Commissioner Wright has objected before that the FTC doesn’t take cost-benefit analysis seriously. He levels much the same criticism at the FTC’s new Internet of Things report in his stinging dissent:
The most significant drawback of relying upon “security by design” and other privacy-related catchphrases is that they do not appear to contain any meaningful analytical Cost-Benefit Analysis, the Forgotten Heart of the FTC’s Unfairness Doctrine:
Relying upon the application of these concepts and the Fair Information Practice Principles to the Internet of Things can instead substitute for the sort of rigorous economic analysis required to understand the tradeoffs facing firms and consumers. An economic and evidence-based approach sensitive to those tradeoffs is much more likely to result in consumer-welfare enhancing consumer protection regulation. To the extent concepts such as security by design or data minimization are endorsed at any cost – or without regard to whether the marginal cost of a particular decision exceeds its marginal benefits – then application of these principles will result in greater compliance costs without countervailing benefit. Such costs will be passed on to consumers in the form of higher prices or less useful products, as well as potentially deter competition and innovation among firms participating in the Internet of Things.
Before setting forth industry best practices and recommendations for broad-based privacy legislation relating to the Internet of Things – proposals that could have a profound impact upon consumers – the Commission and its staff should, at a minimum, undertake the necessary work not only to identify the potential costs and benefits of implementing such best practices and recommendations, but also to perform analysis sufficient to establish with reasonable confidence that such benefits are not outweighed by their costs at the margin of policy intervention. At this juncture, I believe the Workshop Report either should set forth that evidence or, in the alternative, request additional empirical evidence upon which to make future recommendations. In the absence of such evidence, the Commission should decline to publish the Workshop Report’s recommendations.