Mandatory Disclosure Compliance Theater
Regulators mandate disclosure requirements — financial reports, privacy policies, terms of service, ingredient labels, risk warnings — believing transparency empowers informed decisions. The volume of mandatory disclosures has grown exponentially. But humans have finite attention. When everything must be disclosed, nothing is effectively communicated. Companies comply with the letter of disclosure laws while burying meaningful information in hundreds of pages of boilerplate. The disclosure regime creates an illusion of transparency that actually reduces accountability, because companies can claim they disclosed risks that no reasonable person would have found or understood.
What people believe
“Mandatory disclosure requirements increase transparency and accountability.”
| Metric | Before | After | Delta |
|---|---|---|---|
| Disclosure readership rate | Expected: high | Actual: <1% | -99% |
| Average privacy policy length | 1,000 words (2000) | 4,000+ words (2024) | +300% |
| Compliance cost for companies | Minimal | $2-10M/year for large firms | Significant |
| Consumer understanding of disclosed risks | Expected: informed | Actual: near-zero | No improvement |
Don't If
- •You believe adding more disclosure requirements will improve consumer understanding
- •Your disclosure is written by lawyers for legal protection rather than for reader comprehension
If You Must
- 1.Mandate standardized, machine-readable disclosure formats
- 2.Require plain-language summaries with readability score requirements
- 3.Cap disclosure length and require the most material risks upfront
Alternatives
- Standardized labels — Nutrition-facts-style labels for financial products and privacy
- Default protections — Protect consumers by default rather than requiring them to read disclosures
- Fiduciary duties — Require companies to act in customer interest, not just disclose risks
This analysis is wrong if:
- Consumers regularly read and understand mandatory disclosures before making decisions
- Increased disclosure requirements correlate with improved consumer outcomes
- Companies do not use disclosure compliance as a legal shield against accountability
- 1.Omri Ben-Shahar: More Than You Wanted to Know (book)
Comprehensive analysis of mandatory disclosure failure
- 2.Carnegie Mellon: Privacy Policy Research
Reading all privacy policies would take 76 work days per year
- 3.SEC: Disclosure Effectiveness Review
SEC's own assessment of disclosure regime limitations
This is a mirror — it shows what's already true.
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