Remarks of Berin Szóka, President of TechFreedom:
I’m Berin Szóka, President of TechFreedom and a longtime observer of the FTC. Last year, the FTC’s Ethics Officer asked Chair Khan to recuse herself from an enforcement action against Meta. She refused—something no Commissioner had ever done before. The Ethics Officer noted that her participation was “not a per se federal ethics violation.” But that’s not really the issue.
At last week’s oversight hearing, Khan promised not to “allow any personal financial interests or [her] previous work on antitrust issues to influence [her] decisions.” This, too, misses the point.
The real issue is the Constitution’s guarantee of due process. In America, every defendant has a right to an impartial tribunal. If, as the Second Circuit held in 1959, a “disinterested observer may conclude that [an agency] has in . . . some measure adjudged . . . a particular case in advance of hearing it,” then its “reputation for objectivity and impartiality is opened to challenge.”
Such prejudgments led courts to disqualify FTC Chair Paul Rand Dixon three times in the following decade, voiding lawsuits he brought. As the Sixth Circuit noted, Chair Dixon had, “as counsel for a Senate Subcommittee, . . . investigated and developed many of [the] same facts” that would underpin administrative suits he brought as Chair. Likewise, Chair Khan has proudly claimed that she “led the congressional investigation into digital markets and the publication of its final report.” That report prejudged many key aspects of potential suits against tech companies.
Both Chairs repeated their prejudgments publicly. Such statements, as the D.C. Circuit warned, “may . . . entrench a Commissioner in a position . . . , making it difficult, if not impossible, for [them] to reach a different conclusion . . . after consideration of the record.”
Thus, concluded the Sixth Circuit, “[w]herever there may be reasonable suspicion of unfairness, it is best to disqualify” a Commissioner from participating as an adjudicator.
Such a Commissioner may yet be able to vote to bring suit directly in federal court. When a Commissioner acts only as prosecutor, their potential prejudgment doesn’t raise the same constitutional problems as when they sit as judge and jury. If Chair Khan insists on using the administrative trial process where “there may be reasonable suspicion of unfairness,” she may find that she has expended years of staff time and effort only to have a court void the entire lawsuit.
That is the real issue here.
Remarks of Bilal Sayyed, Senior Competition Counsel at TechFreedom:
Earlier this week, former president and current presidential candidate Donald Trump announced his intention to bring independent agencies under presidential authority if he returns to the White House. According to Mr. Trump, “the independent regulatory agencies, such as . . . the FTC . . . do not get to become a fourth branch of government, issuing rules and edicts all by themselves.”
Attacks on the Commission’s independence from the executive branch would have previously met with strong resistance from the business and academic community, the judicial branch, and the Congress. I no longer believe this is likely. Support for significant curbs on the so-called administrative state has reached deep into these communities, and within a significant percentage of the public.
The substantive reasons for dissatisfaction with the Commission are not easily summarized in a few hundred words and are deeper than the current Commission’s enforcement and regulatory agenda. And I recognize, and believe it is laudable, that this Commission especially but not uniquely has attempted to expand its base of those with an interest and voice in its mission.
However, it is no secret that this Commission’s actions have alienated many who agree with and accept the Commission’s mission and have in the past worked productively with it to advance the dynamism of our economy and to protect consumers, and who have traditionally defended the Commission’s independence.
The Commission should be aggressive in protecting consumers and competition. But it should not be reckless or casual in challenging the constraints it operates under, as I believe it has been recently. Smaller steps toward the development of the law and regulatory policy in support of its mission should be chosen over leaps. And the Commission, while expanding its stakeholder base, should repair its relationships with those with a longstanding interest in the Commission’s success as a protector of competition and consumers.
Remarks of Andy Jung, Legal Fellow at TechFreedom:
I’m Andy Jung, a Legal Fellow at TechFreedom.
Last year, the Commission released a report on so-called “dark patterns,” defined as design practices used to “trick or manipulate consumers into buying products or services or giving up their privacy.” This broad definition includes conduct like native advertising and hidden junk fees.
Former Commissioner Phillips responded: “I just don’t think the term dark pattern is very helpful . . . it fails in helping businesses and consumers identify those practices that are illegal.” His warning was prescient.
The term blurs the distinction between gray-area business practices and hardcore fraud at the core of the FTC Act. In a recent complaint, the Commission accuses Amazon of using “dark patterns” by streamlining the enrollment process and complicating the cancellation process for Prime subscriptions. The FTC might show that Amazon’s practices are unfair. Or Amazon might show that they’re not. Section 5(n) requires a weighing of costs and benefits for practices that fall into this gray zone of normal business activity.
But hardcore fraud is different. Under Section 19, where a practice is “one which a reasonable man would have known under the circumstances was dishonest or fraudulent,” the FTC may obtain monetary relief.
For example, the FTC released a complaint against Fluent, which operates robocall lead generation websites. The complaint alleges that Fluent uses “dark patterns . . . to manipulate consumers into divulging their contact information,” purportedly to enable Fluent to send consumers a reward or to help consumers apply for a job. The promised rewards and jobs, however, usually do not exist. Fluent then sells this fraudulently collected data to call centers, which inundate consumers with robocalls and spam.
The FTC accuses both Amazon and Fluent of using “dark patterns,” but these are very different cases. A complicated cancellation workflow is categorically different from deceiving consumers into sharing personal information and sending them harmful spam. The Commission shouldn’t lump together potentially legitimate business activity with hardcore fraud. As former Commissioner Phillips explained, “calling conduct a dark pattern . . . is not a replacement for the legal and factual analysis required . . . to show that a practice is deceptive or unfair.”