Divided FTC Issues Enforcement Priorities for Gig Economy
The FTC voted 3-2 along party lines Thursday to issue a policy statement outlining enforcement priorities against unfair, deceptive and anticompetitive practices involving the gig economy. The commission also unanimously issued a staff report on dark patterns and a proposed rule against impersonation fraud.
Two Washington, D.C.-area DoorDash employees asked the commission to consider the benefits of gig work, including flexibility. Chair Lina Khan said the gig business model can come with tradeoffs that deprive workers of traditional protections: “We need to make sure the dazzling novelty and conveniences of these services doesn’t distract away from the ability to recognize what in other instances might be more readily discernible as clear law violations.” The policy statement outlines several issues for gig workers, including “deception about pay and hours, unfair contract terms, and anticompetitive wage fixing and coordination between gig economy companies.”
Workers deserve flexibility, but the agency’s job is to ensure companies uphold promises and don’t take advantage of workers, said Commissioner Rebecca Kelly Slaughter. Democrats cited the agency’s enforcement action Republican Chairman Joe Simons led against Amazon, which paid $62 million to settle allegations that it deceived Amazon Flex drivers about promised tips 2016-19 (see 2102020039). Khan said the agency is exploring a potential rule on earnings claims that defraud consumers and workers. Due to the importance of the gig economy to workers, it’s necessary to clarify rules for the gig sector and the different ways the agency can protect workers, said Commissioner Alvaro Bedoya.
The FTC should focus more on bringing cases than on issuing policy statements, said Commissioner Noah Phillips. The statement is “critically flawed,” he said, disputing whether it properly defines gig work and saying it gets basic facts wrong about the sector. The agency failed to provide conclusive evidence that practices cited in the statement are deceptive or unfair, he said. The statement also fails to consider the benefits of gig work, as cited by the two DoorDash employees, Tineka Singletary and Dwanet Perry, Phillips said: Both spoke about the job's flexibility, which allows them to care for their children and juggle side businesses.
The gig economy works for millions of workers and consumers, and due to inflation, this is the “worst time” for the federal government to disrupt gig work, said Timothy Lee, Center for Individual Freedom senior vice president-legal and public affairs. Workers deserve to receive income on their own terms, said Kristin Sharp, CEO of Flex, a trade association that represents DoorDash, GrubHub, InstaCart, Lyft and Uber.
The policy statement signals another potential shift away from the consumer welfare standard, said Commissioner Christine Wilson. She noted the statement’s disproportionate focus on gig workers. She also disagreed with the statement’s analysis of noncompete agreements, citing the lack of clear conclusions about whether they’re harmful, since there are benefits to innovation.
The commission voted 5-0 to issue a staff report on dark patterns, though Phillips said he has “quibbles” with the report. Despite the concerns, he voted in favor because he supports making the findings public. He disputed whether the term dark pattern is properly defined or even if such a vague term should be used to justify legal action for unfair and deceptive acts. Slaughter agreed it’s not the most precise term but said in the absence of a perfect term, the FTC needs to use what it has. The consumer welfare standard is another vague term with varying definitions, she said. Wilson said the report will be useful to companies as they decide how to design their “choice architecture.” Khan defined dark patterns as design features used to trick or manipulate consumers into making decisions they wouldn’t normally make or surrendering more data than they should, like pre-checked boxes and complicated online navigation paths.
The commission voted 5-0 to issue an advanced notice of proposed rulemaking to “address government, business, and nonprofit impersonation fraud.” Both Khan and Phillips agreed that since the FTC lost monetary relief authority in the Supreme Court’s AMG case (see 2107270050) a rulemaking will help the FTC regain civil penalty authority. This is “rulemaking done right, and I’m glad to support,” said Phillips. Slaughter called it a straightforward NPRM that articulates as a rule what has always been the law: impersonating government and businesses violates the FTC Act. It’s a “carefully tailored rule” in clear, simple language, said Wilson, noting other FTC rulemaking proceedings should follow this model.