Net Neutrality, Tech Issues Dominate FTC Confirmation Hearing

Senate Commerce Committee Chairman John Thune, R-S.D., opened the committee's Wednesday FTC confirmation hearing quipping the agency's nickname is the “Federal Technology Commission,” and much of the hearing focused on tech and telecom policy under the commission's purview. Some nominees voluntarily highlighted changes in technology as a major challenge for the agency and lawmakers sought answers on related topics, including net neutrality, data breaches and market power in the tech sector, as expected (see 1802130046). President Donald Trump nominated antitrust lawyer Joseph Simons, whom he plans to designate chairman; former Consumer Financial Protection Bureau Assistant Director Rohit Chopra; Noah Phillips, aide to Senate Minority Whip John Cornyn, R-Texas; and from Delta Air Lines Christine Wilson (see 1801250055 and 1801250066).

Thune told the nominees he wants to “move very quickly” to bring them up for Senate floor confirmation, later telling reporters he hopes to slate them for consideration at Commerce's “first available” markup. That could come “soon,” pending answers to follow-up questions from committee members, Thune said. Responses are due Feb. 20.

A full Senate vote on the four nominees likely will wait until Trump puts forward another FTC Democrat so they can “get packaged together,” and Senate Majority Leader Mitch McConnell, R-Ky., will make the final call, a Republican aide told reporters. The four nominees would give the FTC a 3-1 Republican majority, with Chopra the Democrat. Simons would replace current Democratic Commissioner Terrell McSweeny, whose term expired but who can stay.

Consumer Protection Subcommittee ranking member Richard Blumenthal, D-Conn., cautioned via a question to Simons that “the commission should consist of five commissioners, not just” the four nominees, “and that it should be bipartisan.” Blumenthal previously told us he believes a full Senate vote on the four nominees should wait until Trump names another Democrat (see 1802060039). The administration is considering Rebecca Slaughter, chief counsel to Senate Minority Leader Chuck Schumer, D-N.Y., for the slot, on Schumer's recommendation, industry lobbyists said. The White House didn't comment.

Net Neutrality

Commerce ranking member Bill Nelson, Fla., delivered the first of several rounds of Democrats' emphasis on the FTC's role on net neutrality, saying the agency “is not the agency” to enforce those policies even in the wake of the FCC's order to rescind its 2015 net neutrality rules. “Despite the amazing things the FTC does, it does not have the expertise, the resources or the authority to adopt forward looking rules to protect broadband consumers,” Nelson said. He noted his support for a planned Congressional Review Act resolution of disapproval that would repeal the FCC rescission (see 1712110050 and 1712120037).

Blumenthal and Sen. Ed Markey, D-Mass., leading work on the Senate CRA, emphasized their view that the FTC lacks rulemaking authority on net neutrality. The 9th Circuit U.S. Court of Appeals 2016 in FTC v. AT&T Mobility (see 1608290032) “creates a major gap” in the agency's net neutrality jurisdiction because of the common-carrier exemption, Blumenthal said. The 9th Circuit is reviewing en banc the three-judge panel's ruling, but until a ruling happens, the FTC “may face an unlevel playing field where some major market participants are exempt from the commission's authority, while others are subject to it,” Chopra said.

Simons dismissed skepticism about the FTC's net neutrality role, saying if the agency “gets back its authority" in the internet space, it's going to be a vigorous enforcer. "We're going to take the statutory authority that we have and use it as best we can,” he said, saying he hesitated without consulting agency lawyers to give a definitive answer on the extent of the FTC's current authority to go after ISPs for blocking, throttling and paid prioritization. “It would be a great idea if we got rid of the common-carrier exemption from the FTC Act entirely,” Simons said. Chopra and the other nominees also supported that.

Tech Concerns

The FTC should consider gaining the authority to levy civil penalties against companies after data breaches, Simons testified, worried the regulator doesn’t have the capacity to incentivize companies to take proper care of consumer data. Last year’s Equifax data breach was widely discussed. Chopra called it a “wake-up call” about the patchwork of state laws. Sen. Maria Cantwell, D-Wash., a Freedom from Equifax Exploitation Act (S-1816) co-sponsor, asked witnesses if guidelines should be more rigorous for companies to quickly report intrusions. Chopra said that in general several weeks doesn't sound “fast enough.”

All four told Sen. Catherine Cortez Masto, D-Nev., data thefts are the most contentious and difficult consumer protection issue before the FTC. “They are becoming much more significant, much more frequent, and I think that’s a real, real concern for us,” Simons said.

Competition in the U.S. tech sector was addressed at length. Sen. Ted Cruz, R-Texas, noted Facebook and Google have a combined market value of $1.3 trillion, more than the world’s top five advertising agencies, top five media companies and top five communications companies combined. Thune said some argue big tech should be subject to more antitrust scrutiny and that the applicable law should require a more nuanced analysis, not based on size alone. Simons said “big” does not always mean bad. Sometimes it's good or both good and bad, he said. Often companies become big because they're successful with consumers, but "companies that are already big and influential can sometimes use inappropriate means, anti-competitive means, to get big or stay big, and if that’s the case we should be vigorously enforcing antitrust laws and attacking their conduct and prohibiting it.”

Sens. Shelley Moore Capito, R-W.Va., and Jon Tester, D-Mont., highlighted concerns about FTC Do Not Call list efficacy amid shifting robocall and telemarketing practices. “Technology has now outpaced” the list, Wilson said: “We need to find a technological solution and significant enforcement” on robocalls to address gaps. The FTC and FCC are “having conversations and working” on a technological solution, Simons said. “There's no question that this needs to be a priority for us,” Phillips said. The FTC needs to look at robocalls and other telemarketing issues “not as an inconvenience but as a real harm to many,” Chopra said.

Simons and the others touted their commitment to ensure the FTC continues to make decisions via a bipartisan consensus, staking out competing positions on what that consensus should be. “By vigorously policing anti-competitive conduct, and preventing anti-competitive consolidation, the commission can help ensure that firms compete on the merits, providing better products and services to consumers at lower prices,” Simons said. “The free market is the most powerful and effective engine of social progress in human history,” Phillips said. “It works better with rules of the road and cops to enforce them.” The agency “must be careful to wield its power appropriately,” Wilson said. “The FTC must avoid trading its role as referee of our markets for one as a manager of, or a star player in, those markets.” Chopra emphasized the need for the commission to use “research, consumer and business education, and cooperation with other agencies” to complement enforcement actions.