Comment by glaucon
6 days ago
Thanks for the analysis.
Gotta laugh at the threshold being USD100M costs to the affected businesses without the law taking into account how much the annual costs to consumers are, assuming the continuation of the practices.
Why is that laughable? Congress decided that all rules changes need additional scrutiny if they impose large costs. After all, those costs are eventually going to be passed down to consumers so making overly–complicated rules just ends up hurting consumers. And there has to be _some_ threshold number; they couldn’t just leave that one undefined or nobody would ever bother with the extra steps.
What makes me laugh (sardonically) is that I would have hoped that, as well as considering what the costs are to the suppliers, the law might also have taken into account the size of the injury being suffered by consumers. And that if that injury was large enough then that problem should override concern the cost to the companies that have chosen to use sharp practices in maintaining their revenue flow.
Maybe you saw something in the quoted text that I didn't but I understood the USD100M to mean the costs that would arise due to companies who are currently utilising these practices stopping those practices. There's not an ongoing cost to those companies unless you call the deprivation to them of the revenue they shouldn't be receiving because their customers no longer wish to buy the service a cost.
> After all, those costs are eventually going to be passed down to consumers
And when they are the consumers will be able to stop buying off those companies, well, I mean, as long as they can cancel their subscription.
> Maybe you saw something in the quoted text that I didn't but I understood the USD100M to mean the costs that would arise due to companies who are currently utilising these practices stopping those practices.
No, Congress put in the hundred million rule to protect honest companies from overly–complicated rules meant to weed out the dishonest. The analysis is intended to force the FTC to consider alternative rules and pick the simplest one that will work.
As you point out, the dishonest companies aren’t going to bother following the rules, so new rules don’t impose any costs on them. Even Congresscritters can understand that.
> I would have hoped that, as well as considering what the costs are to the suppliers, the law might also have taken into account the size of the injury being suffered by consumers…
Yea, there’s an argument to be made in favor of that. You could contact your local Congresscritter and ask them to propose an amendment, but I would first consult the Congressional record to read up on the debate at the time the law was passed. I am sure something like this would have been proposed, and it might be useful to know why the law ended up the way it is. It might just have been simpler to get everyone to agree to a number than to a formula. Eliminating unnecessary complexity is the point, after all. I think this section was last amended in 1980, but I might be wrong…
> After all, those costs are eventually going to be passed down to consumers
No they aren't. The ease with which you can continue to charge consumers without providing value to them directly affects the total amount of those charges (also, profits is a variable)
Suppose I am selling magazine subscriptions. I basically already follow all of the FTC’s new rules, because I’m not trying to cheat. But the new rules are pages and pages of amendments to pages and pages of existing rules. Those rules are complicated and detailed. How can I be _sure_ that _all_ of my marketing materials are compliant with these new rules, which detail exactly what information I must disclose to my customers and potential customers. I have to first understand the new rules, then review all my existing marketing materials, possibly with the aid of legal advice. Maybe I have to reword some things so that I’m using exactly the language specified by the FTC. Changing a website is cheap, but what about my printed materials? I’ve got 6 editions in various stages of completion for each of my dozen different brands.
Those costs are definitely going to be passed along to the consumer in some form or another. Fewer sales, fewer discounts, higher subscription prices, higher advertising prices, thinner magazines, it doesn’t matter. It all flows down to the consumers in the end. I don’t see how you can argue that these costs _can’t_ be passed down to the consumers.
And it’s definitely going to cost more than $1,000. The FTC estimates that there are over a hundred thousands entities offering subscriptions of some kind to customers in the US. 100,000 × $1,000 = $100,000,000. That’s the threshold beyond which rules changes need additional review.
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