Privacy Interests See Impending Legal Challenge for FTC Rule

The FTC’s authority will be challenged if it issues a privacy rulemaking, former agency and industry officials said Wednesday, a day before the FTC is set to host a public forum on its rulemaking effort (see 2208110068).

“The FTC’s legal authority ... is doubtlessly going to be litigated,” said Chamber of Progress CEO Adam Kovacevich, a former employee of Google and the Information Technology Industry Council. Expect right-wing groups to focus on the FTC’s lack of authority over data collection practices in its Advanced NPRM, he said. The ANPR is a “document at war with itself,” he said, arguing the questionnaire shows the agency believes it might already have the answers it's seeking from the public. “The best way forward for the Democratic majority is to build political support for rules,” he said, casting doubt Republican commissioners will support the agency’s next major document, an NPRM.

“First principles” need to be kept in mind when deciding how far the agency’s authority goes, said Svetlana Gans, an attorney with Gibson, Dunn & Crutcher who spent eight years with the FTC and is said to be in the running to replace Commissioner Noah Phillips (see 2208170039). It seems the agency is asking the public to provide examples of unfair and deceptive practices instead of looking to case law, agency orders and enforcement, said Gans: “I’m not sure that’s the proper frame of reference for this FTC rulemaking.”

It’s a “good idea” to pursue privacy rules, said Consumer Reports Technology Policy Director Justin Brookman, a former FTC Office of Technology Research and Investigation staffer. The House Commerce Committee’s bipartisan privacy bill is more than a hundred pages long, but FTC Act Section 5 is only a paragraph, so clearer rules would help the agency strengthen its enforcement, he said. A rule will help set legal precedent for things like geolocation data collection and sales, a practice the agency targeted in its lawsuit against Kochava (see 2208290052). The agency now relies on case-by-case consent decrees, which lack first offense penalties, so privacy rules could create more incentives for companies to follow the law, he said. If the agency writes a rule saying the sale of geolocation data in certain scenarios is illegal, it’s easier for the agency to bring such cases, he said.

Gans quoted dissenting views from Phillips when the agency requested comment, saying the ANPR failed Section 18 requirements because it didn’t identify areas of focus and objective regulatory alternatives. “We’ll see how the process progresses and what additional mechanisms the FTC will deploy in this rulemaking,” said Gans.

The FTC’s use of the term “commercial surveillance” in its ANPR implies a wide range of data collection is “de facto bad,” said Kovacevich. He accused the agency of “painting” all data collection practices with a broad brush. Banning all targeted ads, for example, isn’t a proposal that has mainstream support from Congress, he said, arguing targeted ads done safely can be good for consumers and competition. The House Commerce Committee’s legislation largely bans targeted ads, so there's congressional appetite for the idea, said Brookman. Consumer Reports supports a global opt-out option for consumers, which would allow internet users to set their data collection preferences across the web, he said. Kovacevich and Brookman agreed the ANPR asks many appropriate questions about data collection practices that lead to discrimination on things like employment, housing and credit.