Today, three of TechFreedom’s policy experts delivered remarks at the FTC’s October Open Commission Meeting. We’re posting a transcript of their comments here, lightly edited for clarity.

Comments of Berin Szóka, President, TechFreedom

Today, the Commission launches three new Magnuson–Moss rulemakings. That’s on top of the four initiated in recent months. This pace is reminiscent of the late 1970s, when the FTC initiated one rulemaking each month. Some of these new rulemakings may be well-justified, like the one focused on impersonation. But in general, and especially on privacy, the Commission is repeating the mistakes of the 70s. As law professor Teresa Schwartz complained in an influential 1977 article: “Too frequently … the Commission has not defined the legal theory in its rulemaking proceedings.” 

By attempting to regulate everything, and without clear statutory justification, the Commission was becoming a second national legislature. In 1980, a heavily Democratic Congress was so outraged that it briefly shut down the agency. Lawmakers tried to focus the FTC’s rulemakings by requiring Advanced Notices of Proposed Rulemaking. Congress envisioned that most Mag–Moss rulemakings would target conduct whose unlawfulness had already been explained—in detail—by FTC administrative orders. Congress did also allow ANPRs to target “a widespread pattern of unfair or deceptive acts or practices.” But it presumed that the Commission would still establish the unlawfulness of such conduct no less precisely than it would in any 5(b) proceeding.

Today, the Commission is reverting to its old habit of launching rulemakings without even proposing a clear legal basis. Its recent ANPRs are effectively notices of inquiry, citing only news reports and the FTC’s allegations in past complaints. As Tim Muris, then director of the Bureau of Consumer Protection, warned in 1982: “Without a clear explanation as to why a particular practice violates the law, knowing what evidence is necessary is difficult.” 

That’s exactly why it’s critical that any NPRMs the FTC issues clearly explain why the Commission believes specific acts or practices are unfair or deceptive. Only then can commenters and hearing participants provide the evidence necessary to establish whether such practices actually violate Section 5.

Comments of Bilal Sayyed, Senior Competition Counsel, TechFreedom

The acquisition by a foreign firm of under 50% of the voting securities of a foreign issuer is exempt from reporting that acquisition to the FTC and DOJ and exempt from observing the waiting period requirements of the HSR Act.

Consider all of the non-U.S. firms who supply U.S. consumers and businesses with critical products and critical inputs—and reflect on the fact that any one of these companies could purchase up to 49.99% of its non-U.S. competitors or non-U.S. suppliers—without making an HSR filing and without allowing the FTC or DOJ to investigate such a transaction prior to its consummation.

This exemption is not required by statute but was adopted by the Commission in 1978. It was adopted because foreign firms were thought to have “minimal relationship to U.S. commerce” and an anticompetitive impact upon U.S. commerce was believed less likely to occur when it involved only non-U.S. firms. 

The conclusion that non-U.S. firms have a minimal relationship and impact on U.S. commerce is incorrect. 

This exemption has no similar counterpart in the merger notification regimes of any other significant competition agency. It is not required by best practice recommendations of the ICN or OECD.

The Commission is in search of “competition rules” that will protect competition. This is one that the Commission can pursue without regard to questions about its substantive and legal authority.  The Commission should act to abandon the foreign-to-foreign exemption.

 I will submit a written, more expansive draft of these remarks.

Comments of Andy Jung, Legal Fellow, TechFreedom

Today, the commission will vote on whether to issue an Advance Notice of Proposed Rulemaking addressing fake reviews and other endorsements. The ANPR should make clear how, exactly, the FTC intends to crack down on reviews and endorsements. If it doesn’t, the Notice of Proposed Rulemaking must do so. 

In particular, the FTC should clarify whether the rulemaking targets users who post reviews and endorsements or the platforms that host them. Who’s being regulated will determine which legal requirements the FTC must satisfy. 

Agency rules focused on users who post reviews and endorsements online must satisfy the First Amendment. False statements based on objective, provable facts are not protected speech. In contrast, the First Amendment does protect statements based on subjective opinion and obvious hyperbole. 

The FTC should focus on reviews that constitute commercial speech and are false or deceptive. Courts are split over whether paid reviews and endorsements generally constitute commercial speech, which receives less First Amendment protection.

On the other hand, rules targeting online platforms and services which host reviews and endorsements must contend with Section 230 of the Communications Decency Act, which states that “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

Section 230 protects “internet computer services”—websites, platforms, and online services—from legal liability for content posted by users. Courts have applied this immunity to publishing, hosting, and leaving up user reviews posted by third parties. When issuing rules or guidance related to the hosting of reviews or endorsements by online services, the FTC should focus on those instances where an online service contributes to the unlawfulness of third-party content, or commits independent acts in furtherance of a deceptive scheme.