FTC Warned Against Devising Rules That Take 'a Problematic Path'

The FTC’s Democratic leadership set “very high” expectations for expanding the agency’s authority that aren’t in line with legal realities, Commissioner Noah Phillips said Tuesday. He spoke at the International Association of Privacy Professionals’ global privacy summit the day after Chair Lina Khan opened the conference, telling attendees the agency is considering new marketwide rules to provide clear notice and more efficient enforcement.

There’s a limit to FTC authority, particularly on unfairness and potential competition rules, said Phillips: “Just because something involves data” and the FTC’s enforcement encompasses data practices “doesn’t mean unfairness let’s us do whatever we want to any part of the economy. You see expectations being set very high, but the legal reality being somewhere different.” The FTC has floated theories of unfairness in recent months with virtually no limit, he said: There have been readings of rules and statutes that are “utterly alien” to what Congress or the agency intended. “If that’s the approach we take to rulemaking just at the start, I think you’re headed down a problematic path,” he said.

FTC staff is “focused on adapting the commission’s existing authority to address and rectify unlawful data practices,” Khan said Monday: It’s seeking to “harness” its scarce resources to “maximize impact” with a focus on companies that cause widespread harm. She noted the commission’s consideration of a rulemaking to address commercial surveillance and “lax” data security practices (see 2112150040). “As the economy continues to further digitize, marketwide rules could help provide clear notice” and create more impactful and efficient enforcement, she said: The agency needs to reassess frameworks it uses to assess unlawful conduct, she said.

Phillips welcomed the expected addition of fifth commissioner Alvaro Bedoya, who’s awaiting Senate confirmation. The upper chamber filed cloture on his nomination last week before leaving town (see 2204070057). Phillips noted he has known Bedoya for more than a decade: “He is as decent, honest, thoughtful and smart a person as you will find, and I think he’s going to be a real asset” to the FTC: “I’m really excited for Alvaro to arrive.”

Phillips expressed reservations about what tone Democrats might set when Khan regains majority. The FTC has historically been a commission with the ability to arrive at consensus and compromise through discussion, he said. Most votes taken recently have been through consensus, but the few months in which Khan had a majority didn’t “live up to that,” he said. He cited rushed process and bad communication leading to dramatic policy changes at the FTC: “I hope that that was growing pains or something to that effect, and I hope the new majority doesn’t behave like the old majority did,” he said. “And I have some cautious optimism that it won’t.”

Khan said there should be some substantive limits on data collection practices, not just procedural protections for consumers. Certain data collection practices should be banned in the first place, she said, noting federal legislation will help shift the paradigm.

An FTC privacy rulemaking is worth pursuing, given congressional inaction, Colorado Attorney General Phil Weiser (D) told us after his appearance at the summit: “It’s important to make sure it’s interoperable and harmonious with what states do.” State regulation is the “second-best world” for addressing privacy, the first being federal legislation, said Weiser during his panel. But passing federal privacy legislation is like asking when the Mets are going to win a World Series: “Maybe next year.” He told the audience to look to states for public policy innovation, not Washington. He noted a lot can be ironed out through the rulemaking process, saying he would have opposed Colorado's privacy law without the inclusion of rulemaking authority.

The latest round of Facebook hearings helped bring senators together and got them “more interested in talking,” said John Beezer, senior adviser to Senate Commerce Committee Democrats. He said there was a “real noticeable change in attitude,” with members taking less hard lines. Members are more open to different “gradations” of a private right of action and state preemption, he said: “I’m not going to say those things are resolved, but they’re substantially less of an obstacle than they used to be.”

Some Republicans conceptually don’t want to harm small businesses and the “longtime advertising engine” growing in many sectors, said Tim Kurth, chief counsel to House Commerce Committee Republicans. “An agreement could be had,” said Syd Terry, chief of staff to House Consumer Protection Subcommittee Chair Jan Schakowsky, D-Ill. He said if Schakowsky were in attendance, she would say “definitively” that Congress is “going to get it done this year. Of course, you’ve been promised that before.”

Apple CEO Tim Cook opposed legislative efforts at the federal and state levels to open up the app market (see 2202030079) and 2201190083). The regulations being discussed could undermine privacy and security, he said during his keynote. He warned against forcing Apple to allow apps on iPhone that circumvent the app store through sideloading. It would enable apps to avoid Apple’s privacy protections and track users against their will, he said. And it could allow bad actors to avoid security features, get direct contact with users and infect devices with ransomware, he said. Apple believes in competition and the good intentions of the bills’ supporters, but allowing unvetted apps onto iPhone could have profound impacts, he said.