts to weigh in, to say whether this applies and that new way of selling things is not okay without some modification or it is okay. And that's what makes this area of law interesting to me, is that sort of tension between we have the legislature, then we have marketers and then we have plaintiffs lawyers trying to poke it, new tactics, and then we have the courts. And then sometimes if there's an industry pressure or some other reason, we might get an updated law or something that's revived and say, "Okay, that's really not what we meant when we wrote this." We couldn't have anticipated that people would be even sending text messages or communicating via web browser or something like that. It's time to update this, to not punish people for doing something that's commonplace. [00:18:21] There's always that sort of lag time between what the law says, what courts tell us the law means and what marketers are out there doing. [00:18:29]

Phillip: [00:18:31] This actually bridges very nicely into a lot of the conversations that we've seen over the last few years around ADA compliance or the colloquialism of ADA compliance. This idea that web content accessibility is sort of a right. It's been enforced by law that could not have predicted the Internet. The Americans with Disabilities Act, as most people in eCommerce probably know by now one way or another, for better or worse, I think was written in 1990 or passed in 1990 and could not have anticipated the digital economy. We use that as some... It has been used and weaponized for the digital economy that we do have now. Let's talk a little bit about sort of the capital structures of that, how that came to be and what the implications of that might be today as we're moving on beyond. I saw recently you were tweeting "ADA lawsuits are still happening," and they're still happening with recognizable brands in the world. But there was a sort of a structure of the way that those lawsuits came about in sort of profit seeking that I think has an interesting sort of like origin story that bridges us into well, what else can that be utilized for? What are the other next-generation eCommerce types of litigation that we might be seeing in the world?

Robert: [00:20:44] There are certain types of claims that plaintiffs class action lawyers love, and the reason they love them is because they're easy to replicate. If the factual scenario is not that difficult to articulate and if the law provides for mandatory attorney's fees if you prevail, those are the sorts of green lights that a plaintiff's lawyer will look at in assessing whether a law is right for what I think he could fairly call exploitation. ADA website accessibility is one of those. TCPA claims for a while were certainly one of those. Prop 65 in California is one of them. It's seemingly not, certainly not like a morally culpable thing, in my opinion, if you've got over a certain threshold of some chemical, that's probably not really harmful, but it violates the letter of this law we have in California. And so everybody's potentially on the hook for a significant amount of money. And those claims are really easily replicable, especially ADA website accessibility. There are firms out there that realize this that they can get one person who suffers from visual impairment or something like that, and they can use that person to just access every eCommerce website in the United States and then file an ADA lawsuit about it. And that's why there were more than 3000 of them filed just in federal court last year. So that doesn't even account for the ones filed in state court. And it doesn't account for all the cases that were settled before a lawsuit was even filed. So they take a formal complaint, they can just effectively mail, merge the defendant's name into it and just pump those out. And if you can settle one of those for $5,000 a pop, which is not unreasonable for settling one of those and you file 100 of them a week, that's not bad if you're that lawyer. And that's why those sorts of things proliferate. So in jurisdictions like California that doesn't really fly anymore. It's still alive and well in New York. It's alive and well in Pennsylvania. And until we get legislative action to either amend the ADA or otherwise change it, or until more courts say, "What you're trying to do here with eCommerce websites that have no physical presence is not what this law is intended for," plaintiff's lawyers have the incentive and they're going to keep grinding away at it.

Phillip: [00:23:30] We've got years before we can actually pass laws again. But I think also beyond that, the sensationalism of the current media cycles leading up to a general election, in a couple of years' time, I don't think it really provides the environment to change this. And so I hear this over and over again, Robert. "It's never been easier to start a business," but it actually sounds like it's never been harder to run one because these kinds of things make it really difficult for a business owner who is gaining traction in the marketplace because of tools are so accessible to actually be able to profitably run that that enterprise. And is this not... I have to ask. Is this not also the responsibility of the platforms that provide the tools to the end user of the tool? Why is this incumbent entirely upon the popcorn company to understand every facet of accessibility when it's the platform who provides the tool for them to reach the end consumer in the first place? Maybe we could talk a little bit about that and that'll get us over to some other interesting stuff that you've got to talk about.

Robert: [00:24:44] You're right that it's the easiest time to start a business. You don't necessarily need an office. Working remotely. Pretty much anybody can create a Shopify page and get started. And I also agree with you that it's probably the most difficult environment overall to run a business without... The time frame for encountering a legal problem is probably shorter than it's ever been, and there are more angles to be attacked from. If you're in business long enough, it's always been the case that you'll be threatened with a lawsuit for something, whether it's legitimate or not. Someone's going to take a run at you if you're in business for long enough. But there are more ways that that can happen now. And just taking the FTC as an example, the current regime has been much more pro-consumer in their mind, and anti-business in practice than they've ever been before. In fact, even changing the language of their policy statement, it used to be that they said, "We will champion for the rights of consumers without unduly burdening businesses." They're supposed to be a balance there. And they removed language from one of their mission statements that that phrasing "without unduly burdening businesses." Why would you make that change unless you're really trying to make it clear like, "We don't care what it costs businesses. We're out here to advance consumer protection." It was an edit that I don't think got very much attention. I saw another advertising law firm blog mention it and thought, "Yeah, what the hell is that? Why would you take that language out of there even if that's not how you implement your policy, why would you change the public facing policy to remove that? But I think that just gives a real window into where that administration's collective head is at right now. The other part of your question was why is the burden on every business owner and not a platform to sort of bear the burden of ensuring something like accessibility? It's a really complex policy question. The blunt, reductive answer is because that's how the law is written. [00:27:19] If it's written in such a way that a business owner has to undertake the compliance effort to make sure that they're in compliance and they can't sort of pass the buck to somebody else. In the context of broader advertising law and the FTC, they reiterate time and time again that compliance with the advertising law is everyone's responsibility. It's specifically, they said in the context of the influencer disclosures like what we're talking about. If there's some non-compliant piece of content or that disclosure is not made, the influencers liable, the brand is liable, and any intermediary agency that touched the campaign is liable. They even say again and again that a web designer could be liable if they create a website that has some misleading claim on it. They've never, to my knowledge, brought any kind of lawsuit against a web developer. But because they keep saying that, it underscores how they feel that everyone's liable, you're all on the hook for making sure that our rules are complied with. And where that policy comes from is, you know, that's kind of a philosophical question, I think, but that's what we have. [00:28:37]

Phillip: [00:28:39] I think that's a really nice segue then into a couple of these news stories that have come up from time to time. Boohoo, I think was reported recently to be in violation of promotions, basically advertising fake prices. This is a thing that gets talked about endlessly in echo chambers, about ways to create a false sense of urgency with the consumer. The digital economy... I think this is what really it comes down to we're generally not aware of where the lines are around this type of behavior because most of the people in eCommerce were technologists first and retailers and merchants second, if not a distant third. And that is because we were really good at creating these systems that created seamless consumer interfaces and persuasive engines to purchase, not so much around the actual mechanics and dynamics of selling people products in a marketplace. And to your point, Robert, this is the kind of thing I think maybe you could weigh in on, is that the persuasive nature of this price adjustment or fake discounts, fake promotions seems to be the kind of general advice that you would hear as saying this is a best practice. But in reality, these are the kinds of things that it's all too easy to execute in eCommerce and really hard to do in physical retail. But in eCommerce, it's a click of a button to execute this kind of a campaign. Maybe you could talk a little bit about how maybe the tools also enable the bad behavior. Shouldn't that be a guideline that the tool provider should be helping to educate their customer on?

Robert: [00:30:58] Yeah, I completely agree with that. It's very easy to install Shopify plugins that will violate the law for you unless you're aware of that. I can sympathize with someone who's fresh and who is not really aware of what's permissible legally and what isn't, especially with so much noncompliance online, it's very common for business owners to look at what their competitors in the space are doing and say, "Okay, if they're doing it, I haven't heard of them getting in trouble for it, so it must be okay." Or even worse than that is, "If everyone is doing this, but it's illegal, I still have to do it to compete. And so I feel like I have to roll the dice to even stay in the market." And that's an unfortunate reality in a position that I sympathize with with a lot of the business owners that I've talked to. But the pricing is that the laws around that have been in place for a while and it's been a popular type of claim for class actions for many years. I think the first time I remember defending one of those class actions at my previous firm, like the second year I was practicing, which is like nine years ago. And these things are filed almost every day. Have alerts set up on my research tools for different types of claims, but we can get into that if you want. But basically, if you're advertising something as being marked down from an original price or a former price, they're time limitations for how long you get to do that. If they've actually sold it at that advertised stroke-through markdown price for a certain amount of time in order for that to be legitimate. But like you said, it's very easy. It probably would take under five minutes to change your site to run a promotion like that. And it's not like, "Oh, well, we corrected it, so we're off the hook." The claims can be backward looking through 3 or 4 years, depending on what law we're talking about. And what you did three years ago can come back to haunt you. But that type of pricing manipulation, that sort of tactic where you're making an emotional appeal, whether it's false urgency or some other FOMO or social proof, like all these people just added this to the cart or here's a countdown timer that automatically resets... Those sorts of tactics, especially for eCommerce is what the FTC has called Dark Patterns. They released a report on all the different types of Dark Patterns. And it's certainly top of mind for that agency. And we can expect to see more rulemaking around specific tactics like that.

Brian: [00:33:43] And we haven't even touched on data and privacy yet. That is a whole other layer of additional things to think through. When you were talking earlier about what types of things are open for lawsuits and good product market fit, if you will, for lawyers to go after, feels like data is right in line with that kind of a scenario. And we've seen a lot of lawsuits around improper handling of data. And I think we're going to start to see some really creative ways, maybe gray areas, as we start to see the cookie disappear in how data is gathered, captured, and used because cookies have become so clear cut. Everyone knows a good way to use a cookie and a bad way to use a cookie now, but there's going to be a whole bunch of new ways of collecting data. Have you seen anything around this yet?

Robert: [00:34:53] Oh it's non stop, and I'll preface this by saying that with most data privacy compliance work, I refer out to specialists who just focus on that area of the law exclusively. The reason for that is, part of it is I'm a believer in seeing using specialists for specialist work. We do not want the person who handles my business information to give me actionable advice about complying with all of these different data privacy laws. And the other part of it is we don't have a federal data privacy law. There's not one rule we can all understand and comply with. Many states, and there's more all the time, take it upon themselves to come up with their own versions, whether it's CCPA, which is going to become CPRA, or Illinois's biometric data law. There are all these different laws with differing requirements that are oftentimes internally inconsistent. Like the CCPA. There's an Internet law professor named Eric Goldman who has a fantastic blog about this kind of stuff, and he is one of the authorities on this. Every time he posts about a data privacy law, he uses a gif of a dumpster on fire because the law is just such a mess. It's almost impossible to really make sense of it within itself. And they always update, not always, they frequently have updated the regulations. And this is just California. So even if you get your arms around that, you've got all these other states that are coming out with different ones. So it's a real patchwork. That's a challenge in and of itself just to understand what the hell they're saying. So we have seen a lot of class actions around a company suffering a data breach, and then that triggers if you weren't completely compliant with CCPA, for example, and you suffer a data breach and customer information was exposed, then there is a private right of action, meaning it's not just enforceable by the government. You can have these plaintiffs class action lawyers who are up to speed on this stuff come in and have a really damaging lawsuit on your hands. But there are other laws. But again, I don't want to be quoted on this exactly, but my understanding is that Illinois's biometric data law allows for a private right of action. Just without some sort of predicate data breach happening. It's like if you collect what the law defines as a certain category of information and you don't give people the right notice or you use it in an incorrect way, they can just go right to court because of that. There are other laws with different definitions of what personal information is, what a sale of information is. I think you get a sense that the point I'm trying to make is it's really a compliance, I don't want to say nightmare, it can be done and it should be done. And there are professionals that I trust who can help get you there and assess what you need to do, and what you don't need to do. But data privacy is a mess and it seems to just be getting messier.

Phillip: [00:38:05] We live in an era now where... So I grew up in the world-changing idea of we're going to bring all of human knowledge together in a free, open Internet where we can all learn from each other. And that kind of happened for a little while, but now we have such fractured, different rules of the road. I shouldn't say it that way. We have different rules of the road depending on where you live in the world and which state you live in within those places in the world. And it gets more and more complicated to the point that now we see companies just deciding not to do business within countries or even within states. For instance, Pornhub has decided they don't want users from Utah accessing their site. And while circumventing that may be trivial. The point being made is that we are setting precedents for a fundamentally not open Internet and we cannot reliably access information in the world because of the legal entanglements and the risk associated with it. And that, I think, is unfortunately, that is the future of commerce. The future of commerce is more fragmented and less guarantee of access across the board, depending on where you live. Brian, not my favorite person in the world, but Balaji Srinivasan has a really great perspective on this around this idea of network state being a new type of allegiance. If I want to transact Bitcoin, I may have to move to Wyoming at some point. If I want to access a certain type of website, I shouldn't be living within Utah. And those types of ideas and our affiliation to ideas and ideals have a lot to do with where we live in the world in 2023, and I think that that's actually pretty scary because it changes how we think about the way a global community and a global eCommerce community might work. It changes the types of business you build. It makes everything more difficult.

Brian: [00:40:13] Aren't we just going backwards though, like we talked about these idealistic of a global free world where everyone can access the Internet equally? I mean, isn't this like just going back to sort of like having city states?

Phillip: [00:40:28] We're done with globalism. We don't want that anymore.

Brian: [00:40:30] So no more globalism. Global globalism is dead.

Phillip: [00:40:34] It's been dead for years. We're all just now walking out the future. So let's get to the fun stuff. Sorry, didn't mean to elucidate there. I was going to ask you a question and I decided to just get on a soapbox. Robert, when you're thinking about the ways that content creators and eCommerce are having this interesting intersection in the way that they're aggregating audiences and then driving them to products, Mr. Beast is the greatest example that comes to mind. We teased it in the beginning of the show. Brian almost front loaded it. Brian, you got to back load this stuff. When we think about how someone like Mr. Beast has a ton of influence, has an owned audience, and is now driving them to products: Feastables, Mr. Beast Burger. There are things to buy, not just swag. He has actual businesses and products to be able to support his audience. And connecting the dots between those two things seems to be a pretty tough needle to thread. I think that that probably gets pretty fraught. What are the kinds of things that he has to worry about as he builds out this universe of content and how these things all interconnect and what are ways that he may be missing the mark today as he's building out his content and how he's relating that back to the products that he wants people to buy in the end?

Robert: [00:41:50] I have to admit I haven't paid super close attention to all of his activity and how he's promoting his different ventures and so forth. Certainly, he needs to be mindful of the things that we spoke about at the beginning, like making sure that his audience understands when he's creating commercial content that promotes either one of his own businesses or if he has some sort of sponsorship arrangement or something like that. Having your name in the product is a smart idea. I don't know if it was intentional or not. You don't always need a disclosure. It's like Mr. Beast's pizza or whatever. It's pretty obvious that he owns that. He probably doesn't need to make a disclosure every time he talks about that because his name is business. But if he called it something else that has no connection to him, then he would probably need to be more mindful about that when he talks about it, because it might not be immediately obvious to his audience. The recent thing that I commented on had to do with his Instagram giveaway and giveaways and sweepstakes are an area that it's not as complex to understand as something thing like data privacy. But there are rules about it on the various platforms and federal laws, and every state has some form of sweepstakes law that you need to pay attention to so that either you're not running a lottery, which is a crime in every state, or you're not violating some part of the business code that can subject you to a class action or some kind of enforcement. We can talk about how that comes up in eCommerce. But what Mr. Beast, I noticed as probably anybody did who was on Instagram in the last week, that people were sharing his post as a way to enter into his giveaway. And I've looked at and used other creator examples to sort of bring awareness to one, the fact that there are rules and what those rules are. David Dobrik typically does a pretty good job when he runs his giveaways. He gives away Teslas, it seems like a couple times a year. What he's always done, as far as I know is it's in connection with some brand sponsorship. Like the most recent, the one that's going on right now, if you download some app that he's partnered with, that's one way to enter. And when you partner with brands, sophisticated ones especially, they'll do the legwork of coming up with the official rules and telling you what you have to post and do the registration and the bonding and stuff like that. Mr. Beast apparently was just giving away $50,000 of his own money. There was no brand affiliation. So I suspect that's why he omitted official rules and the other sorts of technical stuff that you have to comply with. And so I tweeted about that and I said, look, this is where I think you missed the mark in terms of what Instagram requires and what these state laws require. And here's why. And here's the potential penalties if he were to do that. The intention was a lot of people look at huge creators as an example, and a lot of the comments I got were... The ones that weren't just accusing me of trying to cancel Mr. Beast, who I do not have strong opinions about either way. I don't pay that much attention to what he's doing. But some of them were saying, "Well, surely he has lawyers. You think that you know the law better than his team?" It's like, no, don't think that I know anything better than any other lawyer that he may or may not have. But I do know that in this situation, he didn't do what you're supposed to do, and others who might emulate him put themselves at more risk than somebody with such star power like Mr. Beast might have. He's probably not ever going to have his Instagram deleted unless he goes completely off the rails. But you might. Like you might get suspended. And so it's a mistake to think that you can just make a post about a giveaway and there are no potential consequences. There have been lawsuits about sweepstakes not being run properly. There have been government actions. People have gone to jail for running lotteries. It's real. And that was the point I was trying to make in the post.

Phillip: [00:46:15] If I could elucidate a little bit and then Brian, I'll give you the final word. I have a pet theory. Pet theories don't fly with lawyers generally. So, you know, take this for what it's worth, Robert. But it's really difficult to exist in this economy and to keep pace with inflation. You have to continue to grow your income. And we all want to do better. I love the free American free enterprise system. I love this country. I love capitalism. Yay, capitalism. But you kind of need multiple streams of income just to live a middle class life in 2023. And it becomes the channel of choice, especially with social media and especially with platforms like Shopify, it is incredibly easy to start and launch your own business in order to solve that problem. And the issue that I have with the way that the ecosystem is at the moment is it becomes a requirement for us to participate in eCommerce in order for us to live and thrive. We all must manufacture another stream of income. And these are the ones that are available to us that don't require us to have to go buy a physical storefront somewhere. And so because it's the channel de jour or it's the de facto, it's the default, I feel like that requires and creates this... Yeah. It's incumbent on all of us as needtrapreneurs. Like we have to now participate in this way that now we have this level of expectation of understanding the rules of the road that I don't think anyone, any normal person has. So Mr. Beast, notwithstanding, the influencer or the creator economy is kind of everyone's responsibility now. We all have to participate within it, whether we like it or not. And that's what's so challenging about this conversation is it's like, how do you realistically have a thriving enterprise or a business with these kinds of encumbrances? I mean, state laws. Great. Sweepstakes, maybe just don't run a lottery. But we tend to emulate our heroes and our icons, and these are the ones that we have in front of us at the moment.

Brian: [00:48:47] Well, I think so this actually leads really well into what I was about to say, which is as consumer and business blends, which is what you just said, Phillip, it's really interesting to me that business protection is being de-emphasized because people actually kind of are becoming businesses. And actually, Mr. Beast giving $50,000 of his personal money away is it's actually kind of in line with this idea that people are businesses. It's actually his business model. He just implemented it from his personal account instead of his brand account like it or whatever the situation is. Whether or not that's a situation, it's highly conceivable that it would be. Okay, let's layer on another side of this, which is [00:49:40] we're talking about influencers, we're talking about getting attention for products, whether it be Shopify or getting attention for things that you do. That naturally lends itself to pushing legal boundaries. Because as you go to try and do something more and further that stands out, of course, the top influencers are pushing legal boundaries. That's probably how they got there in the first place. And so we talk about emulation and liability. I do wonder how is this merging of personal and business, consumer and business, and the proliferation of attention-driven brands going to result in some larger situation down the road where protections or businesses discourage. [00:50:42] I don't know there's going to feel like we're heading towards something right now and it's freaky.

Robert: [00:50:46] Yeah, that is a really interesting point that I don't think I've thought about in the way that you described. The dichotomy between the consumer and the business is not always an option, not that clear-cut. And I agree with you that there is a tremendous amount of pressure. Even if you weren't somebody who would ever consider themselves an entrepreneur. If you're just on social media, you will be served with ads from the guy in your face in front of the Ferraris telling you how to get rich and just give me money and then you'll make money and that sort of thing. And some of those are very persuasive. I think we're all probably jaded to it, but there is a lot more. The idea that you should own your own business and not that that's an exceptional thing to do is incessant now. And it just really didn't feel that way when I was in school. The business owner was not a path that most of my friends and peers were considering. It's like you go into a career and you get a job that pays you, and business ownership is like some other thing that very few people do. I think that if we're being charitable to the FTC for a minute, I think that the flip side of encouraging people to strike it out on their own and develop another stream of income online is that it is an area that is ripe for fraud and taking advantage of less sophisticated people. And that's easier to do than it's ever been. Yes, it's easier to start a business and develop those additional income streams than it ever has. It's also necessarily then easier to rip people off and do that in a way that really does harm people beyond like, "Oh, you didn't put it in official rules in your sweepstakes." I don't care that much about that. That's not something that I would lobby about. But you read like, for example, when the Celsius trading platform got into trouble as part of their bankruptcy, they solicited statements from people who have had their life savings depleted. And it's honestly hard to read through some of those because regular people were duped into thinking that this was something safe. The people in charge knew it wasn't. And they've ruined a lot of people's lives. And other scams like that are very easy to do. So I don't have like a nice way to put a bow on this other than [00:53:14] there is tension mounting between all the ways that people feel pressured to make money online just to make ends meet, which of course makes it much more tempting to either skirt the rules or push them past the breaking point to get that money quickly. And more and more people want to make money quickly rather than build a sustainable business or a long term brand. And we're seeing that tension play out with things like more FTC rulemaking, more lawsuits. And at the same time, there doesn't seem to be any slow in the tide of people who are pitching ways for you to make that money online and encouraging, if not overtly, at least implicitly, bending the rules a bit. [00:54:01]

Phillip: [00:54:02] Robert Freund, amazing to have you on the show. Thank you so much for coming.

Brian: [00:54:06] Thanks, Robert.

Robert: [00:54:07] Thank you. This was fun.

Phillip: [00:54:08] And thank you all for listening to Future Commerce. Hey, the future of commerce is what you make of it or what the FTC makes of it, I guess is what we heard today. But you can find more about ways that you can help to build the future of commerce and become a participator in the future of commerce. You can do that by subscribing to Future Commerce Insiders or The Senses in your inbox three times a week. Thank you for listening to this episode of Future Commerce.

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