Mises Daily Articles
Consumer Protection or Legal Extortion?
On April Fool's Day of this year, New Mexico resident Mark Hershiser received a letter from Erika Wodinsky, a San Francisco attorney, demanding Hershiser turn over all revenue from Native Essence Herb Company, a small business co-owned by Hershiser and his wife Marianne. The letter was not a joke or a mistake. It was a premeditated act of extortion by Ms. Wodinsky. She had never met or spoken with Hershiser; her staff discovered Native Essence through its modest website.
Internet scams and predators are commonplace. What distinguishes Erika Wodinsky from a Nigerian banker or a pedophile is that she's the assistant director of the Federal Trade Commission's San Francisco office. Her staff spends their days trolling the Internet for small business owners, like the Hershisers, who sell herbs and herbal remedies to willing customers. The FTC routinely targets such businesses as part of its "consumer protection" mission — which in practice has nothing to do with actual consumers.
Ms. Wodinsky's demand letter said that her office had conducted a "non-public investigation" of Native Essence and determined that the company's website contained "false and/or unsubstantiated claims" that "induced" customers to buy certain herbal products. This itself was a false statement. Ms. Wodinsky and her staff never interviewed any of Native Essence's customers. Indeed, many of the website statements deemed illegal by Ms. Wodinsky offered firsthand customer testimony praising Native Essence's products and customer service.
But in "consumer protection" cases, the FTC does not have to allege or prove any actual consumer injury. Instead, midlevel bureaucrats like Ms. Wodinsky merely substitute their own judgment for that of a business's customers. Since she wouldn't buy Native Essence's products based on the company's website, neither should anyone else. Anytime an FTC official disagrees with the content of a commercial website, it logically follows that the website operator is making "false and/or unsubstantiated claims" in violation of the Federal Trade Commission Act of 1917.
Having made a unilateral determination that the Native Essence website should be censored, Ms. Wodinsky offered the Hershisers a simple choice: sign an enclosed "negotiated settlement," where she had already decided the terms, or face an FTC-controlled administrative litigation process. Of course, if they opted for litigation, Ms. Wodinsky would ask a federal judge to place Native Essence under a government receiver and freeze all of the couple's personal assets to ensure they couldn't afford to defend themselves.
The "negotiated settlement" was hardly a better option, however. Under its terms, Native Essence and the Hershisers individually would be under FTC control for the next ten years. This would mean, among other things, that all of the couple's business records — for any business they own now or in the future — would be subject to FTC search and seizure without a court order: accounting records, personnel records, customer files (including names, addresses, dollar amounts paid, and products purchased), advertisements, and promotional materials would all be under the FTC's control.
The "settlement" would also require the Hershisers and Native Essence to turn over all money earned through the sale of their products to the US Treasury. In theory, the FTC would administer refunds to "injured" customers, but since there are no injured customers, the money will simply remain in the Treasury "as disgorgement." And since the FTC didn't know how much money the Hershisers earned, detailed financial disclosure forms accompanied the proposed "settlement" for Native Essence and the Hershisers individually.
Most recipients of extortion letters from Ms. Wodinsky and other FTC regional bureaucrats simply sign the "settlement agreement" and pray for mercy. The Hershisers took the opposite approach — they filed a preemptive lawsuit against the FTC in US District Court in Albuquerque. They have asked the court to enjoin the FTC from proceeding against them, primarily on the grounds that the First Amendment protects their website from government censorship.
Ultimately, Hershiser v. FTC is about the free-speech rights of businesses and their customers. The FTC is actively preventing individuals from seeking information about products that they might find useful. If you read the feedback on one of the Hershisers' websites — posted after news of Ms. Wodinsky's extortion letter became public — you'll find dozens of satisfied customers who don't want or need the FTC's interference.
Here's a particularly eloquent explanation of what the Hershisers really do, from a customer identified as "V.M.":
I have been buying herbal products from Native Essence Herb Co. for nearly 14 years. I have engaged in extensive conversations with Native Essence Herb Co. owner, Mark Hershiser, and I have read the data on his website.
At no time has Mark, his literature, or his web site claimed anything could prevent, treat, or cure disease. Period! All information we discussed was clearly indicated to be based on research on traditional uses of herbs.
Not only is Mark's traditional information and practice NOT deceptive, it isn't even different from data that I've found from other sources when I cross reference the information. In fact, Mark has even suggested books so I could do my own research.
Mark is one of the kindest and most caring people I know. Many times he didn't even charge me for an item. He is not mercenary, but instead truly intends to help improve people's lives and the world we live in.
By providing high quality herbal products that we, as his customers, can rely on, Mark is filling a genuine need in our society. Vast amounts of traditional healing information and knowledge are being lost. Mark is helping us by researching the data, bringing it together, and offering some excellent traditional herbal products for those of us who prefer to follow tradition.
To fine or threaten to sue Native Essence Herb Co. and its owners in an effort to "redress injury to consumers" is to threaten and cause injury to those very consumers the FTC is imagining it is redressing. I will not be as well off without the web site and other data from Mark. All sources of data about traditional healing practices are available. Any threat which inhibits the free flow of information and knowledge about traditional healing practices undermines our constitutionally guaranteed freedom of speech.
In my case, it could stand in the way of following traditional health practices I have chosen to follow and which work well for my family. Mark's knowledge and information have played a major role in keeping my husband (66) and me (63) healthy through traditional knowledge and trustworthy products based on that knowledge. Neither of us are on any prescription drugs nor do we have any major internal diseases.
Mark has never prescribed any of his products for us. The choice is completely mine based on traditional knowledge and contemporary research which I get through, among others, Dr. Andrew Weil, head of the Program of Integrated Medicine at the University of Arizona.
The FTC's ideological position is that any information about herbs and herbal remedies must be censored through the federal government — preferably the FTC. In other words, the government alone will decide what information consumers are allowed to consider. Any information published without state permission is inherently "deceptive" and illegal.
Some libertarians use the phrase "Nanny State" to describe this sort of government intervention. But "nanny" implies an overprotective caretaker who nonetheless has the child's best interests at heart. People like Erika Wodinsky are more akin to abusive, alcoholic parents who beat their spouses and children to enforce strict obedience. Indeed, Ms. Wodinsky's rage seems more directed at Native Essence's customers — how dare they discuss and purchase herbal remedies without my permission — than at the Hershisers themselves.
Hopefully, Mark and Marianne Hershiser's stand against the FTC's abuse will encourage other victims to stand up and be heard. The public rarely hears about the FTC's extortion until after the "settlements" have been signed and approved by FTC leadership. It's too early to know if the Hershisers' First Amendment lawsuit will succeed, but one thing is almost guaranteed: the FTC will fight this case tooth and nail; after all, the power of people like Erika Wodinsky to violate the privacy, property, and due-process rights of all Americans could hang in the balance.