During a hearing today before the House Appropriations financial services and general government subcommittee hearing, subcommittee Chairman Mike Quigley (D., Ill.) raised concerns that the Federal Trade Commission settled for too little in its recent privacy case against Facebook, Inc.
The $5 billion payment that Facebook agreed to is “not even one month’s revenue for the company,” he said.
Chairman Quigley noted that pending House appropriations legislation proposed a $40 million increase in FTC funding. “That is a bump of more than 10%. We’re here to determine … how the FTC can get the best bang for the buck for consumers.”
Subcommittee ranking member Tom Graves (R., Ga.) expressed concern about “SIM swapping,” or the practice of fraudulently convincing a wireless service provider to switch a subscriber’s service to a subscriber identity module (SIM) card installed in a different device, enabling the criminal to obtain personally identifiable information and access to accounts that use the victim’s cellphone number for two-factor authentication.
This type of mobile identity theft “seems to be intensifying,” Rep. Graves said, adding that Twitter, Inc., Chief Executive Jack Dorsey “suffered this himself just a few weeks ago.”
FTC Chairman Joseph Simons agreed that “this is a big problem” because it “enables fraudsters to access text messages [and] get into your bank accounts.” He noted that the FTC provides consumer education about this problem.
Democratic FTC Commissioner Rohit Chopra noted that “as two-factor authentication spreads, which is generally a good thing,” it does increase the harms a consumer could suffer as a result of fraudulent SIM swapping.
Rep. Graves apparently misunderstood Commissioner Chopra’s report, remarking that two-factor authentication doesn’t stop SIM swapping.
Chairman Simons suggested that the FTC might need to work with carriers to find ways to keep fraudsters from being able to convince them that they have the authority to request the SIM swap.
Rep. Graves also raised concerns about geolocation data from mobile phones and apps being sold to third parties.
Rep. Matt Cartwright (D., Pa.) asked about the FTC majority’s decision to settle with Facebook rather than litigate the case, which involved alleged violations of a 2012 consent order that settled a previous FTC investigation into alleged privacy violations by the company. “I never met a judge who sat still for the intentional violation of court orders,” he noted.
Chairman Simons said, “Going to court may have been cathartic for some people, but it would have taken time, and they wouldn’t have been under the more stringent order” while the case was litigated. He added, “We talked to a lot of people with experience [in this type of litigation] and the consensus was that you wouldn’t get [a court award] even remotely close to the settlement.”
Commissioner Chopra said, “I don’t agree that it’s about catharsis or anything emotional.”
Rep. Graves asked about the decision of the Justice Department’s support for Qualcomm in the FTC’s case.
Chairman Simons, who noted he was recused from the Qualcomm case, said, “I don’t think anyone at the FTC was happy with their intervention. It was highly unusual.” He added that “the only other time I’m aware of that happening was in one of our pay-to-play cases.”
Both Chairman Simons and Commissioner Chopra opposed the idea of protecting large incumbents so that they can act as “national champions” against Chinese firms favored as “national champions” by the Chinese government. —Lynn Stanton, [email protected]
MainStory: FederalNews Congress FTC MergersAntitrust
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