As I highlighted a few months ago, FTC is hard at work updating 30-year old rules on testimonials for the age when anyone is a publisher: "FTC Guidelines for Endorsements Could Shake Up Social Media Marketing".

They made headlines again last week touting the need for regulation: "FTC plans to monitor blogs for claims, payments". Now with the agency's direction being less of a surpirse we are starting to see more coverage and real discussion of if and how such regulations may or may not work.

A government agency regulating an industry? What could go wrong?

While most regulations are written by people who honestly believe they are doing it for the benefit of the public, in practice that is often not the case. I have full faith in the ability of government agencies at all levels to produce rules that fail to achieve stated purpose and instead create unintended consequences, while advancing hidden agendas. The most questionable is FTC's conviction that thousands or obscure (oftentimes anonymous) bloggers could be held to the same standard of disclosure as "professional" journalists. CNET story highlights:

This would, for the first time, bring bloggers under FTC guidelines that ban deceptive or unfair business practices.

"New guidelines, expected to be approved late this summer with possible modifications, would clarify that the agency can go after bloggers--as well as the companies that compensate them--for any false claims or failure to disclose conflicts of interest," the article explained.

The rules could be quite strict, even extending to the practice of affiliate links--for example, a music blogger who links to a song on Amazon MP3 or iTunes that earns an affiliate commission in the process.

The practice of free products for bloggers, most of whom are not bound by ethical guidelines that journalists have historically followed, has been making headlines for some time now. Microsoft, for example, created a wave of bad press a few years ago when it gave free Acer laptops preloaded with Windows Vista to several dozen bloggers.

You have to hand it to Valleywag for their skill in exposing they hypocrisy of FTC's singling out bloggers, while being lax with enforcing existing conflicts of interest in traditional media: "Feds to Hound Blogs for Acting Like Magazines". Valleywag makes FTC look as wrongheaded as banking regulators:

"Journalists who work for newspapers and broadcasters are held accountable by their employers... The blogosphere is quite different."

Except not really. The New York Times, for example, "for years... accepted free cellphone service, satellite TV service, music-download service, whatever," columnist David Pogue wrote in 2006 (the paper only changed this practice in the wake of a a controversy around Pogue's free use of a $2,000 data-recovery service). Over at Hearst's Esquire, restaurant reviewer John Mariani often eats for free, which is nothing compared to the free travel and resort stays other print writers accept.

At fashion-heavy magazines like those run by Condé Nast, free schwag helps make up for lackluster pay, a practice that became more widely known with the Vogue roman-à-clef Devil Wears Prada, in which an assistant's raid on the magazine clothes closet is a key plot point.

If the FTC is truly interested in protecting consumers, it will start its anti-shilling campaign with the media that accept the biggest gifts, make the most money and reach the most people. For the moment, at least, that means traditional media.

Could FTC officials be more interested in gaining cheap fame for "groundbreaking" new rules instead of properly doing the job they already have, however mundane and unsexy it might be? FTC has a burden of proof to show that it is not singling out smallest of the small online outlets, letting the big ones get away with murder.

How do you define an "online publication" these days anyway?

There used to be a clear definition of what is media, what is editorial and what is advertising. But with media fragmentation the lines keep blurring. If I am tweeting party pictures from my iPhone to my online friends and praising the drinks I am getting for free, am I in violation of FTC's guidelines? If you read the letter of the rules they are writing then YES. If you apply a modicum of common sense you have to call this absurd. Will FTC hold us liable for conversations in a coffee shop?

I hope FTC will not disproportionately target social vs. traditional media. Otherwise, they will appear tainted and lose all credibility.