Stark Lines Drawn at FTC Hearing

Photo by Pawel Czerwinski on Unsplash

Subscribe to my newsletter, The Wavelength, if you want the content on my blog delivered to your inbox four times a week before it’s posted here.

The House Energy and Commerce Committee heard from all five Federal Trade Commission (FTC) members and other experts on how the FTC should be reformed to meet the demands of the 21st Century. Democratic Members focused on expanding the FTC’s authority in ways appropriate to the digital era and their messaging emphasized the agency’s inadequate resources and authority. Republican messaging stressed how Democrats have shut them out of the policymaking process and how the FTC under new Chair Lina Khan has turned away from a collegial, collaborative approach. Republicans also hit repeatedly on the need for privacy legislation, a push coming from minority stakeholders in both chambers. Yet, Republicans do not seem willing to budge on a private right of action and state preemption, the two major sticking points in talks. Democrats were sanguine in responding to Republicans, noting ongoing talks. Interestingly, this new emphasis superseded the recent Republican focus on the harm online platforms are doing to children even though the FTC is the federal agency that enforces the “Children’s Online Privacy Protection Act” (COPPA).

Before the hearing the Consumer Protection and Commerce Subcommittee provided a briefing memorandum that summarized the various measures used as a starting point for discussions about how to reform the agency:

  • The “Online Consumer Protection Act,” (H.R.3067) introduced by Subcommittee on Consumer Protection and Commerce Chair Schakowsky (D-IL) and Rep. Castor (D-FL), would require social media platforms and online marketplaces to establish, maintain, and disclose written terms of service and create consumer protection programs to ensure compliance with applicable consumer protection laws. The bill requires implementation through rulemaking under the Administrative Procedure Act (APA) and provides for enforcement by the FTC and state attorneys general and allows them to seek civil penalties. It also allows for individuals to sue when harmed by violations of the Online Consumer Protection Act and invalidates forced arbitration agreements. The bill also expressly states that section 230 of the Communications Decency Act (section 230) does not limit liability with respect to violations of the bill. Furthermore, the bill would amend section 230 to clarify that it does not apply to FTC enforcement actions.
  • The “21st Century FTC Act,” (H.R.4447) introduced by Rep. Castor, would provide the FTC with rulemaking authority under the APA and the authority to obtain civil penalties for initial violations of section 5 of the FTC Act with regard to unfair or deceptive acts or practices.
  • The “FTC Autonomy Act,” (H.R.4488) introduced by Chair Schakowsky, would provide the FTC with independent litigating authority to initiate enforcement actions seeking civil penalties without coordination with the Department of Justice.
  • A bill to amend the Federal Trade Commission Act to permit the Federal Trade Commission to enforce such Act against certain tax-exempt organizations,” (H.R. 3918) introduced by Rep. Rush (D-IL), would give the FTC authority over non-profit organizations exempt from taxation under section 501(c)(3) of the Internal Revenue Code.
  • The “Protecting Consumers in Commerce Act of 2021,” (H.R. 4475) introduced by Rep. McNerney (D-CA), would give the FTC authority over certain common carriers, including the ability to bring enforcement actions for unfair or deceptive acts or practices.
  • The “Technological Innovation through Modernizing Enforcement (TIME) Act,” (H.R. 2677) introduced by Rep. Burgess (R-TX), would place an eight- year cap on consent decrees ordered in FTC enforcement actions. The bill would also require review of all FTC consent decrees five years after the decree is entered into, unless a particular case is related to alleged fraud and the FTC determines that the decree should last longer based on consideration of the impact on technological progress and risk of future violations of the decree. FTC consent decrees are generally in place for 20 years under current practice.
  • The “Statement on Unfairness Reinforcement and Emphasis (SURE) Act,” (H.R. 2702) introduced by Rep. Mullin (R-OK), would prohibit FTC from declaring an act or practice unfair unless the act or practice is likely to cause substantial injury not reasonably avoidable by consumers and not outweighed by countervailing benefits to consumers, competition, or society generally. Under the bill, an act or practice does not cause substantial injury if the resulting harm is trivial or merely speculative. Acts or practices are not unfair unless found to be injurious in net effect, requiring the FTC consider various “costs” for consumer remedies including increased paperwork, regulatory burden, and reduced incentives to capital formation. The bill mirrors select language in FTC’s policy statement on unfairness written in 1980.
  • The “Solidifying Habitual and Institutional Explanations of Liability and Defenses (SHIELD) Act,” (H.R. 2671) introduced by Rep. Armstrong (R-ND), would prohibit FTC from basing an enforcement action on guidelines, policy statements, or other guidance rather than statutory provisions enforced by the FTC. However, the bill allows for compliance with FTC guidelines, policy statements, or other guidance to be used by companies as evidence of compliance with a statute in any FTC enforcement action.
  • The “Veterans and Servicemember Consumer Protection Act of 2021,” (H.R. 4483) introduced by Reps. Rice (D-NY) and Upton (R-MI), would establish a coordinator within the FTC to prevent fraud and scams targeting or adversely affecting military veterans and servicemembers. The coordinator shall consult with other applicable federal agencies to educate military veterans and servicemembers on schemes targeting them and disseminate information for reporting such schemes to the FTC. The coordinator must also maintain a website to provide resources to military veterans and servicemembers and coordinate the FTC’s establishment of procedures to receive complaints made by military veterans and servicemembers.
  • The “Consumer Equity Protection Act,” (H.R. 4460) introduced by Rep. Kelly (D-IL), would establish a task force within the FTC to advise on equity issues and prevent unfair and deceptive acts or practices that target or affect consumers on the basis of race, color, religion, sex, national origin, sexual orientation, disability, age, or other protected characteristics. The task force is directed to consult with other applicable federal agencies to educate the public through information on and how to report schemes targeting or affecting specific consumer groups. The task force must also maintain a website to provide resources to the public and coordinate the FTC’s establishment of procedures to receive relevant complaints.
  • The “Federal Trade Commission Technologists Act of 2021,” (H.R. 4530) introduced by Rep. McNerney, would require the FTC to establish an office of technologists within 180 days after enactment that would advise the FTC on technological matters including FTC use of technology, technical aspects of enforcement, and technology policy. The bill mandates at least 25 technologists be appointed and authorizes appropriations to carry out the bill’s requirements.
  • The “FTC Robust Elderly Protections and Organizational Requirements to Track Scams (FTC REPORTS) Act,” (H.R. 2672) introduced by Rep. Bilirakis (R-FL), would require FTC to publish an annual plan for the next year of its projected activities, including policy priorities; planned rulemakings and guidance documents; planned commission or working group restructurings; planned workshops, conferences, and reports; and projected timelines for these activities. The bill would also require a separate report on enforcement actions involving elder fraud for the previous calendar year.
  • The “Revealing Economic Conclusions for Suggestions (RECS) Act,” (H.R. 2676) introduced by Rep. Bucshon (R-IN), would require the FTC’s Bureau of Economics to conduct a cost-benefit analysis for any legislative, regulatory, or enforcement recommendations, including a rationale for the FTC’s determination that private markets or public institutions could not adequately address the issue that is the subject of the recommendation.
  • The “Clarifying Legality and Enforcement Action Reasoning (CLEAR) Act,” (H.R. 2690) introduced by Rep. Guthrie (R-KY), would require FTC to submit an annual report to Congress that includes the number of investigations begun, number of investigations closed with no official action, the disposition of investigations that have resulted in official action, and for each investigation that closed without action, an explanation of the legal analysis supporting the agency’s decision to close the investigation.
  • The “Reporting Attacks from Nations Selected for Oversight and Monitoring Web Attacks and Ransomware from Enemies (RANSOME) Act,” (H.R. 4551) introduced by Rep. Bilirakis, would amend the U.S. SAFE WEB Act of 2006 (SAFE WEB Act) to require the FTC to report to Congress, on a recurring basis, on cross-border complaints received by the FTC and how it used the authorities granted by the U.S. SAFE WEB Act in response. The bill amends the existing report requirements to specifically address cross-border incidents that involve ransomware and other cyberattacks from foreign actors. The bill also requires the FTC to report to the House Energy and Commerce Committee and the Senate Commerce, Science, and Transportation Committee, on a recurring basis, on cross-border complaints on incidents, including those related to ransomeware and cyberattacks, committed by certain foreign actors from Russia, China, Iran, and North Korea. The report would also include any recommendations for legislation to advance the security of the United States and U.S. companies against ransomware and other cyberattacks as well as recommendations for best practices to mitigate against ransomware
  • The “Federal Trade Commission Transparency Act,” (H.R. 4564) introduced by Rep. Guthrie, would prevent the FTC from adopting any order, decision, report, or action by Commission vote at a Commission meeting unless the text is published on the FTC’s website 30 days before the date of vote. The bill would allow exceptions for existing non-disclosure provisions of federal law as well as emergencies and other exigent circumstances as determined by the Chair.

Subcommittee Chair Jan Schakowsky (D-IL) recited a number of standard Democratic talking points on the insufficiency of the FTC’s resources and authorities. She previewed a number of the Democratic bills before the subcommittee that would allow the agency to use the normal notice and comment rulemaking procedure, seek civil fines in the first instance, and litigate on its own behalf. Schakowsky also pointed to bills that would give the FTC more resources, establish new offices in the agency. She lauded the two open meetings and changes in policy that have occurred under new Chair Lina Khan. Schakowsky emphasized that the FTC must have new authority to police the practices of technology companies:

The era of self-regulation is over. Self-regulation has threatened our democracy and now threatens our health and our very lives as vaccine misinformation continues to spread indiscriminately across social media. Consent tools have proven ineffective at improving the behavior of technology companies. Violation after violation underscore that stronger enforcement tools are urgently needed.

Subcommittee Ranking Member Gus Bilirakis (R-FL) stressed that his focus during the hearing would be on oversight of the FTC in addition to possible legislative changes. He stated he also wanted to know how the agency will enforce existing powers to seek out and punish scammers and fraudsters as well as a national privacy statute. Bilirakis expressed an interest in how the FTC can help prevent ransomware and other cyber attacks. He articulated his concerns that Khan’s leadership of the FTC is endangering the agency’s collegial atmosphere, especially individuals inside the agency being silenced or Commissioners being shut out of the process. Bilirakis stressed that the FTC’s procedures and process must remain open and transparent. He announced the minority side of the subcommittee will be opening a process to hear complaints from FTC staff on this point. He summarized some of the Republican bills before the subcommittee as seeking to ensure “guardrails” are part of the FTC’s decision making process. Bilirakis emphasized that Republicans support giving the FTC the authority to punish bad actors and help consumers (a reference to the recent Supreme Court decision striking down the FTC’s customary usage of its Section 13(b) powers and the bill that passed the House on largely Democratic votes: the “Consumer Protection and Recovery Act” (H.R.2668)). He added that he hopes Democrats will engage in earnest in enacting a national privacy standard.

Chair Frank Pallone Jr. (D-NJ) traced the history of Congress adding and adjusting the FTC’s authority in response to changed circumstances, often to the benefit of consumers. He asserted that the digital age demands more such adjustment. Pallone noted with approval some of the Democratic bills that would, among other things, give the agency the authority to conduct rulemakings like virtually every other federal agency and would end the exemptions of non-profit and telecommunications entities from FTC jurisdiction. He characterized Republicans bills as hamstringing the agency and its staff with needless reports and processes, ultimately to the detriment of consumers as the agency would be limited in its ability to act. Pallone welcomed Republican calls for privacy legislation but argued the bills they have put forward would gut the FTC’s ability to police privacy. (See here for his full written remarks as prepared for delivery.)

Ranking Member Cathy McMorris Rodgers (R-WA) noted the legislation on which Republicans and Democrats worked to expand the FTC’s authority to go after COVID-19 scams. She expressed concern that the subcommittee is putting politics before protecting Americans. Rodgers characterized the recent passage of H.R. 2668 as a partisan exercise that shut out Republicans that narrowly passed. She observed that Bilirakis’ amendment offered during the markup of this bill to expand the FTC’s Section 13(b) authority received bipartisan support but was shut out of the final (Rodgers appears to be referring to Bilirakis’ amendment that was defeated by a 25-28 vote that one Democrat voted for). She further claimed that Democratic attempts to clarify the intent of the bill during debate would have been clarified by Bilirakis’ “compromise.” Rodgers speculated that Bilirakis’ amendment would have been added to the floor during House consideration if it had been allowed to be offered. She added that the consideration of H.R.2668 was a missed opportunity to enact national federal privacy standards, “something we desperately need to ensure that peoples’ personal information is protected online.” Rodgers claimed that some of the bills on the subcommittee’s agenda were part of the negotiations in the last Congress on privacy legislation. She expressed her hope these bills will be part of a comprehensive privacy bill and that they do not move as standalone bills. Rodgers repeated Bilirakis’ claims about deleterious process changes at the FTC and urged the agency to listen to the complaints and concerns of experts and the public. She leveled the charge that the White House is controlling the FTC and its agenda.

In the FTC’s joint testimony, the Commissioners pointed to two recent court decisions that have limited the agency’s ability to punish bad actors and recover money stolen from Americans:

  • The Supreme Court’s decision in AMG Capital Management Inc v. FTC that has put in doubt the over $2 billion in “potential relief to victims” the FTC has pending. And, without clear authority to seek and obtain monetary relief, the agency’s directive to punish deceptive, unfair, and anticompetitive conduct will be hampered
  • A 2019 appeals court decision in FTC v. Shire ViroPharma, Inc., that “held that the language in Section 13(b) of the FTC Act describing a company that “is engaged in, or is about to engage in” illegal conduct means the FTC can initiate enforcement actions only when a violation is either ongoing or “impending” at the time the suit is filed.” The FTC asserted this ruling has also limited the agency’s power

The Commissioners continued with their collective view on how Congress can help the agency:

Restoring the FTC’s power to seek injunctions and monetary relief is critical to our work to protect Americans from unlawful business conduct. In addition, the Commission is currently facing extremely severe resource constraints. Global mergers and acquisitions have soared to new records, putting heavy stress on our ability to effectively investigate and challenge unlawful transactions. The pandemic has also led to large numbers of complaints to the FTC about marketplace abuses. The Commission believes that additional resources are necessary to help it effectively achieve its mission.

The FTC declined to discuss the specific bills on the hearing agenda and offered these general remarks:

Several of the reform bills are among those that have had longstanding bipartisan support at the Commission. For example, the FTC has long called for the repeal of the telecommunications common carrier exemption, which has impeded the FTC’s enforcement initiatives, such as tackling illegal telemarketing. Other reform bills – including legislation that would subject nonprofits to the FTC Act and in certain contexts give the Commission rulemaking and civil penalty authority – have also received broad support, although some Commissioners would support such measures in more limited ways.

Chair Lina Khan touched on the AMG ruling and the need for a restoration of Section 13(b) of the FTC Act. She added the FTC also faces an increase in fraud across the economy that is “supercharged by digital platforms where this conduct is tolerated and even promoted by some of the world’s largest companies.” Khan was obviously referring to Amazon, Google, and Facebook and pointed to their use of 47 USC 230 to fend off lawsuits based on consumer protection statutes:

Business models singularly focused on scale and engagement coupled with microtargeting have allowed these platforms to become finely tuned instruments for bad actors, who often target the most vulnerable. Although digital platforms profit off the tools that are being weaponized against Americans, these companies often claim special immunity under the law.

Khan then stated:

Third, even as the agency tackles the proliferation of unfair or deceptive practices, the current merger boom threatens to make them worse. Significant market consolidation deprives consumers, workers, and independent businesses of choice, further enabling dominant firms to engage in unfair practices. As the wave of privacy abuses in recent years has shown, market dominance often allows companies to renege on commitments, evade the law, and repeatedly violate Commission orders. We are seeing rapid consolidation across industries. Through the first three quarters of this fiscal year, antitrust agencies have processed over 2,400 merger filings—a level of activity that is already the highest in two decades. Although the FTC is working to review many of these deals, the sheer volume of transactions is significantly straining Commission resources. I am deeply concerned that the current merger boom will further exacerbate deep asymmetries of power across our economy, further enabling abuses.

In terms of the legislation before the subcommittee, Khan practiced the “if you have nothing nice to say, say nothing” rule about the Republican bills while praising some of the Democratic bills:

  • Both the FTC Autonomy Act and the 21st Century FTC Act would help the Commission seek civil penalties against lawbreakers. This would mark an important change, guaranteeing the public greater protections. Bills that would end special protections for select industries would also strengthen our law enforcement. For example, the Online Consumer Protection Act would clarify that platforms cannot claim special privileges when facing an FTC enforcement action.
  • Meanwhile, the Protecting Consumers in Commerce Act and Removing Nonprofit Exemption Act would allow the FTC to challenge abuses by common carriers and nonprofit entities.

Not surprisingly, Commissioner Noah Joshua Phillips, a Republican, echoed Bilirakis and Rodgers about process changes and asserted that changes made by Khan have resulted in less notice to and input from the staff, Commissioners, public, businesses, and other stakeholders about proposed policy changes. He lauded some of the Republican bills as providing important procedure protections and maintaining transparency. Phillips took issue with recent FTC action:

As you consider agency reforms, I urge you to consider other ways in which the agency is changing course. The first big change is the Commission pivoting, without Congress, to regulate a great deal of the economy. Over the last few years, my colleagues have called for a bevy of new rules, mostly under the authorities we have. The President’s recent executive order contemplates our issuing major regulations concerning, among other things, pharmaceuticals, technology, labor, retail, and devices. Not all of the proposals in the executive order are bad, to be clear; but much of it would replace consumer-driven market forces with government-supervised regulation, the opposite of the competition. And much of that appears to be based on authority we simply do not possess. The Commission, however, is in a hurry to regulate. On July 1st, without input from the public, we adopted rules to enable us to promulgate regulations with less objectivity, less oversight, and less public input. The Commission majority is reducing what it calls “red tape” on the Commission—to impose more real red tape on American businesses, large and small.

Phillips claimed Congress and not the FTC should set policy, most notably on privacy. He claimed the FTC is moving away from an evidence-based, empirical approach that will harm the economy, businesses, and consumers. Regarding Section 13(b), he remarked “[c]ount me among those who believe that a well-crafted amendment to Section 13(b), with guardrails, will help serve consumers.” Phillips cautioned against the FTC’s new emphasis on fighting big companies would come at the cost of the agency forgoing enforcement of illegal and fraudulent activity among smaller entities.

Commissioner Rohit Chopra asserted the COVID-19 pandemic “created the conditions for a wide range of market abuses that harmed so many Americans, including millions of small businesses.” He added that “[m]any small businesses in America didn’t just find their financial futures in peril – they also found themselves completely under siege against unfair, deceptive, and anti-competitive practices by dominant firms.”  Chopra contended:

  • Local restaurant owners were worried about food delivery apps that used coercive practices to force them into paying massive fees. Franchisees faced new onerous requirements that national franchisors were imposing on them, even as they struggled to stay afloat. Independent pharmacists, who played a critical role in the response to the pandemic, found themselves at the mercy of so-called pharmacy benefit managers using tactics that are driving many local pharmacy and clinics out of business. And the list goes on and on. It was crystal clear that small businesses across the country needed the FTC’s help, but many felt ignored.
  • Small businesses have expressed concern that the FTC gives favorable treatment to large, powerful firms, such as Big Tech and Big Pharma giants, while ignoring pleas for action to address practices harming small players. And when Big Tech companies egregiously violate our privacy and the law, the FTC has shown it is willing to be lax and forgiving. But when small businesses violate these laws, the FTC brings down the hammer on them, wiping out revenues and even shutting them down. This two-tier approach doesn’t make sense.

Chopra then discussed two issues not covered by any of the bills before the subcommittee: 1) former Commissioners and senior FTC officials working indirectly for large firms and the need to enlarge the post-FTC employment ban; and 2) the laws that allow current FTC officials to be provided flights and accommodations for private panels or conferences (i.e. sponsored travel.) He argued for a revisiting of these statutes to minimize the ways large and dominant firms can use their resources to influence and learn of FTC enforcement.

Commissioner Rebecca Kelly Slaughter reiterated the assertion she made at the FTC’s PrivacyCon that “data abuse” is a better term to describe the current collection, use, and distribution of personal data as opposed to privacy (see here for more detail and analysis.) She explained her reasoning: “[t]hinking in terms of abuses reflects the fact that rampant data collection, sharing, and exploitation harms consumers and competition in ways that affect nearly every aspect of our lives.” She further asserted:

When it comes to questions about personal data, I respectfully suggest we move past outdated notice-and-consent models that put untenable burdens on users. Instead, we should turn our focus to changing the underlying incentives that fuel data-driven business models such as behavioral advertising. One approach to consider is data minimization, a principle that would ensure companies can collect only the information necessary to provide consumers with the service on offer, and use the data they collect only to provide that service. That minimization could be coupled with further use, purpose, sharing, and security requirements to ensure that the information companies collect isn’t used to build tools or services that imperil people’s civil rights, economic opportunities, and personal autonomy, or facilitate corporate self-dealing. We have to recognize that, as long as key digital markets are controlled by just a few large, data-hungry online platforms, both consumers and prospective entrants are at their mercy.

Slaughter then addressed obliquely some of the criticisms leveled at the FTC primarily by Republicans about using its rulemaking powers to police data abuses:

A quick note about rulemaking, which I know can generate big reactions. Congress specifically delegated to the FTC the authority, albeit with a burdensome process, to write rules that prohibit or regulate any unfair or deceptive practice that is prevalent in interstate commerce. In other words, if we can already sue someone for committing an unfair or deceptive practice in violation of Section 5 of the FTC Act, and the practice is prevalent, then we can also write a rule that clarifies for the markets that the conduct is prohibited. That means rulemaking can only target conduct that is already illegal. Rules are developed using a participatory process with substantial stakeholder engagement, and, when finalized, provide notice and certainty to the markets about what conduct is outside the scope of our hundred-year-old statute. As I’ve said before, I believe it is past time for the FTC to begin a rulemaking process on data abuses; among other benefits, this process can have a clarifying effect for the Congressional debate as well.

Commissioner Christine Wilson remarked “[s]ubstantively, President Biden and his appointees may choose to pursue competition and consumer protection policies that differ from those of their predecessors…[b]ut the process used to implement those policy changes matters.” Wilson expressed her opposition to process changes at the FTC and for legislation ensuring process, procedure, and transparency are protected:

  • As a political appointee nominated by the White House and confirmed by the Senate, I am obligated to exercise due oversight of Commission business. Commission actions traditionally have been the product of robust dialogue and considerable analysis supported by thorough briefings and memoranda from our staff. Established procedures facilitate a flow of information among Commissioners and between Commissioners and our experienced staff; they permit us to engage transparently with each other and to listen carefully to stakeholders. When we adhere to these traditions and norms, I am able to fulfill my oversight function. In recent weeks, though, these traditions and norms have been jettisoned. While time does not permit me to discuss events in detail, I have memorialized my concerns elsewhere and would be happy to answer questions. For purposes of these opening remarks, I will merely observe that practitioners, academics, and former enforcers across the political spectrum have expressed concern about the agency’s abrupt departure from regular order and that I share these concerns.
  • The purpose of today’s hearing is to discuss 16 pieces of proposed legislation. Some of the bills we will discuss today seek to impose additional procedural safeguards within, and Congressional oversight over, the Commission. Particularly given the recent shift away from regular order, I support the goals of those bills. Other bills seek to vest the FTC with significant additional authority. If we could ensure that the Commission’s leadership – both now and in the future – would use this authority prudently, perhaps my view of those bills would be different. Given the FTC’s conduct in the 1970s, though, I have long been concerned about the possibility of agency overreach; recent actions by Commission leadership5 have deepened those concerns. Consequently, I fear that some of the bills would give authority to the FTC that ultimately would result in stifled competition and innovation to the detriment of American consumers, U.S. industries, and our economy.

During a second panel, Georgetown University Law Center Professor David Vladeck noted he served as the Director of the Bureau of Consumer Protection at the FTC from 2009 to 2012. He began by stating:

Let me begin by making a comment that frames my views on the proposals before the Subcommittee. The Subcommittee should evaluate each proposal by asking one question: If enacted into law, would the legislation assist or hinder the FTC in carrying out its consumer protection mission? That, in my view, is the one salient question, and only if the answer is unmistakably “yes” should the Subcommittee move the proposal forward.

Vladeck stated that “[b]ut  today  the  FTC  is  facing  multiple  challenges  that  Congress  needs  to  address…[and] [a]s I see it, the key priorities are: 

  • Restoring  the FTC’s  authority to  force  lawbreakers  to  return  money  to  scammed consumers and disgorge ill-gotten gains;   
  • Providing adequate funding and staff so the FTC, which has barely two-thirds of the personnel it had in the early 1980s, can meet the challenges of protecting consumers in today’s complex marketplace;   
  • Modernizing  the  FTC’s  enforcement  mission  by  providing  the  FTC  rulemaking authority under the Administrative Procedure Act and  jurisdiction over common carriers and non-profit organizations; and
  • Bolstering  the  technological  resources  available  to  the  FTC  and  giving the FTC broader authority to hold the platforms and social media companies accountable for deceptive acts and practices.

Regarding the legislation before the subcommittee that would help the FTC, Vladeck stated:

Eight bills propose to amend the Federal Trade Commission Act (FTC Act) in ways consistent with the Commission’s longstanding, bi-partisan approach to statutory reforms. I will discuss these proposals by category: Two of them, H.R. 4475 (Protecting Consumers in Commerce Act), and H.R. 3918, propose amendments to the Commission’s existing jurisdiction. I will address those proposals first. Next, four other bills provide the Commission with better tools to do its work: H.R. 4447 (21st Century FTC Act), H.R. 4488 (FTC Autonomy Act), H.R. 4530 (FTC Technologists Act of 2021), and H.R. 3067 (Online Consumer Protection Act). Last, but hardly least, two bills seek additional protection for certain classes of consumers: H.R. 4460 (the Consumer Equity Protection Act of 2021) proposes that the FTC ensure that protected classes are not subject to or targeted by deceptive or unfair acts or practices. And H.R. 4483 (Veterans and Servicemember Consumer Protection Act of 2021) proposes to establish a coordinator within the FTC to ensure the protection of military veterans and servicemembers. Each of these proposals has merit and should be enacted into law.

Vladeck then turned to proposals, in his view, that would weaken the agency:

Several well-intentioned proposals are pending before the Subcommittee that are aimed at relieving burdens on businesses subject to FTC investigations or consent orders. I do not support these proposals because I am concerned that they would impose substantial burdens on the FTC without clear, discernable benefits, hinder the FTC’s enforcement abilities in ways that could put consumers at risk, and inhibit the FTC’s ability to prevent lawbreakers from becoming recidivists.

Vladeck identified these bills as weakening the FTC and being contrary to the agency’s mission:

  • The “Solidifying Habitual and Institutional Explanations of Liability and Defenses (SHIELD) Act,” (H.R. 2671)
  • The “Technological Innovation through Modernizing Enforcement (TIME) Act,” (H.R. 2677)
  • The “Statement on Unfairness Reinforcement and Emphasis (SURE) Act,” (H.R. 2702)
  • The “Revealing Economic Conclusions for Suggestions (RECS) Act,” (H.R. 2676)
  • The “Revealing Economic Conclusions for Suggestions (RECS) Act,” (H.R. 2676)
  • The “Clarifying Legality and Enforcement Action Reasoning (CLEAR) Act,” (H.R. 2690)
  • The “Federal Trade Commission Transparency Act,” (H.R. 4564)

Finally, Vladeck opined that the “Reporting Attacks from Nations Selected for Oversight and Monitoring Web Attacks and Ransomware from Enemies (RANSOME) Act,” (H.R. 4551) needs fine-tuning because some the language needs clarification.

National Consumers League Executive Director Sally Greenberg argued, making clear her support of many of the Democratic bills:

Congress has given more responsibilities to the Commission but it has not expanded the FTC’s authority or given it the resources needed to robustly execute on its mission. Before us today are legislative proposals to give the Commission the teeth it needs in the fight against an ever-evolving landscape of unfair and deceptive practices. The bills the subcommittee is considering will enable the Commission to initiate rulemakings more efficiently, hold accountable businesses that engage in abusive consumer practices and better protect vulnerable communities. Congressional action is critical to the FTC’s ability to protect consumers. The Supreme Court’s recent decision in AMG Capital Management removed a key enforcement tool from the FTC’s toolbox, making it even more difficult for the Commission to fight corporate misconduct.

Greenberg also made apparent her opposition to many of the Republican bills:

What consumers do not need are new statutes that force the Commission to go through more red tape – economic analyses of each and every recommendation, periodic reviews of consent decrees, annual reports on the statuses of investigations, or heightened standards of unfairness – in order to execute on its mission. What consumers do need in the current fraud threat landscape is a robust Commission that is empowered to go after wrongdoing, not a milquetoast enforcer weighed down by its own burdensome procedural requirements.

ACT | The App Association Senior Director for Public Policy Graham Dufault explained his trade organization supports expanding the FTC’s enforcement abilities and resources but opposes antitrust and competition bills reported out of the House Judiciary Committee that would limit many of its members in protecting privacy:

We support enhancing the enforcement capabilities and resources for the FTC to stop and prevent consumer protection harms. The FTC needs sharper teeth to stop consumer harms resulting from privacy and data security lapses in particular, as those problems have proliferated and continue to generate headlines and stoke constituent outrage. We understand the intent behind these proposals, and they are emblematic of why we oppose efforts in the House Judiciary Committee to outlaw software platform (app store / operating system combination) activities designed to protect privacy. For example, the American Choice and Innovation Online Act (H.R. 3816) would prohibit actions by certain software platforms to advantage their own offerings, including by restricting access by other platform participants (including bad actors) to consumer data. Similarly, the Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act of 2021 (H.R. 3849) would require covered software platforms to enable access to consumer data by open application programming interface (API) as a default rule.

However, the ACT | The App Association’s support for enhanced FTC powers and funding stops at allowing the agency to use normal notice and comment rulemaking:

Although we appreciate the intent behind the proposals to expand the FTC’s regulatory and enforcement powers across the board, we continue to have concerns with granting the Commission general, undirected rulemaking authority to regulate privacy harms. The same concerns extend to even more general rulemaking authority to police all consumer protection harms under the FTC’s purview, as the 21st Century FTC Act (H.R. 4447) would do.

Dufault also drew the line at general authority to levy fines for first offenses:

We have similar concerns with granting the Commission broad civil penalty authority for any violation of the FTC Act. Although we support granting the Commission civil penalty authority for specific kinds of offenses, including as part of a general privacy bill, civil penalties for cases of first impression would chill innovation that has a net positive effect on consumer welfare.

Dufault also asserted:

Other proposals that would enhance the FTC’s authority raise similar concerns for our member companies, although we would support these limited expansions in some forms in the context of a general privacy bill. For example, H.R. 3918 would expand the FTC’s jurisdiction to cover non-profit entities and H.R. 4475 would expand FTC jurisdiction to cover common carriers under the Communications Act (telecommunications and wireless carriers, for example). It may make sense to clarify that the FTC has activity-based enforcement jurisdiction over these kinds of entities in a more limited context like a general privacy bill, but we would be concerned about redundantly adding breadth to the FTC’s purview generally. For Communications Act common carriers and non-profit entities, we have seen provisions in privacy bills that would place both categories into FTC jurisdiction—while carving those common carriers out of Communications Act jurisdiction—for the purposes of the privacy law and regulations promulgated under it.

In summary, Dufault seemed to signal support for federal privacy legislation that would augment the FTC’s authority but within limits and certainly not as Democrats have proposed in the bills before the subcommittee. Presumably he and the ACT | The App Association would want no private right of action and preemption of all state privacy statutes.

© Michael Kans, Michael Kans Blog and, 2019-2021. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Michael Kans, Michael Kans Blog, and with appropriate and specific direction to the original content.

Photo by Kiarash Mansouri on Unsplash

Photo by Pawel Czerwinski on Unsplash

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s