WASHINGTON, DC — Today, a broad coalition of tech companies and trade associations, including broadband providers as well as edge and device companies, urged Federal Communications Commission (FCC) Chairman Tom Wheeler to regulate broadband privacy under the same unfairness and deceptive (UDAP) standards as the Federal Trade Commission. See the letter here.
When the FCC reclassified broadband providers as common carriers last year, it robbed the FTC of jurisdiction, because Section 5 of the FTC Act covers nearly all companies other than common carriers. Thus, the FCC claimed it needed to fill a regulatory vacuum — of its own creation. While the FCC acknowledged that the Consumer Proprietary Network Information (CPNI) rules developed for analog telephony, concerning anti-competitive uses of marketing data, were a poor fit for Internet services, it promised to begin an inquiry about how to replace them. The FCC is expected to issue that Notice of Proposed Rulemaking in the coming months.
“All tech companies should be held to the same standards on consumer privacy, whether they offer Internet access, online services, or devices,” said Berin Szoka, President of TechFreedom. “Even if the FCC somehow prevails on Title II reclassification, there’s no reason that should result in more heavy-handed or arbitrary regulation of broadband privacy. The FTC’s standards are the bedrock of American consumer protection law, forged as a careful balance between over- and under-regulation. These flexible standards are fully capable of guiding the FCC as it grapples with technological change. Stealing the FTC’s jurisdictional lunch money was bad enough — the FCC shouldn’t be able to toss out its legal standards, too.”
“The FCC should adopt the FTC’s standards for unfairness and deception across the board,” proposed Szoka. “Unfortunately, the FCC has been moving to do just the opposite: to claim essentially unfettered discretion to second-guess how the companies it regulates can innovate. Essentially, the FCC is trying to reinvent the FTC’s unfairness and deception standards in name only, stripped of their underlying analytical rigor.”
In its October 2014 prosecution of Terracom, the FCC reinterpreted Section 222(a) and Section 201(b) as a broad duty to provide “reasonable data security.” This is essentially equivalent to the FTC’s approach to data security — except that it completely omits the underlying statutory elements of unfairness: (1) causing, or likely causing, substantial injury, (2) that is not reasonably avoidable by consumers and (3) that is not outweighed by countervailing benefit. This key difference means that it would be difficult to challenge an FCC data security or privacy enforcement action — as in the LabMD case, where the FTC’s own administrative law judge recently ruled that the FTC had failed to satisfy the first prong of unfairness. Similarly, Terracom interpreted Section 201(b) as a kind of deception authority — minus the materiality requirement central to the FTC’s 1983 Deception Statement. In addition, the FCC has hinted that it may use the power it claimed in 2010 under Section 706 to regulate privacy and data security as loosely related to broadband deployment.
“It’s not enough for the FCC to pay lip service to the FTC’s standards, while ditching their underlying legal substance,” concluded Szoka. “The FTC has already drifted far away from its own UDAP standards by avoiding litigation and building what it calls a ‘common law of consent decrees,’ thus avoiding judicial enforcement of its UDAP standards. But at least the courts could still rein in the FTC and the agency can generally be shamed into some degree of self-restraint. But if the FCC simply copies the FTC’s current, mostly-lawless approach, the result will be completely lawless, arbitrary and political regulation of the Internet — even if it claims to be using the same standards.”
TechFreedom is leading a group Silicon Valley innovators and entrepreneurs as an intervenor challenging the FCC’s 2015 Open Internet Order. TechFreedom also runs, with the International Center for Law & Economics, the FTC: Technology & Reform Project.
- Out of the Frying Pan & into the Fire: The FCC Takes over Privacy Regulation, TechFreedom working paper
- The FTC’s Data Security Cases: What LabMD & Wyndham Mean for Internet Regulation (Event September 2013)
- Wyndham Settlement Reinforces Need for Congressional Overhaul of FTC
- The Second Century Of The Federal Trade Commission, TechDirt