TR Daily FTC Resources, Authority, Partisanship Debated During House Hearing
Thursday, July 29, 2021

FTC Resources, Authority, Partisanship Debated During House Hearing

During a hearing yesterday that combined Federal Trade Commission oversight with discussion of 16 bills aimed at modernizing the agency, Rep. Jan Schakowsky (D., Ill.), chair of the House Energy and Commerce Committee’s consumer protection and commerce subcommittee, emphasized the need to provide the FTC both with more resources—that is, funding for staff—and stronger enforcement tools.

Subcommittee ranking member Gus Bilirakis (R., Fla.) emphasized his hopes that the FTC can help address the problem of ransomware, noting that his Reporting Attacks from Nations Selected for Oversight and Monitoring Web Attacks and Ransomware from Enemies (RANSOME) Act (HR 4551) would require the FTC to report periodically on its use of its authority to address the issue by using its authority under the US SAFE WEB Act to work with foreign enforcement officials. It would also require the FTC to report to Congress periodically on complaints regarding ransomware and cyberattacks stemming from foreign actors from Russia, China, Iran, and North Korea.

He also said that he is concerned about reports that "individuals within the FTC are being silenced" and that Republican commissioners are not being consulted or informed on upcoming actions. He announced an email address for FTC staff that wish to make "whistleblower" reports: [email protected]

Full Commerce Committee Chairman Frank Pallone Jr. (D., N.J.) said that it is "time to bring the FTC into the modern era" by, among other things, granting it civil penalty authority and ending exemptions from its FTC Act enforcement authority for nonprofits and telecommunications common carriers. However, he said he was concerned by some legislative proposals that would "burden" the agency and "frustrate" exchanges of information.

Committee ranking minority member Cathy McMorris Rodgers (R., Wash.) said she was concerned about the "partisan direction" toward addressing FTC legislation, citing the failure to consider a bipartisan Bilirakis amendment on the House floor last week during its consideration of the Consumer Protection and Recovery Act (HR 2668), which would authorize the Federal Trade Commission to seek monetary relief directly from courts under section 13(b) of the FTC Act (TR Daily, July 20).

She added, "The FTC is an independent agency that should not have your agenda dictated by the White House."

During the first panel, all five FTC commissioners testified.

Recently installed Chair Lina Khan said that the loss of the agency’s ability to pursue monetary relief under section 13(b), due to a recent court ruling (TR Daily, April 22), has "jeopardized over $2 billion" in relief that the agency was pursuing in pending cases.

Republican Commissioner Noah Joshua Phillips said he favors "well-crafted 13(b) legislation with guard rails." He added that "not all of the ideas" in the competition executive order recently signed by President Biden (TR Daily, July 9) "are bad," but he warned that some of the ideas proposed for FTC action would replace the market with government rules and "it is not clear all [the proposals] are within our authority."

Among other things, the executive order encourages the FTC to limit the ability of manufacturers to restrict the ability of purchasers to use third-party repair services or to repair equipment themselves. This is an area that consumer advocates have raised with respect to mobiles devices and other consumer tech devices, although the executive order cites the example of farm equipment.

Democratic Commissioner Rohit Chopra said that the FTC has been "overly forgiving" of big firms while pursuing stronger enforcement actions against smaller firms.

He urged Congress to consider addressing the agency’s post-agency employment restrictions, which he said currently allow former FTC employees to work "behind the scenes" for companies "based on their knowledge of agency proceedings."

Commissioner Chopra also called for an examination of whether laws or regulations need to be amended to address sponsored travel by non-government interests and the consequent sharing of nonpublic information at "private panel junkets."

Democratic Commissioner and former acting FTC Chairwoman Rebecca Kelly Slaughter reiterated her preference for the term "data abuses" rather than the more limited term "privacy" to encompass a wider range of harms related to data collection and use.

She also said that the FTC should be able to write rules about conduct that is already authorized to pursue enforcement actions against because it is illegal.

Republican Commissioner Christine Wilson expressed concerns about agency process. "In recent weeks"—that is, within the short tenure of Chair Khan—"longstanding norms and practices" have been "jettisoned," she said.

Like Commissioner Phillips, she said she supports FTC authority to pursue monetary relief under section 13(b) but is concerned about the application of such authority "without guardrails."

During the question and answer part of the hearing, Chair Schakowsky asked if the FT has enough resources. Commissioner Chopra noted that the agency is "facing a massive merger surge," which would presumably require more staff for reviews and possibly enforcement.

Rep. Bilirakis noted that with Commissioner Chopra’s pending nomination to be director of the Consumer Financial Protection Bureau, the FTC could soon be split 2-2 on party lines. "Will you commit to run the FTC in a bipartisan fashion?" he asked.

Chair Khan said, "certainly," adding that it is "a fascinating moment for a new bipartisan consensus," especially on issues related to Big Tech.

He asked Chair Khan if she is planning to move agency resources away from the unit that investigates scams, and she said "not particularly," although the agency is looking into "managerial efficiency."

Chairman Pallone said that "some of the bills that Republican members are proposing today would hinder FTC enforcement on privacy and data security."

Commissioner Slaughter said she is concerned that the Statement on Unfairness Reinforcement and Emphasis (SURE) Act (HR 2702) might enable companies to argue that a business practice related to a free service can never be unfair. The bill would require a practice to be likely to cause substantial harm not reasonably avoided before it could be deemed unfair.

She also said that she was worried that any reporting requirement imposed without providing additional resources would cut into the agency’s ability to pursue its other missions.

Rep. McMorris Rodgers asked Chair Khan for a commitment to sharing information from investigations with other commissioners, including the Republican commissioners.

Ms. Khan said, "Absolutely," adding that agency staff "is routinely available to provide analysis" to commissioners.

Rep. McMorris Rodgers said, "You’re the chair. You set the tone. It appears that there’s an effort to consolidate power and decision making in your hands. That’s not the way it has worked in the past."

Rep. Brett Guthrie (R., Ky.) asked for support for his Federal Trade Commission Transparency Act (HR 4564), which would require the FTC to publish items 30 days before a vote.

Chair Khan said, "I want to make sure that it isn’t conflicting with other statutes." However, she added, "the general idea of providing notice is a good one," a sentiment echoed by Mr. Chopra.

Rep. Bobby Rush (D., Ill.) said that he is "currently drafting legislation to address access to repair devices and equipment."

Chair Khan agreed that undue restrictions on repairs are a problem.

Rep. Debbie Dingell (D., Mich.) asked Mr. Chopra whether, as a member of the minority party under Republican leadership, he was denied access to information at the agency.

"Routinely," Commissioner Chopra said.

Rep. Dingell suggested that the eight-year cap on consent decrees, subject to FTC demonstration of continued need for the decree after five years, as proposed in Rep. Michael Burgess (R., Texas) in the Technological Innovation through Modernizing Enforcement (TIME) Act (HR 2677), would "insulate bad actors from having to pay fines."

During a second panel with witnesses from outside the agency, David Vladeck, a Georgetown University Law Center professor and former director of the FTC’s Bureau of Consumer Protection, called it "imperative" that Congress restore the agency’s rulemaking authority so it can "set clear and specific rules" regarding unfair and deceptive acts.

"This should not be a heavy lift," Mr. Vladeck said. "Virtually every other agency has this power."

Restoring that authority "would provide the certainty the business community claims it wants and enable the FTC to develop binding, enforceable norms that will both deter violations and permit efficient and effective enforcement," he said.

In addition, Mr. Vladeck said, the FTC would, "no longer have to rely on the archaic and resource-wasting enforcement regime that exists today," which results in the FTC bringing "cookie-cutter cases" aimed at "shutting down one scam and moving onto the next essentially identical scam."

Mr. Vladeck pointed to the FTC promulgating rules under the Telemarketing and Consumer Fraud and Abuse Act to "chase out all of the bad actors" engaged in debt relief scams as an example of how the agency could effectively use broader rulemaking authority.

"The FTC could replicate this success many times over and make enforcement so much more efficient," he said.

Mr. Vladeck also rejected as an "old canard" the argument the FTC should not regain its rulemaking authority because it might abuse it.

"Of course, that could be said of any agency," he said. "And here, there are strong safeguards in place to guard against that."

Mr. Vladeck also said Congress should give the FTC jurisdiction over consumer protection against actions by common carrier telecommunications companies.

"The line between common carriage and other telecommunications services has been obliterated and consumers face real risks of things like bill cramming, throttling of service, false claims about Internet speed, and other unfair and deceptive acts by common carriers," he said. "There’s nothing that the [FCC] can do to keep consumers safe in this space."

Graham Dufault, senior director-public policy of the app association ACT, said legislative action to expand the FTC’s enforcement and regulatory capabilities to "punish and deter consumer protection harms" should be "tied to clearly defined privacy and data security requirements."

Congress should also establish "guardrails in order to avoid 180-degree shifts from administration to administration and to ensure the agency carries out Congress’ intent," he said.

Measures that would "clarify the contours of the FTC’s authority" should be "coupled with more authority and better enforcement tools for the FTC to pursue privacy and data security harms with direction from Congress," Mr. Dufault said.

ACT also supports legislation that would establish various FTC reporting and transparency requirements, he said.

"The Consumer Equity Protection Act would help ensure the commission develops a meaningful record on harmful activities targeting protected characteristics, like sexual orientation, race, disability and others," Mr. Dufault said. "The FTC reports would also give the subcommittee a better sense of the commission’s plans and would help the commission make informed decisions on how to prioritize enforcement actions against schemes targeting older Americans."

Mr. Dufault also spoke in favor of enacting national privacy rules in order to give businesses certainty and consistency and enable them to avoid having to comply with varying state rules.

National Consumers League (NCL) Executive Director Sally Greenberg said the group supports many of the FTC reform bills under consideration that would "give the agency what it needs most," namely rulemaking authority and more resources.

"Faced with an onslaught of fraud and misinformation threats, consumers need a nimble FTC that can address new industry abuses and hold wrongdoers accountable," Ms. Greenberg said. "If we want the threat of enforcement to truly deter criminals in the marketplace, we need an FTC that can do more than simply try to recover ill-gotten gains, as important as that authority is."

NCL "strongly supports" restoring the FTC’s rulemaking authority and ensuring the agency has the ability to impose civil penalties "by eliminating burdensome regulations that can delay enforcement activity," Ms. Greenberg said.

Congress should also expand the agency’s funding, she said.

"Expecting the FTC to adequately police the technology industry with its current staff resources is akin to bringing a water gun to a thermonuclear war," Ms. Greenberg said. "The commission is being asked to consider extremely detailed regulation and enforcement in the ad tech, privacy, application store, and data privacy security spaces with what can only be described as a skeleton crew."

NCL also backs establishing a technologist office within the FTC to provide analysis that can be used to inform the agency’s ability to "rein in the tech sector’s refusal to police its own platforms," she said.

In addition, she said, the FTC needs to take more action to combat the "constant threat" of disinformation online.

"Reducing the ability of purveyors of disinformation, falsehoods, and conspiracy theories to abuse social media tools must be a pressing national priority," Ms. Greenberg said. —Lynn Stanton, [email protected], and Jeff Williams, [email protected]

MainStory: FederalNews Congress FTC MergersAntitrust

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