Today, three of TechFreedom’s policy experts delivered remarks at the FTC’s Commercial Surveillance and Data Security Public Forum, held to discuss the Commission’s Advanced Notice of Proposed Rulemaking (ANPR) on commercial surveillance and data security practices. We’re posting their written comments here, lightly edited for clarity.

Comments of Berin Szóka

I’m Berin Szóka, President of TechFreedom, a think tank dedicated to Internet law.

The Federal Trade Commission has uniquely broad powers over nearly the entire economy—especially the power to decide what is “fair.” In the 1970s, the FTC’s conception of unfairness had practically no limits. 

By 1980, the FTC was becoming an unelected  second national legislature. Huge bipartisan supermajorities in Congress imposed procedural safeguards to ensure that unfairness and deception rulemakings focused on clear problems with no effective alternative to regulation.

That’s why past Advanced Notices of Proposed Rulemaking focused on discrete issues, such as impersonating government agents, negative option marketing, and clothing washing labels. By contrast, this ANPR is as broad as is the concept of “privacy” itself. 

Past ANPRs identified administrative orders or court decisions establishing the unfairness or deceptiveness of specific practices. This ANPR cites only complaints, settlements, and news reports across a wide range of data practices. Any proposed rule must describe, with “particularity,” why the Commission has “reason to believe” that specific practices are unfair or deceptive. And any final rule must explain why proscribed practices actually violate the FTC Act. 

An unfair practice must “cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.” Some data practices do cross that line. But the Commission must prove its case regarding each practice it seeks to regulate by rule—just as in any enforcement action. The Commission must also establish the prevalence of any practice subject to a rule. If case-by-case enforcement has already effectively deterred harmful practices, they won’t be “widespread” enough to justify a rule.

To ensure that its rules survive judicial review, the Commission must do what it’s done in every past Magnusson-Moss rulemaking: focus on discrete, egregious practices that clearly harm or deceive consumers. It should continue to police hard privacy questions case by case. But it should leave major questions around privacy to the elected representatives of the American people.

Thank you.

Comments of Bilal Sayyed

My name is Bilal Sayyed. I am Senior Competition Counsel at TechFreedom.

Timely and stable guidance with respect to privacy and the collection, use, and security of data is necessary. But the scope of the ANPRM and the 3–2 vote on its release indicate that the Commission has embarked on a path with little likelihood of providing this guidance in a timely manner or in a manner that withstands changes in Commission makeup and leadership. The Commission should rethink its approach.

It would be far better for the Commission to provide a policy statement on privacy and data, or, alternatively, a statement that identifies with specificity how the principles in the Statements on Deception and Unfairness will be applied in such matters.

A policy statement will provide substantial guidance to attorneys, privacy officers and the many firms likely to conform their behavior to the principles underlying the statement, and to Congress.

Consumers benefit when Commission guidance is grounded in core principles of consumer protection, support for vigorous competition, cost-benefit considerations, materiality of harm, and robust economic analysis. Thus, a statement should reflect the principles of consumer welfare, reasonableness, countervailing benefits, and economic analysis that are reflected in the Deception and Unfairness Statements and the FTC Act.

A statement is a legally sound approach and unlikely to lead to the litigation delays associated with an administrative rulemaking. A statement also provides more flexibility in addressing new issues and incorporating new information and academic and empirical research into decisionmaking. The Commission should work to make such a statement unanimous, to better provide certainty to firms and consumers, and so that the statement has a reasonable chance of withstanding changes in Commission leadership and members.

Each Commissioner, and the agency, has significant experience with privacy and data security issues.  Accordingly, the Commission should act quickly to identify its framework, and support for that framework, for deciding matters within the scope of its legal authority.

Thank you.

Comments of Andy Jung

I’m Andy Jung. I’m a Legal Fellow at TechFreedom, a nonpartisan technology law and policy think tank.

In Question 26, the Advance Notice of Proposed Rulemaking asks: “To what extent would any given new trade regulation rule on data security or commercial surveillance impede or enhance innovation?”

I commend the Commission for addressing innovation, which is a key factor in the FTC’s analysis required by Section 5(n) of the FTC Act. Broad and sweeping trade rules on privacy and data security could impede innovation in three primary ways:

First, new regulations can create higher compliance costs and raise barriers to entry for companies developing online tools and services. This may disincentivize firms, especially small ones and startups, from building or investing in online tools and services.

Second, new privacy and data security regulations could make online tools and services less effective and less accessible. For example, rules limiting how firms collect and use consumer data would restrict the ability of firms to offer targeted, personalized services based on behavioral and browsing data.

Third, privacy and data security rules may force firms to start charging for online tools and services that are currently ad-supported. New privacy and data security rules would limit firms’ ability to monetize free online services, forcing them to switch to paid models which charge consumers upfront.

Section 5(n) requires the FTC to weigh such costs to innovation against the benefits of any new rules. How to assess such tradeoffs will be among the most important disputes of material fact in this rulemaking—and critical to whether any rules the Commission issues can survive judicial review.

Thank you.