FCC Privacy Regulation Should Follow FTC’s Consumer Protection Standards
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.
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We can be reached for comment at [email protected]. See our other work on FCC Process and FTC Reform, including:
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
FCC Reform Bill Would Shed Light on Opaque Process
Yesterday, the House, by a voice vote, approved legislation to make the Federal Communications Commission (FCC) more transparent, efficient, and accountable. Among other reforms, the bill would increase public transparency of items before the Commission by eliminating the pernicious practice of placing large amounts of information into the record on the last day of the public comment period.
The bill would also amend the Sunshine Act to allow more than two Commissioners to meet privately after the comment period ends in the weeks leading up to a vote, facilitating candid conversation and, ideally, resulting in less politicized votes. Previously, in the run-up to a vote, Commissioners could communicate only through staffers or on a one-on-one basis.
In an effort to get bipartisan support, Republicans agreed to water down a provision that would have required the FCC to publish all final rules 30 days before voting on them. Instead, the bill merely requires the FCC to launch a proceeding to examine whether such early publication is feasible and prudent. The bill will be discussed at today’s Congressional FCC oversight hearing.
“The FCC reform bill is very good news for consumers even though it was watered down in order to get bipartisan support,” said Tom Struble, Policy Counsel for TechFreedom. “For too long, the FCC has operated as a Star Chamber, proceeding in secret and hiding critical information from public view. This reform bill sheds new light on agency proceedings its passage bodes well for a long overdue update of the Communications Act, including a broadband deployment package and a legislative end to the decade-long partisan tangle over net neutrality.”
We are available for comment at [email protected], and see our other work on FCC Process, especially:
“FCC Reform Bills Miss the Mark,” a statement from TechFreedom
Coalition letter warning against the FCC’s increasing politicization
“FCC Chairman Invokes Nuclear Option, Bypasses Commissioners on Key Decisions,” a statement from TechFreedom
Coalition letter against Title II signed by a broad array of policy groups across the political spectrum, entrepreneurs and venture capitalists
Today, the House Energy and Commerce Communications and Technology Subcommittee will markup several bills regarding process and transparency at the Federal Communications Commission (FCC). In addition to a discussion draft authored by Subcommittee Chairman Walden, ranking member Anna Eshoo (D-CA) and Rep. Adam Kinzinger (R-IL), the Subcommittee will consider six other draft bills, with three each coming from either side of the aisle.
TechFreedom and the International Center for Law & Economics (ICLE) sent a joint letter to ranking members on the Committee and Subcommittee urging them to consider additional measures to address the FCC’s increasingly unconstrained discretion.
The letter opens:
We commend those members of the House Energy and Commerce Committee from both parties who have proposed bills to increase transparency and accountability at the Federal Communications Commission (FCC). Such reforms are badly needed, and the proposed changes would help to greatly improve the current situation.
But welcome as they are, none of the proposed reforms goes to the real problem: the FCC’s increasingly unconstrained discretion. While the reforms may help to raise the political costs of agency actions that are unwise or push the boundaries of its legal authority, vague threats of oversight and censure are too unreliable to offer the certainty and humility that regulated industries require for investment and innovation to flourish.
“The draft bills contain some worthwhile reforms, but unfortunately several key provisions are still missing,” said Tom Struble, Legal Fellow at TechFreedom. “Constraints on the FCC’s transaction review process that were included in a 2012 bill have been omitted, leaving the FCC free to continue manipulating its process to extract ‘voluntary’ conditions outside its legal authority — and typically without judicial oversight. We’re also urging Congress to require the FCC to conduct cost-benefit analysis to justify all economically significant actions, as is currently required of executive branch agencies.”
We are available for comment at [email protected], and see our other work on FCC Process, especially:
Coalition letter warning against the FCC’s increasing politicization
“FCC Chairman Invokes Nuclear Option, Bypasses Commissioners on Key Decisions,” a statement from TechFreedom
Coalition letter against Title II signed by a broad array of policy groups across the political spectrum, entrepreneurs and venture capitalists
Now that the FCC has released its new reclassification order, it is worth remembering past complaints about the FCC’s transparency and process problems. Their relevance will become more clear as the unforeseen consequences of the FCC’s reclassification order become more apparent.
In 2010, when FCC Chairman Martin released a draft order, Free Press complained before the vote:
We appreciate the opportunity to comment on the report, though the truncated comment cycle coming after the Chairman’s office circulated a draft Order leads us to believe this is an exercise in optics, not a serious attempt to give consideration to this critical issue.
A 2010 Court decision, in which Free Press was a plaintiff, concluded that the FCC had not fulfilled its “obligation to make its views known to the public in a concrete and focused form:
”Two weeks before the Chairman‘s response period closed, and before most of the responses were received, a draft of the order was circulated internally. The final vote occurred within a week of the response deadline. This is not the agency engagement the APA contemplates. In this context, we have little choice but to conclude that the FCC did not, through the FNPR, fulfill its ―obligation to make its views known to the public in a concrete and focused form so as to make criticism or formulation of alternatives possible.
In 2012, Free Press/Save The Internet issued a statement complaining that the FCC “still has not made public its actual media ownership order”:
On Monday, attempting to respond to a growing chorus of critics, the Federal Communications Commission issued a statement claiming it has conducted its media ownership review transparently. The FCC also gave the public 30 days to comment on recently released summary data about female and minority ownership. However, the Commission still has not made public its actual media ownership order, conducted proper analysis of the impact of proposed rule changes on ownership diversity, or scheduled any public hearings on the issue.
Free Press President and CEO Craig Aaron made the following statement:
"The FCC should retract this misleading statement. Under Chairman Julius Genachowski, the FCC’s push for more harmful media consolidation has been anything but transparent. The FCC's latest attempt to sugarcoat its bitter media consolidation pill is not going to fool anyone. … Furthermore, it's disingenuous for the FCC to suggest that its process now is more transparent than the one former Chairman Martin used to adopt similar rules. Genachowski's FCC has yet to publish any details of its final proposal, offering only vague snippets in press releases.
In 2008, a Democratic House Commerce Committee staff report complained that Chairman Martin refused to publish the text of proposed rules well enough before a vote so that the public could meaningfully comment on the specific rules.
In an undated letter received by the Committee a few weeks later, Chairman Martin specifically agreed to adhere to the requirements of the Administrative Procedure Act (APA) and to make all but one of the management improvements requested by Chairman Dingell. In his letter, however, Chairman Martin refused to agree to "publish the text of proposed rules sufficiently in advance of Commission meetings for both (i) the public to have a meaningful opportunity to comment and (ii) the Commissioners to have a meaningful opportunity to review such comments.” While Chairman Martin is technically correct that the APA does not require that he publish the actual text, his reply was a red flag that all was not well. Transparency was plainly not a priority.
Unsurprisingly, transparency has not become a priority. As a result, not only are the new rules unclear to observers (“it will still be a while before it's clear what they mean.” -- Vox, Tim Lee), but even the FCC does not appear to understand what the rules it just passed actually mean.
“Asked at a press conference what this means, FCC Chairman Tom Wheeler replied: “We don’t really know. We don’t know where things will go next.” -- Wall Street Journal
These are the sort of things that more transparency and better process could have avoided. Instead, we plunge into the unknown bound only by the discretion of an agency that doesn't really understand the rules it just passed and cannot bind future Commissions to its evolving whims.
FCC needs real debate in rulemaking process: Berin Szoka in Comm Daily
The Federal Communications Commission’s Connect America Fund Order is stuck inside the agency, with the 5 commissioners debating edits that some say may change the meaning of the order rather than focusing solely on clarifying agreed-upon rules. TF's Berin Szoka condemned the opaque process in Communications Daily (subscription service):
TechFreedom President Berin Szoka quoted House minority leader Nancy Pelosi, D-Calif. "We have to pass the bill so that you can find out what is in it." “At the FCC, it's more like: ‘We have to pass the order so we can decide what's in it,’” Szoka said. Too many FCC chairmen have viewed other commissioners “as annoyances whose involvement should be minimized as much as possible rather than coequal partners in the rulemaking process,” he said. “This tendency becomes most visible when the partisanship at the agency increases.” Federal commissions “rely on collegiality to function effectively,” Szoka said.
FCC Reporting Reform Passes House Committee, but Omits Key Transparency Reform
The House Energy and Commerce Committee today approved the Federal Communications Commission Consolidated Reporting Act of 2013 on a voice vote today. The following statement can be attributed to TechFreedom President Berin Szoka :
Unfortunately, the bill currently omits one crucial reform that should be equally uncontroversial: requiring the FCC to put its reports out for notice and comment. This reform is among those proposed in Chairman Walden’s FCC Process Reform Act , which passed the House last Congress but has met stubborn opposition from Democrats. Whatever one thinks of other reforms proposed in that bill, any believer in good government should support such basic transparency measures as allowing an opportunity for comment on the methodological decisions made in FCC reports — and the conclusions they generate. Immunizing the process from public comment gives the FCC free rein to manipulate supposedly objective reporting in the interest of a political agenda. As Nobel Prize winning economist Ronald Coase poignantly quipped: “If you torture the data enough, nature will always confess.”
If Congress can’t even agree on this simple reform, what hope is there for the more difficult task of overhauling the rest of the FCC’s broken, politicized processes?
Szoka and Starr are available for comment at [email protected] . Find/share this release on Facebook or Twitter. For more information on FCC process reform, see TechFreedom’s recent TechBriefing on FCC reform , and Congressional testimony by commentator Larry Downes.
