[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
LEGISLATIVE HEARING ON 17 FTC BILLS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
MAY 24, 2016
__________
Serial No. 114-148
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
___________
U.S. GOVERNMENT PUBLISHING OFFICE
21-275 WASHINGTON : 2017
________________________________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Publishing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].
COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
JOE BARTON, Texas FRANK PALLONE, Jr., New Jersey
Chairman Emeritus Ranking Member
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania ELIOT L. ENGEL, New York
GREG WALDEN, Oregon GENE GREEN, Texas
TIM MURPHY, Pennsylvania DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee MICHAEL F. DOYLE, Pennsylvania
Vice Chairman JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington KATHY CASTOR, Florida
GREGG HARPER, Mississippi JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky PETER WELCH, Vermont
PETE OLSON, Texas BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia PAUL TONKO, New York
MIKE POMPEO, Kansas JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida KURT SCHRADER, Oregon
BILL JOHNSON, Missouri JOSEPH P. KENNEDY, III,
BILLY LONG, Missouri Massachusetts
RENEE L. ELLMERS, North Carolina TONY CARDENAS, California
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota
Subcommittee on Commerce, Manufacturing, and Trade
MICHAEL C. BURGESS, Texas
Chairman
JANICE D. SCHAKOWSKY, Illinois
LEONARD LANCE, New Jersey Ranking Member
Vice Chairman YVETTE D. CLARKE, New York
MARSHA BLACKBURN, Tennessee JOSEPH P. KENNEDY, III,
GREGG HARPER, Mississippi Massachusetts
BRETT GUTHRIE, Kentucky TONY CARDENAS, California
PETE OLSON, Texas BOBBY L. RUSH, Illinois
MIKE POMPEO, Kansas G.K. BUTTERFIELD, North Carolina
ADAM KINZINGER, Illinois PETER WELCH, Vermont
GUS M. BILIRAKIS, Florida FRANK PALLONE, Jr., New Jersey (ex
SUSAN W. BROOKS, Indiana officio)
MARKWAYNE MULLIN, Oklahoma
FRED UPTON, Michigan (ex officio)
C O N T E N T S
----------
Page
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 1
Prepared statement........................................... 3
Hon. Janice D. Schakowsky, a Representative in Congress from the
State of Illinois, opening statement........................... 4
Hon. Marsha Blackburn, a Representative in Congress from the
State of Tennessee, opening statement.......................... 6
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 7
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, prepared statement................................... 226
Witnesses
Edith Ramirez, Chairwoman, Federal Trade Commission.............. 8
Prepared statement........................................... 11
Joshua Wright, University Professor, Antonin Scalia Law School,
George Mason University........................................ 59
Prepared statement........................................... 62
Abigail Slater, General Counsel, the Internet Association........ 78
Prepared statement........................................... 80
David Vladeck, Professor of Law, Georgetown Law School........... 88
Prepared statement........................................... 90
Geoffrey Manne, Founder and Executive Director, the International
Center for Law and Economics................................... 110
Prepared statement........................................... 112
Daniel Castro, Vice President, Information Technology and
Innovation Foundation.......................................... 134
Prepared statement........................................... 136
Richard Hendrickson, President and CEO, Lifetime Products........ 158
Prepared statement........................................... 160
Greg O'Shanick, President and Medical Director, the Center for
Neurorehabilitation Services................................... 163
Prepared statement........................................... 165
Stephen Shur, President, Travel Technology Association........... 168
Prepared statement........................................... 170
Robert Arrington, President, the National Funeral Directors
Association.................................................... 178
Prepared statement........................................... 180
John Breyault, Vice President of Public Policy,
Telecommunications, and Fraud, the National Consumers League... 185
Prepared statement........................................... 187
Gil Genn, Maryland Sports and Entertainment Industry Coalition... 199
Prepared statement........................................... 201
Jamie Pena, Vice President, Revenue Strategy and Global
Distribution, Omni Hotels & Resorts............................ 204
Prepared statement \1\....................................... 206
Michael Best, Senior Policy Advocate of Consumer Federation of
America........................................................ 213
Prepared statement........................................... 215
Submitted material
Statement of the Brain Injury Association of America............. 227
Statement of the American Society of Association Executives...... 229
Statement of the National Sporting Goods Association............. 231
Statement of joint associations.................................. 232
Statement of Ashford............................................. 234
Statement of Delta............................................... 235
Statement of the Chamber of Commerce............................. 261
Statement of the American Academy of Pediatrics.................. 263
Statements of Consumers Union.................................... 264
Statement of the Retail Industry Leaders Association............. 269
Statement of Safe Kids Worldwide................................. 271
Statement of the National Association of State Head Injury
Administrators................................................. 272
Article entitled, ``In dark move, Congress considers rolling back
transparency for meetings,'' Sunlight Foundation Blog, May 23,
2016........................................................... 273
Statement of various stakeholders................................ 278
----------
\1\ The addendum to Ms. Pena's testimony is available at: http://
docs.house.gov/meetings/IF/IF17/20160524/104976/HHRG-114-IF17-
Wstate-PenaJ-20160524.pdf.
LEGISLATIVE HEARING ON 17 FTC BILLS
----------
TUESDAY, MAY 24, 2016
House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:00 a.m., in
room 2123 Rayburn House Office Building, Hon. Michael Burgess
(chairman of the subcommittee) presiding.
Members present: Representatives Burgess, Lance, Blackburn,
Harper, Guthrie, Olson, Pompeo, Kinzinger, Bilirakis, Brooks,
Mullin, Schakowsky, Clarke, Kennedy, Cardenas, Rush,
Butterfield, Welch, and Pallone (ex officio).
Also present: Representatives McNerney and Tonko.
Staff present: Leighton Brown, Deputy Press Secretary;
Rebecca Card, Assistant Press Secretary; James Decker, Policy
Coordinator, Commerce, Manufacturing, and Trade; Graham
Dufault, Counsel, Commerce, Manufacturing, and Trade; Melissa
Froelich, Counsel, Commerce, Manufacturing, and Trade; Giulia
Giannangeli, Legislative Clerk, Commerce, Manufacturing, and
Trade; Paul Nagle, Chief Counsel, Commerce, Manufacturing, and
Trade; Tim Pataki, Professional Staff Member; Olivia Trusty,
Professional Staff, Commerce, Manufacturing, and Trade; Dylan
Vorbach, Deputy Press Secretary; Michelle Ash, Minority Chief
Counsel, Commerce, Manufacturing, and Trade; Jeff Carroll,
Minority Staff Director; Lisa Goldman, Minority Counsel,
Commerce, Manufacturing, and Trade; Rick Kessler, Minority
Senior Advisor and Staff Director, Energy and Environment; Dan
Miller, Minority Staff Assistant; Caroline Paris-Behr, Minority
Policy Analyst; Tim Robinson, Minority Chief Counsel; Matt
Schumacher, Minority Press Assistant; Andrew Souvall, Minority
Director of Communications, Outreach and Member Services; and
CJ Young, Minority Press Secretary.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess [presiding]. The subcommittee on Commerce,
Manufacturing, and Trade will come to order.
The Chair recognizes himself for 5 minutes for the purpose
of an opening statement.
I want to welcome everyone here this morning. This is going
to be a very productive morning and, certainly, we have been
looking forward to it for some time. It has been 20 years since
Congress last reauthorized the Federal Trade Commission. I
don't need to remind you that that was in the Dark Ages. People
still carried pagers; they dialed into the internet, if they
were lucky enough to have one, let alone multiple, e-mail
accounts. The world was very much a different place.
We are long overdue to revisit the FTC Act and to ponder
some of the targeted adjustments. We are guided by many new
products and services that we have examined in this
subcommittee in our Disruptor Series. Mobile payments and
connected devices, for example, pose new policy questions. Some
of these questions have inspired technophobia, but there is
something that is actually more frightening than new
technology, the prospect of never realizing the jobs and
prosperity that result from the inventive industry because of
fear of production.
A key takeaway from the Disruptor Series is that, if the
law lags behind technology, capital shrinks and new products
and services do not emerge. Certainty, on the other hand,
begets investment, which, in turn, delivers more progress for
consumers and, finally, does answer the questions that many
Americans are still asking, where are the jobs?
Many members of the subcommittee have introduced bills that
make general reforms to the Commission's activities under
Section 5 of the FTC Act, and I thank them for their
involvement and their leadership in this area. The basic FTC
framework for policing unfair or deceptive conduct after the
fact is a good one. However, the Federal Trade Commission faces
tough decisions when it encounters cases presented by new
products and new services in evolving markets.
For example, it must revisit the length of consent decrees
against the speed of businesses and what other agencies do.
Twenty-year consent decrees easily move away from after-the-
fact remedies to a prospective ``Mother May I''-type
regulation.
Other areas need fortification. It is widely understood
that informal policy guidelines are helpful and do not create
liability independent of enforceable rules or statutes.
Clarifying that the Federal Trade Commission will not use them
to pressure a settlement would provide incremental definition
to a company's liability while maintaining the Federal Trade
Commission's current authority.
Similarly, providing analyses showing why the Federal Trade
Commission believes certain investigations reveal no liability
would also help define legality under Section 5. Along with
policy guidance, previous complaints, and consent orders, this
additional information would be another strong signal for the
market.
The second thing this morning deals with specific
industries or services under the Federal Trade Commission's
jurisdiction. The bills in this category focus on specific
conduct that has been observed and has felt to possibly harm
consumers. The Federal Trade Commission is likely familiar with
many of these issues.
The Reinforcing American-Made Products Act recognizes the
Federal Trade Commission's work on made-in-the-USA labeling and
establishes it as a nationwide standard. Differing standards
among states as to what is an American product has not always
been helpful. This legislation would be especially impactful to
a company back in Texas. In Justin, Texas, surprisingly, is the
home of Justin Boots. They make handcrafted leather cowboy
boots. The various patchwork state standards of made-in-America
regulations throughout the country have made it difficult for
Justin Boots to sell its products in all 50 states. And
certainly, this morning I look forward to supporting
legislation that will unburden this historic and great company
from the amount of red tape imposed on it through these
regulations. This bill is a critical step in making it
worthwhile for United States manufacturers to make their
product in America.
The Consumer Review Fairness Act builds on the Federal
Trade Commission's work in the Roca Labs case, which was an
enforcement action brought by the FTC against a company which
producing a line of weight-loss supplements who allegedly made
baseless claims for its products and, then, threatened to
enforce gag clause provisions against consumers to stop them
from posting negative reviews and testimonials online. A
company should never be in the business of preventing American
consumers from speaking honestly.
In summary, the bills we put forward today are designed to
make some adjustments to ensure that innovation can thrive in
order to provide consumer benefits and create jobs.
I now yield to the ranking member of the subcommittee, Ms.
Schakowsky, for 5 minutes.
[The prepared statement of Mr. Burgess follows:]
Prepared statement of Hon. Michael C. Burgess
It has been 20 years since Congress last reauthorized the
Federal Trade Commission. Back then, people still carried
pagers, dialed into the Internet and were lucky to have one,
let alone multiple, email accounts. The world was a different
place.
Thus, we are long overdue to revisit the FTC Act and ponder
some targeted adjustments.
We are guided by the many new products and services
examined in our Disrupters Series of hearings.
Mobile payments and connected devices, for example, pose
new policy questions. Some of these questions have inspired
`technophobia.' But there is something more frightening than
new technology: The prospect of never realizing the jobs and
prosperity that result from inventive industry, simply because
of fear.
A key takeaway from the Disrupters Series is that if the
law lags behind technology, capital shrinks and new products
and services will not emerge. Certainty, on the other hand,
begets investment-which in turn delivers progress for consumers
and help the many Americans still asking, ``Where are the
jobs?''
Many members of our Subcommittee introduced bills that make
general reforms to the Commission's activities under Section 5
of the FTC Act, and I thank them for their leadership in this
area.
The basic FTC framework for policing unfair or deceptive
conduct after the fact is a good one. However, the FTC faces
tough decisions when it encounters cases presented by new
products or services in fast evolving markets.
For example, it must revisit the length of its consent
decrees against the speed of business and what other agencies
do. 20 year consent decrees easily move away from after the
fact remedies to prospective, ``Mother May I'' regulation.
Other areas need fortification. It is widely understood
that informal policy guidelines are helpful do not create
liability independent of enforceable rules or statutes.
Clarifying that the FTC will not use them to pressure a
settlement would provide incremental definition to a company's
liability while maintaining the FTC's current authority.
Similarly, providing analyses showing why the FTC believes
certain investigations reveal no liability would also help
define legality under Section 5. Along with policy guidance,
previous complaints, and consent orders, this additional
information would be another strong signal for the market.
The second theme deals with specific industries or services
under the FTC's jurisdiction. The bills in this category focus
on specific conduct that has been observed to harm consumers.
The FTC is likely familiar with many of these issues. The
Reinforcing American Made Products Act recognizes the FTC's
work on `Made in the USA' labeling and establishes it as the
nationwide standard. Differing standards among states as to
what is an American product is not a helpful approach. This
legislation would be especially impactful to a company in my
district, Justin Boots, which makes handcrafted leather cowboy
boots. The various patchwork state standards of ``Made in
America'' regulations throughout the country have made it
difficult for Justin Boots to sell its products in all 50
states, and I look forward to supporting legislation that will
unburden this great company from the myriad of red tape imposed
on it through these regulations.
This bill is a critical step in making it worthwhile for
U.S. manufacturers to make their products here in America. The
Consumer Review Fairness Act builds on the FTC's work in the
Roca Labs case, which was an enforcement action brought by the
FTC against a company which produces a line of weight-loss
supplements who allegedly made baseless claims for its
products, and then threatened to enforce ``gag clause''
provisions against consumers to stop them from posting negative
reviews and testimonials online. A company should never be in
the business of preventing American consumers from speaking
honestly.
In summary, the bills we put forward today are designed
make some adjustments to ensure that innovation can thrive in
order to provide consumer benefits and create jobs. I thank all
of the witnesses for being here and helping guide our inquiry
today. I look forward to their testimony.
OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. OK. All right. Thank you, Chairman Burgess,
for holding this, our first legislative hearing in the
subcommittee since September.
We have a long list of bills to discuss today, enough to
fill several legislative hearings, and the connecting theme is
the Federal Trade Commission.
The FTC is critical to consumers and businesses. It
protects consumers from unfair and deceptive practices. At the
same time, it defends fair competition. In just the past few
months, the FTC has stopped organizations falsely claiming to
help cancer patients in order to steal from unsuspecting
donors. It has stopped a debt-relief organization that was
targeting struggling homeowners and charging illegal fees.
We have talked a lot in this subcommittee about new
technology, and the FTC has been fully engaged. Last month the
FTC put out guidance for mobile health apps, encouraging
companies to protect consumers' privacy as they develop these
new products.
The FTC track record as a consumer and competition watchdog
is impressive. As Chairman Ramirez shares with us in her
written testimony, last year the FTC's consumer protection
efforts yielded over $700 million in savings and its
competition efforts saved consumers $3.4 billion. This agency
works, and this subcommittee should be working to strengthen
the FTC, not disrupt it.
Unfortunately, the bills put forth by Republicans in this
hearing go in the wrong direction. They tie the hands of the
FTC under the guise of so-called process reform. I have
concerns with each of the eight Republican process bills.
For instance, the FTC uses consent decrees to protect
consumers from repeated bad behavior by companies. One bill
would cut the maximum length of these consent decrees by more
than half, leaving consumers more vulnerable.
Suppose the FTC issues a consent decree against a company
that fails to protect a consumer's credit card information.
Under this bill, the company could put consumers' finances back
at risk in as little as five years.
This and other proposals would effectively bog down the FTC
by forcing it more frequently to review and renew its actions.
Stretching the agency's resources would mean less protection,
more consumers falling victim to deceptive ads and unfair
business practices.
Under these bills when the FTC does take action, it would
have to jump through additional hoops to protect consumers. It
would be harder for the FTC to pursue actions to prevent harm
to consumers, and when the FTC would want to take action under
its now-narrowed authority, it would have to wait for a time-
consuming economic analysis, even on minor actions. Instead of
protecting consumers, these bills would protect companies that
victimize consumers.
The so-called SHIELD Act would provide a safe harbor for
companies that comply with FTC guidance at the same time it
says that FTC cannot use noncompliance with guidance as proof
that the law was violated. You can't have it both ways.
Guidance is not the law and it definitely should not be treated
as the law only when it works to the company's advantage.
I don't have enough time to go through all the problems
with these bills one by one, but I think you have got the
picture. These eight bills reflect an effort to prioritize the
interest of industry above the interest of consumers.
Meanwhile, Democrats have introduced bills to empower the
FTC. Congressman McNerney's bill would allow the FTC to go
after deceptive practices by telecom companies such as lying
about data, speed, or service that consumers will receive.
Congressman Rush's bill would allow the FTC to more easily go
after sham nonprofits.
In this hearing we will also be considering seven bills
directed at specific areas of commerce such as tickets,
sporting goods, hotels, funeral services, consumer reviews, and
American manufacturing.
I look forward to hearing from supporters and opponents of
each of these bills. I worry we won't have enough time to give
each individual bill a thorough examination in this hearing,
but I am glad that we are finally giving them a closer look.
We have a lot to discuss today, but, as we look at the
bills today, I hope we focus on how we can best fulfill the
FTC's mission of protecting consumers and competition.
I thank all our three panels of witnesses, and I look
forward to your testimony.
I yield back right on time.
Mr. Burgess. Thank you very much, Congresswoman.
The Chair now recognizes the Vice Chair of the full
committee, Congresswoman Blackburn of Tennessee.
OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TENNESSEE
Mrs. Blackburn. Thank you, Mr. Chairman.
Ms. Ramirez, we appreciate that you would take the time;
also, appreciate your testimony and the fact that you have
given a review to the legislation that we are bringing before
you today. As Ms. Schakowsky said, we are going to have
questions. We do want your input, and we look forward to moving
ahead with the legislation and the bills that would really
bring some additional and needed transparency to the FTC's
consumer protection mission and get into addressing some
industry-specific concerns. That is always helpful to industry.
It is helpful to us, and I know you all as regulators, it is
helpful to you.
I want to speak briefly about H.R. 5104, which Congressman
Tonko and I have introduced, the Better On-Line Ticket Sales
Act of 2016, or the BOTS bill as it is commonly called. This is
important to many of my constituents who are in Tennessee who
are concert performers and entertainers.
What this will do, simply, it to disallow the use of some
of this hacking software that we see the scalpers use, and they
bundle up all the tickets, purchase all the tickets before fans
and our constituents and consumers have the ability to, from
their laptop or mobile device or PC, get onto that online
ticket sales portal and make their purchase.
So, as more of this moves online, it is important that we
look at this. As a label head said to me yesterday, this is
about keeping the marketplace fair and about allowing consumers
to exercise online commerce and ecommerce. So, we do seek your
input there.
I also want to welcome Robert Arrington, a fellow
Tennessean who is here for the National Funeral Directors and
say welcome to the committee. We look forward to hearing from
you later on the bill.
With that, I yield my time to the Vice Chair of the
subcommittee, Mr. Lance.
Mr. Lance. Thank you very much, Congresswoman.
This hearing is a product of our ongoing Disruptor Series,
and the package of bills we are considering today is the result
of what we have learned from these hearings and aims to bring
the Federal Trade Commission into the 21st century.
For my part, I have introduced H.R. 5111, the Consumer
Review Fairness Act, with my colleague from Massachusetts,
Congressman Kenned. Today it is easier than ever for consumers
to make informed choices on which business or service to use by
conducting Web sites and apps that publish crowdsourced reviews
of local businesses. Easy access to reliable product and
service evaluations has reduced transactions costs and helped
contribute to an enormous consumer surplus estimated in the
billions of dollars.
Unfortunately, a number of businesses have become
frustrated by what they perceive as unfair criticism, and some
have turned to the questionable legal remedy known as non-
disparagement clauses, often buried in nonnegotiable form
contracts. These clauses prohibit their customers from writing
negative reviews about their businesses. It is essential we
protect consumers' right to free speech and remove any doubt in
potential consumers' minds that the reviews they are reading
online are anything other than fair and accurate.
This bill would void non-disparagement clauses in form
contracts. It would also provide the FTC with the enforcement
tools it needs to combat the bad actors who try to use these
onerous clauses.
And I yield the balance of my time to Mr. Pompeo of Kansas.
Anyone else on our side?
[No response.]
Thank you very much.
I next recognize the ranking member of the full committee,
Mr. Pallone.
Mr. Pallone. Thank you. It is good to see you in the chair.
Mr. Lance. Thank you, Mr. Pallone. New Jersey has to stick
together.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Today the subcommittee will attempt to review
17 bills. I say ``attempt'' because we cannot possibly expect a
thorough review of each piece of legislation on the agenda.
While I am pleased that the majority agreed to add six bills
authored by Democrats, unfortunately, it was to an already-too-
long list of 11 Republican bills.
Mr. Chairman, as you know, I am a big proponent of regular
order. To me, that means engaging in real deliberation, not
just having a check-the-box hearing. Since I can't possibly
cover all the bills being considered, I am going to focus my
comments on those that are intended to inhibit the ability of
the Federal Trade Commission from carrying out its mission of
protecting consumers. This attack on the FTC is notable, in
light of the majority's recent praise of the FTC's privacy and
data security expertise, both recently in the Communications
and Technology Subcommittee and last year during this
subcommittee's markup of data security legislation.
But the Republican process bills before us today just
confirm the majority's true intention, I believe, and that is
across-the-board deregulation. Republicans say privacy should
be only in the purview of the FTC. Yet, they are simultaneously
introducing bills to gut the FTC of even its limited
authorities.
Among their many deficiencies, these bills would encourage
stall tactics by bad actors, burden the staff with
unconstructive tasks, and effectively obstruct important
information exchanges between Congress and the FTC. These
initiatives also would limit the FTC's ability to assist local,
state, federal, and other countries' governments in their
efforts to help consumers. They would also undermine the FTC's
ability to be flexible and nimble in addressing emerging
problems.
Republicans claim that these bills would promote
innovation, but, in reality, they would actually hurt
companies. For example, two of these bills could lead to
confidential investigations being inadvertently revealed before
the FTC has decided whether to take action or after the
Commission has decided not to take any action. And businesses
do not want the FTC being discouraged from providing guidance
to help those companies ensure that they are complying with the
law.
These eight bills put the FTC on the wrong track. If we
want to help consumers, we should be giving the FTC additional
tools, not raiding their toolshed.
And that is why I support the bill authored by Mr. Rush
that would give the FTC authority over nonprofits. That bill
would increase the ability of the FTC to protect consumers. For
example, it would allow the FTC to pursue scammers that have
formed faked veterans' charities to scam Americans who want to
help veterans.
And I support Mr. McNerney's bill, also, the Protecting
Consumers in Commerce Act of 2016, which would give the FTC the
authority to bring enforcement actions against communications
common carriers. Enforcement should be based on the activity,
not the entity. If a company in the telecommunications industry
acts unfairly or deceptively in advertising, marketing, or
billing, the FTC should act to protect consumers. For example,
if a wireless company promises unlimited data, but deceptively
slows the data speeds of high-usage customers, the FTC should
be able to act.
So, Mr. Chairman, I would like to move several of the bills
under discussion forward with the limited time that we have
left before the summer recess, but I would strongly urge that
we only advance those bills that can garner true bipartisan
support, because together I know we can move the ball forward
for consumers.
I don't know that anybody on my side would like some time.
If not, I will yield back the balance of the time.
Thanks, Mr. Chairman.
Mr. Burgess. The gentleman yields back. The Chair thanks
the gentleman.
That concludes member opening statements. The Chair would
remind members that, pursuant to committee rules, all members'
opening statements will be made part of the record.
We do want to thank our witnesses for being here today and
for taking time to testify before the subcommittee.
Today's hearing will consist of three panels. Each panel of
witnesses will have the opportunity to give a summary of their
opening statement, followed by a round of questions from
members. Once we conclude with questions from the first panel,
we will take a brief recess and set up for the second panel
and, then, subsequently, the third panel.
Our first witness panel for today's hearing is Ms. Edith
Ramirez, the Chairwoman at the Federal Trade Commission. We
appreciate your being here today and thank you for the time and
attention that you have always given to the subcommittee when
we have called. It is certainly appreciated.
We will begin the panel with you, 5 minutes to summarize
your opening statement, please.
STATEMENT OF EDITH RAMIREZ, CHAIRWOMAN, FEDERAL TRADE
COMMISSION
Ms. Ramirez. Thank you. Dr. Burgess, Ranking Member
Schakowsky, and members of the subcommittee, I appreciate the
opportunity to appear before you today to present the Federal
Trade Commission's testimony on the 17 bills under
consideration by the subcommittee. My fellow Commissioners and
I appreciate the subcommittee's commitment to protecting both
consumers and innovation.
As you know, the FTC is an independent and highly-effective
bipartisan agency. We are the only agency with the jurisdiction
to protect consumers and promote competition in most sectors of
the economy.
As a civil law enforcer, we guard against business
practices that are unfair or deceptive to consumers and we aim
to do so without impeding legitimate business activity. We also
enforce the antitrust laws to ensure a competitive marketplace
in which law-abiding businesses can flourish.
In addition to our law enforcement, the FTC engages in
extensive research and policy work. The FTC also educates
consumers and businesses to encourage informed consumer
choices, compliance with the law, and public understanding of
the competitive process.
We are particularly committed to addressing the impact of
technology and changing business practices as part of our law
enforcement, policy, and education efforts. We work to enhance
our understanding of how technology affects consumers and the
functioning of the marketplace through research and engagement
with consumer advocates, industry, academics, and other
experts.
Over the last several years, we have also deepened our
internal technical expertise. We hired our first Chief
Technologist in 2010 and have continued to attract prominent
experts to serve in that role. And last year we created the
Office of Technology, Research, and Investigation to support
our law enforcement efforts and explore cutting-edge technical
and policy issues relating to big data, the internet of things,
and other emerging technologies.
But, even as commerce and technology continue to evolve,
many of the fundamental problems we see in the marketplace
remain the same: fraudulent schemes, deceptive advertising,
unfair practices, as well as mergers and conduct that harm or
threaten to harm competition. The agency tackles these
challenges through targeted law enforcement. Our structure,
committed staff, and research capacity enable the FTC to meet
its mandate of protecting consumers and competition in an ever-
changing marketplace.
I appreciate the opportunity to comment on the 17 proposed
bills before the subcommittee. While the Commission generally
supports several of the bills, we believe that other measures
may unintentionally hamper the FTC's ability to continue to
fulfil its mission to protect consumers and competition. Our
written testimony addresses each of the bills, but let me
provide a brief overview.
House bills 5111, 5092, 4460, 4526, 5212, 5245, and 5104,
if enacted, would identify and address specific acts or
practices that Congress proposes to include in the Commission's
consumer protection agenda. We generally share the
subcommittee's goals in these areas. For example, to prevent
companies from silencing truthful consumer reviews, to stop
deceptive safety claims in the sale of sports equipment, to
promote fairness and transparency in sale of concert tickets,
and to prohibit online travel sites from deceiving consumers
about their affiliations with hotels.
The Commission also shares the subcommittee's goal of
facilitating deliberations and highlighting important agency
work. To this end, H.R. 5116 would give a bipartisan majority
of Commissioners another way to meet and deliberate, and
portions of H.R. 5098 would require an annual report to
Congress on the important problem of elder fraud.
As to several other bills, specifically H.R. 5093, 5097,
5109, 5118, 5136, 5115, and the remaining portions of 5098, we
do have certain concerns. We recognize and support the
objectives of these bills, the avoidance of undue burdens on
business, transparency of agency operations and its application
of the law, and assurance that agency actions are based on
sound analysis and evidence.
But the agency already has a variety of processes in place
to advance these important values. As explained in our written
statement, we are concerned that the measures could have
unintended consequences for our work and, ultimately, for
consumers.
Finally, House bills 5239 and 5255 would repeal the common
carrier and nonprofit exemptions to the FTC Act. The Commission
supports these measures which would allow us to protect
consumers and competition more broadly and to ensure the
consistent application of laws across economic sectors.
In closing, I want to reiterate that we are committed to
finding ways to enhance our effectiveness, anticipate and
respond to changes in the marketplace, and meet current and
future challenges.
Thank you very much.
[The prepared statement of Ms. Ramirez follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentlelady for her
testimony, and we will move to the question-and-answer portion
of the hearing. I will begin the questioning by recognizing Mr.
Lance of New Jersey for 5 minutes, please.
Mr. Lance. Thank you, Mr. Chairman, and good morning to
you, Commissioner.
I understand that the FTC settled a case with Roca Labs
that resulted in an injunction that prohibits the company from
using form contract provisions punishing consumers for giving
negative reviews. And I am the sponsor the legislation in this
regard, H.R. 5111, and I am pleased that you commented
favorably upon it.
I would like to know, based on your expertise, what
additional tools would the Consumer Review Fairness Act give
the Commission to stop these kinds of deceptive practices.
Ms. Ramirez. Congressman, thank you for your question. This
is an issue that is of concern to us in connection with the
case that you mentioned, Roca Labs. That case involved
deceptive advertising with regard to weight-loss products, but
the company also threatened lawsuits against consumers who
wrote negative reviews in connection with those products.
We believe that it is important for consumers to have
access to truthful information, and we believe that the bill
that you are cosponsoring would, in fact, permit that. We can't
address these kinds of issues individually as effectively as
legislation like the kind that you are sponsoring. So, we see
this as something that would be beneficial.
Mr. Lance. I don't recall the details. Was this a decision
of one of the United States Circuit Courts in that case?
Ms. Ramirez. This was a settlement that was reached by the
Commission and it did address this issue of non-disparagement
clauses that we believe have the effect of impeding accurate
and truthful information about products.
Mr. Lance. And generally, how do companies entrap consumers
so as not to be able to be honest in their reviews?
Ms. Ramirez. What could happen is that there might be a
non-disparagement clause that is included as a term in a
contract that consumers may potentially not be aware of. In any
event, it does impede the ability of consumers to provide
useful reviews online. We think that that is an important
avenue for consumers to be aware of reviews of products, and we
promote the need for consumers to have access to truthful and
accurate information, regardless of whether it is a negative
review, so long as it is truthful.
Mr. Lance. And the average consumer might sign some sort of
form when he or she purchases a product and not realize that he
or she is signing a form with a non-disparagement clause in it?
Ms. Ramirez. That certainly could be a scenario that we
might encounter, yes.
Mr. Lance. I think it is essential that the American people
have the right to speak their minds in this area, and I hope
that the bill I am sponsoring, with the cosponsorship of
Congressman Kennedy, will be able to garner unanimous support
here. And I certainly want to work with the FTC because I think
it is nothing short of a scandal that the American people
cannot freely and fairly express their points of view regarding
products and services for which they have contracted.
Thank you, Mr. Chairman, and I yield back the balance of my
time.
Mr. Burgess. The gentleman yields back. The Chair thanks
the gentleman.
The Chair recognizes Ms. Schakowsky of Illinois, the
ranking member of the subcommittee, for 5 minutes for
questions, please.
Ms. Schakowsky. Thank you, Mr. Chairman.
Much of the discussion from the majority in today's hearing
is about how the FTC is holding back innovation by overreaching
on its enforcement. At the same time, they are ignoring, I
think, the need for the FTC to be innovative and flexible, to
adapt to innovation in industry.
So, let me refer to H.R. 5098, which requires the FTC to
publish an annual plan of its projected activities for the
year. The bill may seem innocuous to some people, but I know
the FTC has concerns about publishing such a report. What are
some of the concerns, Mr. Ramirez?
Ms. Ramirez. Thank you, Ranking Member.
I would highlight at least two concerns. One is that we are
already quite transparent about the priorities and work that
the agency undertakes. I mean, I will just offer you just a few
examples of that. That includes the fact that we include our
priorities and plans for the upcoming year in connection with
our congressional budget justification. We also go through a
strategic planning process that we are required to do at the
outset of every administration. We last published a strategic
plan, a 5-year plan, back in 2014 covering the years 2014
through 2018.
Also, in connection with our regulatory matters, we on
annual basis publish upcoming rule reviews or rulemakings that
we are undertaking. That is apart from the significant
communication that we have on our Web site where we list
upcoming events. Our law enforcement actions, of course, are
confidential, but when we do take enforcement action, we
absolutely publicize those.
So, No. 1, I believe that we are fully transparent when it
comes to our priorities and upcoming plans. And secondly, I
worry about the added burden that would be placed on the agency
doing more than we already do with existing reporting
requirements.
Ms. Schakowsky. Well, let me raise a concern I have, that
it would inhibit in some way the agency's ability to react to
emerging trends. So that, if you have to issue a report more
than a year in advance, that it could, and I would be
concerned, that it would make the Commission less flexible.
Ms. Ramirez. I completely concur. We, for instance, hold a
number of workshops over the course of a year. Oftentimes, we
may not know in December what all of the workshops that we may
be hosting the following year. We want to be flexible. We want
to make sure that we stay on top of emerging trends, and we
want to have the flexibility to decide on those going forward.
I think the more burdened that we are with reporting
requirements, we may feel compelled to stick to a particular
framework that has been set out when, in fact, it is more
important for the agency to remain nimble and flexible.
Ms. Schakowsky. Right. H.R. 5097 automatically closes
investigations after 6 months unless the FTC acts through
communications with the company being investigated or the
Commissioners vote to keep the investigation open. Why would
investigations take longer than 6 months? And I wonder if you
have any examples of investigations that may have been idle for
some or just taken longer and why.
Ms. Ramirez. It is not uncommon for an investigation to
take longer than 6 months. A lot of the investigations that we
handle are complex. The competition investigations that we
handle are certainly difficult and complex and do require time.
Let me note that there is regular communication as a
general practice with companies that are under investigation.
So, any concern about there being a company who may not know
the status of an investigation, we generally endeavor to stay
in contact with them.
I think that it would be a very severe consequence that
would penalize consumers if the measure that you note were to
pass. To automatically terminate an investigation for failure
to communicate with a company would, in my mind, be far too
severe and really would undermine our ability to protect
consumers. There could easily be an oversight where there might
not be communication, and in my mind, it is a disproportionate
consequence, a failure to communicate.
Let me also just note that we already have processes in
place. We have a rule that requires any company that is subject
to an obligation to preserve materials, if there has not been
any communication with the agency over the course of one year,
that duty to maintain information expires.
So, we already have rules in place to ensure that there is
regular contact with companies that are under investigation,
but I think it would unduly harm consumers if this measure were
to be adopted.
Ms. Schakowsky. Thank you for clarifying that.
I yield back.
Mr. Burgess. Thanks to the gentlelady. The gentlelady
yields back.
The Chair recognizes the gentlelady from Tennessee, Mrs.
Blackburn, and Vice Chair of the full committee, for 5 minutes
for questions, please.
Mrs. Blackburn. Thank you, Mr. Chairman, and it looks like
your allergies are under control. I am happy to see you sitting
back there with the gavel.
Ms. Ramirez, I do want to come to you with just a couple of
questions on the BOTS Act. As I said earlier, I appreciate your
comments on this. Of course, it is a simple three-page bill. It
would make an unfair and deceptive practice under the Federal
Trade Commission Act to violate the terms and conditions of a
ticketing site and the use of a bot to do that. And the third
section would create a private right of action with a clear
federal standard to allow parties harmed by bots to sue
botsters under that clear federal standard.
So, our goal--and I think you share this goal--is to say,
how can we help ticket-sellers protect themselves against
scalpers who use this circumvention software? And if a ticket-
seller is the victim of a ticket bot scheme, how should they
report that unlawful activity to the Commission?
Ms. Ramirez. Generally supportive of this measure. So,
thank you for sponsoring it. We share the concerns that you
have about the use of software in connection with the sale of
online tickets.
In connection with this bill, we would only have just a
couple of comments to ensure that the bill only prohibits
unlawful activity and doesn't unintentionally ensnare
legitimate activity. And that would be to make sure that it
doesn't punish general purpose software and only software that
is designed for the activities that you note.
We would also suggest that the bill clarify that consumers
could be permitted to resell tickets. Again, our goal would
simply be to make sure that only unlawful activity is captured
by the bill. But generally, we are supportive and share the
concerns that you have articulated.
Mrs. Blackburn. OK. And then, if a ticket-seller is the
victim of a bot scheme, how do they go about reporting that to
you? I want you to discuss just a little bit about your record
of work in combating the illegal activities of ticket scalpers.
Ms. Ramirez. We take all complaints. People who have been
afflicted and victimized by unlawful activity can report
complaints to us online or also via telephone. This is an area
that we are concerned about, and I think this measure would
allow us to be even more active in an area that we certainly do
care about.
Mrs. Blackburn. Well, we will look forward to moving the
legislation forward. We know that scalpers using the bots and
really putting themselves at the head of the line ahead of
consumers ends up costing consumers to have to pay higher
prices. So, we want to make certain that we are specific, that
there is that clear federal standard, and we will look forward
to moving the bill through the process and working with you.
And then, Mr. Chairman, I am going to yield my time back.
Mr. Burgess. The Chair thanks the gentlelady. The
gentlelady yields back.
The Chair recognizes the gentleman from Massachusetts, 5
minutes for your questions, please.
Mr. Kennedy. Thank you, Mr. Chair. I appreciate the chance
to have an important hearing.
And to the Chairwoman, thank you very, very much for
appearing before us.
Last month I was pleased to join my colleague, Congressman
Lance of New Jersey, in introducing the Consumer Review
Fairness Act. And I appreciate the comments on the proposed
legislation that you were helpful with.
I would also like to commend a friend of mine, Eric
Swalwell, who has been working on this issue for several years
as well.
I think we can all agree that truthful consumer reviews are
an invaluable tool for prospective consumers in making an
informed decision. Like you, I am concerned about companies
hiding non-disparagement clauses in their terms of service in
an effort to bar consumers from posting negative reviews of a
product, service, or experience.
Ms. Ramirez, can you briefly discuss the current tools at
the FTC's disposal to combat these types of non-disparagement
clauses and how the FTC has dealt with these cases in the past
using these clauses?
Ms. Ramirez. We have our enforcement tools available to us.
I mentioned in my earlier comments a case, Roca Labs, in which
we encountered this issue. It was a weight-loss case where the
company was making deceptive weight-loss claims.
But, as part of that, they have included terms and
conditions that included a non-disparagement clause, and the
company was threatening to sue consumers who had included
negative reviews about this what we alleged was a bogus
product.
So, we do have law enforcement tools. We can go case by
case, on a case-by-case basis, in an effort to address this
issue. I think legislation would enhance our ability to tackle
these types of non-disparagement clauses.
Mr. Kennedy. And I appreciate that. If you are looking for
additional legislation, do you think the Consumer Review
Fairness Act would address and provide you with sufficient
authority to prevent future use of those clauses from
intimidating----
Ms. Ramirez. I think it would be beneficial for us to have
the additional authority under this measure, yes.
Mr. Kennedy. Great. Thank you.
And shifting gears for a quick second, I was hoping you
might be able to discuss the FTC's approach to made-in-the-USA
labeling. How is it enforced and what are the benefits of ``all
or substantially all'' that standard, if you can just
articulate that?
Ms. Ramirez. Sure. This is a standard that the agency has
been applying for some time now. It is derived from research
that the agency has done to understand how consumers interpret
made-in-the-USA claims. And so, based on this understanding of
the net impression that consumers take away from those types of
claims, we have determined that a product, in order to make an
unconditional, unqualified made-in-the-USA claim, that the
product in question must be all or virtually all, it should all
be made in the USA, in the U.S., rather.
So, as a result, we have been quite active in this area.
This particular measure that would apply a consistent federal
standard we think would be beneficial. The one comment that I
would make here is that I believe that state enforcement is an
important complement to the tools that the agency has used in
this area. So, that would be something that we would encourage.
Mr. Kennedy. So, I agree, and it is my understanding that
the chief goal of this legislation is, just as you said, to
create a singular uniform federal standard for made-in-the-USA
manufactured products. I think that is a great goal. But I
share the reservation when it comes to blanket preemption of
all state laws in that area. In many cases states are far more
effective at implementing these types of standards and serve as
a great partner and complement some of your efforts.
Can you discuss concerns you have with the bill as it is
currently written? And if that is the main concern, preemptive
concerns, if you would just go into a little bit more detail,
and about the ability of states to be able to actually enforce
that standard as well?
Ms. Ramirez. My principal concern here, as in a number of
other areas, is that I find state enforcement to be beneficial.
I think it would be very unfortunate if we were to lose state
activity when it comes to enforcing claims, made-in-the-USA
claims. So, in my mind, it is something that I would urge the
members of the committee to consider adding ``state''. That is
my primary concern.
Mr. Kennedy. And what about a private right of action? I'm
sorry. Excuse me. What about a private right of action?
Ms. Ramirez. The Commission hasn't taken a position on a
private right of action. I think my main concern would be
ensuring that there is enforcement by state law enforcers.
Mr. Kennedy. Great.
In your view, would blanket preemption, as the bill is
currently drafted, cause any shortfalls in consumer protection?
Would it limit the ability of consumers to ensure products are
labeled truthfully if only the FTC has the authority to enforce
it?
Ms. Ramirez. Again, I do. I believe that, as an agency, we
have limited resources. We do our best to tackle deceptive
claims in this area, but I believe that it is important to have
other enforcers in the space. In my mind, state attorney
general offices have done tremendous work in this and other
areas. So, I view, as a general matter and here as well, state
enforcement to be important.
Mr. Kennedy. Thank you, ma'am.
I yield back.
Mr. Burgess. The gentleman yields back. The Chair thanks
the gentleman.
The Chair recognizes the gentleman from Mississippi, Mr.
Harper, 5 minutes for your questions, please.
Mr. Harper. Thank you, Mr. Chair.
And thank you, Chairwoman Ramirez, for being here.
H.R. 5092, the Reinforcing American-Made Products Act,
would establish a national standard on marketing products made
domestically with the label ``Made in USA''. The bill aims to
provide that consistency and clarity for manufacturers and
businesses and, hopefully, for consumers as well. It would also
help manufacturers avoid legal risk and additional regulations
caused by conflicting labeling requirements for individual
states and, thereby, I believe, help consumers by reducing
those costs.
And I certainly appreciate the work that the Commission has
done to develop its guidance on made-in-USA labeling. The FTC
has worked with American manufacturers to ensure they
understand what it means to source all or virtually all of
their inputs domestically. As you noted in your testimony, the
FTC standard is based on consumer understanding, and this is
the touchstone that matters most because the purpose of the
label is to inform rather than to confuse consumers.
What is the danger in having differing standards throughout
the United States on made-in-USA labeling?
Ms. Ramirez. As a Commission, we haven't explored the
dangers of different standards. I think we are generally
supportive of the measure applying what we believe is a robust
standard that the FTC applies. My only comment here would be,
again, the focus that we not lose state enforcement. So, we
haven't opined. I am not an expert in all of the various state
standards. I can certainly see the benefits of having one
federal standard. I think the standard that we employ is a
robust one that does adequately protect consumers. So, as a
result, we are generally supportive of this measure.
Mr. Harper. Of course, the word I used was ``danger''. Had
I said ``impact,'' maybe that would have been a better word.
But doesn't that create, by having different standards in
different states, that is what you believe this would improve
on?
Ms. Ramirez. I think there are benefits to having a
consistent standard. Again, my principal concern would be to
ensure that states continue to play an active role in this
area. They have done, I think, a good job, and I think it is
always important to have complementary law enforcement.
Mr. Harper. So you are saying play an active role based on
a single standard?
Ms. Ramirez. That is right.
Mr. Harper. A uniform standard? Versus having all the
different states with different impacts that may be in
compliance or differing from what FTC would prefer?
Ms. Ramirez. Generally, in support of there being a single
standard that applies the FTC standard, yes.
Mr. Harper. If states begin legislating in this area, what
happens if they conflict and compliance with one means being
out of compliance with another?
Ms. Ramirez. Again, I can see there would be benefits to
having one standard. So, generally supportive of your measure.
Mr. Harper. The Commission has brought a mandate to enforce
all deceptive marketing practices, not just those dedicated to
made-in-USA labeling. Fortunately, however, the Commission has
dedicated a fair amount of resources to this issue. The
Commission brought a complaint against a company in February
for deceptive marketing with a made-in-USA label. Continuing to
ensure that companies are playing by the rules is important to
guarantee that consumers can rely on made-in-USA labeling. Is
the Commission committed to continuing its robust enforcement
on this issue?
Ms. Ramirez. Absolutely, we are.
Mr. Harper. I certainly appreciate your time here. I guess
one of the concerns that we would have, as we look at your
suggestion on this, is, yes, it would move us away from a
single standard, but you could still have a broad
interpretation by 50 different states of state enforcement of
an FTC standard versus FTC doing that. But I appreciate your
input on it and your testimony, and we think this would be a
step in the right direction. Thank you.
I yield back.
Mr. Burgess. The gentleman yields back. The Chair thanks
the gentleman.
The Chair recognizes the gentleman from New Jersey, the
ranking member of the full committee, 5 minutes for your
questions, please.
Mr. Pallone. Thank you, Mr. Chairman.
Ms. Ramirez, H.R. 5136 would require the FTC's Bureau of
Economics to conduct a cost/benefit analysis for all
recommendations for legislative or regulatory actions submitted
by the Commission. Can you provide some background on the
Bureau of Economics, what its function is now, and if the
Bureau were forced to devote time and resources to preparing
the kind of economic analysis required by this bill, would
resources have to be redirected away from the Bureau's current
work?
Ms. Ramirez. Yes, happy to. There are Bureau of Economics
supports all over the work that the agency undertakes. So,
there is no Commission action without the input of our Bureau
of Economics. So, already, they are involved in review, our
enforcement work, our policy work. They play a very active
role. Economic thinking is an important issue that we want to
take into account as we consider any of the work that the
agency undertakes.
We are both a competition agency as well as a consumer
protection agency. So, we are always mindful of the signals
that we are sending to the marketplace, and we want to
encourage companies to protect consumers and to----
Mr. Pallone. Well, what about the resources, because our
time is limited?
Ms. Ramirez. Yes.
Mr. Pallone. And whether this bill would force a
redirection?
Ms. Ramirez. So, my concern about this particular bill is
that it would, frankly, impede our ability to comment on a
number of actions, legislative actions at both the federal and
state level, as well as regulatory actions by other agencies.
We frequently provide our thinking, including our economic
thinking, on proposed action by Congress and other
policymakers. However, what the bill calls for is a
comprehensive cost/benefit analysis that we may not be in a
position to undertake.
No. 1, our expertise is limited to competition and consumer
protection. So, oftentimes, we will comment on a proposed bill
that may have other impacts, including health and safety. We
will not comment on those, but we will simply comment and ask
policymakers to consider the competition or consumer protection
aspects of those bills.
If we are required to undertake a comprehensive cost/
benefit analysis, we would be impeded from commenting on those
types of bills. Even beyond that, the types of resources that
it would take for us to do a type of cost/benefit analysis of
the kind required by the measure would really impede our
ability to comment on a number of things. So, I think the
measure unintentionally would hinder our ability to provide
very useful comments, and I don't believe that that is the
intent.
Mr. Pallone. Well, you listed a number of activities that
the Commission would no longer be able to do. Let me ask, how
does the FTC provide recommendations to state lawmakers or
foreign governments? And under this bill, will you be able to
assist states or foreign governments on these crucial consumer
protection or competition matters or is that going to be
limited, too?
Ms. Ramirez. I think it would dramatically limit our
ability to do that because we would not have the ability to
undertake a full cost/benefit analysis. And, also, it would
dramatically even limit the types of bills on which we could
comment, again, if they implicate areas of expertise that are
beyond competition and beyond consumer protection, we would
feel that we could not opine on the impacts on that side of the
equation. So, I am very concerned about this, and I think,
again, that it does not accomplish its intended objective.
Mr. Pallone. The last thing is my concern that the bill
could prevent the Commission from providing recommendations to
Congress. You are here today to provide comments on 17 bills
that would fundamentally affect the operations of the FTC. Your
written testimony was 22 pages, including a number of comments
and recommendations regarding each of the 17 bills. But, under
this bill, the Bureau of Economics would have to conduct a full
economic analysis of each recommendation you are sharing with
us about each bill. So, would these burdensome analyses
required, would they have even prevented you from being here
today or limited what your ability would have been to even
comment on what you did today, for example?
Ms. Ramirez. We would be severely hampered in our ability
to provide useful comments by this measure, yes.
Mr. Pallone. And other than testifying before Congress,
when else does the FTC provide recommendations? And again,
would that hinder the abilities of the Commission to assist
Congress in these types of things, day-to-day interactions,
whatever?
Ms. Ramirez. We provide both formal comments as well as
informal comments to a host of policymakers, including state
legislators, sister federal agencies. So, this would really
impede our ability to provide, I think, very useful
observations that the agency can convey.
Mr. Pallone. All right. Thank you so much.
Thank you, Mr. Chairman.
Mr. Burgess. The Chair thanks the gentleman. The gentleman
yields back.
And the Chair recognizes the gentleman from Houston, Texas,
Mr. Olson, 5 minutes for your questions, please.
Mr. Olson. I thank my friend from Texas.
Good morning, Chairwoman Ramirez.
As Chairman Burgess mentioned in his opening statement,
this hearing is very important to me and the people of Texas,
too. FTC's actions threatened Justin Boots in Justin, Texas.
That gets my attention because I walked into this hearing with
a pair of black ostrich, form-fitting Justin boots made in
Justin, Texas. Don't mess with Texas.
[Laughter.]
But, to be serious, I do want to talk about the best bill
in the FTC pack, H.R. 5116, the FREE Act. This bill corrects
misapplication of open meeting initiatives, and thank you for
your support.
I have seen this problem firsthand back at home in
Pearland, Texas. Under Texas Open Records laws, I could not
meet with our members of the city council to talk about flood
control, expanding Highway 288, or our team playing baseball in
the Little League World Series. I could not do that because of
Texas Open Records.
So, to get around that, well, we had to meet in public,
have an audience, engage the whole apparatus of the city to
record that meeting for the record. We solved that problem by
meeting two-by-two for half-an-hour, very inefficient, without
enjoying discussions with the full council.
It appears we have strapped the FTC with similar
constraints. H.R. 5116 fixes that problem. My question is, how
does FTC's work see needless constraints on meetings among
Commissioners because of the Open Records Act? I mean, are
there times when this would be helpful? You have three
Commissioners right now. If two sought to meet informally, it
would trigger Open Records. How about making this stop and just
having open and free discussion?
Ms. Ramirez. I can certainly understand the aim of the
Sunshine Act to ensure transparency in government. There are
moments when I agree that the Sunshine Act does create
problems. Certainly, in our situation right now where we have
three Commissioners, I can no longer speak with another one of
my fellow Commissioners without implicating in certain
circumstances the Sunshine Act.
I appreciate your measure, Congressman, that would add
another way for us to deal with the Sunshine Act and allow us
to deliberate. There are constraints. At the same time, we are
moving forward and we are complying with the Sunshine Act and
believe that we can still certainly fulfill our duties.
Mr. Olson. How can you do your job effectively if you can't
sit down with another Commissioner, two of you, and discuss
what is going forward, not discussing some new rules or
something, but just discussing what the FTC does? How does that
hurt you? Because we have got to stop that. That is just
insane. Any examples, specific ones, you would like to share
with us?
Ms. Ramirez. No. Again, I think right now, given our
current composition and the fact that we do have two vacancies,
it has made it more challenging. What it means is that we now
have to notice meetings in advance. I used to be able to pick
up the phone and speak to at least one other fellow
Commissioner. We now have to notice that.
Again, we are certainly working within the confines and
meeting our obligations under the Sunshine Act, but there are
challenges that it presents.
Mr. Olson. So, say it takes you hours/days to fix a problem
as opposed to minutes/seconds with an email, a phone call. You
can't do that. It just seems, in the cafeteria, hey, another
Commissioner, ``Let's chat about this issue.'' You can't do
that without triggering this whole Open Records law, is that
correct?
Ms. Ramirez. It has made it more challenging. Again, we are
working again in compliance with our obligations.
Mr. Olson. Thank you.
And I will close by letting the Chair know that I will
support or introduce some comments for the record for the third
panel from the funeral directors back home over H.R. 5212. It
is coming from the Settegast-Kopf Funeral Home in Sugar Land,
Texas; the Davis-Greenlawn and Hernandez homes there in
Rosenberg, Texas; the Froberg Funeral Home in Alvin, Texas, and
the South Park Funeral Home in Pearland, Texas. They have some
concerns they want to address. I may not be here. So, I will
ask permission to submit those for the record.
Mr. Burgess. OK.
Mr. Olson. And one more time, don't mess with Texas boots.
[Laughter.]
I yield back.
Mr. Burgess. The Chair thanks the gentleman. The gentleman
yields back.
The Chair recognizes the gentleman from Illinois, Mr. Rush,
5 minutes for your questions, please.
Mr. Rush. I want to thank you, Mr. Chairman, and I want to
thank Chairman Ramirez for her appearance today.
Chairwoman Ramirez, currently, the FTC Act applies only to
companies ``organized to carry on business for its own profit
or that of its members,'' which means that the FTC cannot
protect consumers from nonprofit companies that committee
unfair or deceptive acts.
I introduced H.R. 5255, which would amend the FTC Act to
give the FTC authority to cover nonprofits. If a company kind
of runs afoul of the FTC Act, consumers, in my opinion, must be
protected, even if that company is a nonprofit.
Chairwoman Ramirez, in your written testimony, you discuss
how H.R. 5255 would allow the FTC to pursue enforcement of
deceptive data security and privacy practices at not-for-
profits that have been involved with data breaches. I just want
you to take this one sliver of what H.R. 5255 is aimed at, and
could you please expand on the importance of this authority
specifically as it relates to better security and privacy
practices?
Ms. Ramirez. Absolutely. This is a gap that I have serious
concerns about. The fact is that a lot of nonprofits, including
hospitals and universities, hold a significant amount of
consumer information, personal information, that needs to be
protected. And we simply don't have the ability to reach
nonprofits. There are a few exemptions, but for the most part
it is a gap that I think we ought to close in order to provide
more complete consumer protection. So, I think it is an
incredibly important area. The data security side, it is
crucial, but it also impacts us in a number of other areas,
including, frankly, in connection with our competition work,
where we can't reach certain nonprofit hospitals, for instance.
Mr. Rush. Shifting to the unfair or deceptive acts and
practices, what are some cases that the FTC could bring if it
were able to bring cases against nonprofits that are committing
unfair and/or deceptive acts or practices?
Ms. Ramirez. Well, you cited an important area, which is
the data security/privacy arena. Another area that we do often
find that certain charities who avail themselves of nonprofit
status do engage in fraudulent or deceptive conduct, we can
reach that kind of conduct if we can establish that the entity
is, in fact, a sham nonprofit. But sometimes it can be
difficult to establish that, and this measure would close, I
think, an important gap and allow us to be more fulsome in our
protection.
Mr. Rush. Can you expound a little on if the authority at
FTC were expanded to cover not-for-profits? Tell us a little
bit more about how it would protect consumers.
Ms. Ramirez. Again, the examples that you offered are
significant to me. Data security is one of the most significant
issues that we face as a nation. And so, being able to reach
conduct by just universities, for example, or hospitals I think
is deeply important. Fraud in connection with charitable
organizations is another significant area that is of concern to
us. And while we have had some limited activity, where the
facts have warranted it and where we are able to establish that
a supposedly nonprofit organization is, in fact, one of the
top-rating for-profits, we can reach that conduct.
The case of hospital mergers is another example where we
would benefit from having jurisdiction over nonprofits. Because
of the current jurisdictional limitation, those matters have to
go to the Department of Justice for handling, even though we
have significant expertise when it comes to ensuring that
healthcare provider consolidation isn't anti-competitive. So, I
think those are just three different examples of ways that it
would be very beneficial for us to have jurisdiction over
nonprofits.
Mr. Rush. Well, thank you, Mr. Chairman. I yield back.
Mr. Burgess. The Chair thanks the gentleman. The gentleman
yields back.
The Chair recognizes Mr. Guthrie from Kentucky, 5 minutes
for questions, please.
Mr. Guthrie. Thank you.
Thank you, Commissioner, for being here.
A particular piece of legislation that I have that we are
looking at today is the CLEAR Act, and I understand that
closing letters are sometimes provided when an investigation
has taken place and you decide that there wasn't an illegal
act. So, the closing letters are provided, but these do not
include information that would be helpful for companies to
determine behavior that is not illegal.
The CLEAR Act provides a framework for illustrating fair
and truthful practices. But you noted your concern in testimony
that the descriptions required in the bill may identify a
company even though the bill prohibits the Commission from
including information that identifies the company at issue. And
I understand your concern to mean that, even if no information
identifies the company in the description, the company could
be, nonetheless, identified.
So, my first question is, do you believe the Commission is
unable to describe the legal activities of a company without
providing sufficient information for the company to be
identified? Because what we are hoping is that in the course of
your investigation you can say, ``We looked at these practices.
They are legal,'' and other companies could use that to guide
themselves as guidance. Is there a possibility of doing that? I
know when you asked about the CLEAR Act, your concern on the
CLEAR Act was you would disclose companies, and we think it
could be done without.
Ms. Ramirez. I have at least two concerns in connection
with this measure, Congressman. The first is that companies, as
you can imagine, would much rather that we not do anything that
could risk identifying that they were the subject of an
investigation if we determine that it is appropriate the close
the investigation without any enforcement action.
One concern that we have is that being required to identify
and explain the basis for not taking action and being sector-
specific does risk, as you lay out particular facts, does risk
the potential that companies, one could make an inference about
the identity of companies. So, in my mind, that is a very
substantial risk that I think companies would much rather
avoid.
Another significant concern that I have here has to do with
burden. I think it is important for the agency to be able to,
in a very nimble and flexible way, be able to close
investigations. Just to give you a sense of the volume of work
that we do, in the last year we completed approximately 250
investigations, many of which did not, in fact, result in any
type of formal enforcement action.
So, the burden, also, that would be entailed would be very
significant. When it comes to providing guidance, we really do
endeavor to provide guidance to companies about ways that they
can stay on the right side of the law. In my mind, this measure
would not accomplish, I think, its intended objectives.
Mr. Guthrie. But if you were doing an investigation on the
company, obviously, something brought you into the company to
do the investigation. And if you do the investigation and you
realize that they are complying with the law, then I think it
would be useful information for other people to have. I think
it would be good guidance to say, ``Hey, we found these
practices are within what we are describing.''
But would this concern about disclosure be mitigated if the
company could request that particular disclosure for that
company not be made before the final CLEAR Act report is
completed?
Ms. Ramirez. I would still be concerned about this measure
in all candor. I think in order to describe a basis for not
taking action, I think one would have to describe certain facts
that, again, raises the same risk of potentially identifying a
company. So, I think that concern would persist.
Again, I think in my conversations with companies and our
interactions with them, they would much prefer the ability of
the agency to much more nimbly close the investigation. I will
note that, when we think it is important for us to convey
information about the closing of an investigation, we do have
closing letters that are posted to our Web site. Last year we
had approximately 40 closing letters, to give you an example.
So, sometimes we might encounter a particular business practice
that we feel, while it did not rise to a violation, we think it
would be useful to notify industry about the concerns and,
then, also just explain why we decided not to take action. So,
we certainly do do that when it is appropriate. But I think to
require that that be done in every single instance when the
agency closes an investigation would place an undue burden and
would not achieve----
Mr. Guthrie. Well, what if you could make out a company the
end result was make out this company and say, ``They're
complying with the law.''? That is when you do the closing.
But, Rule 3.2.4.2 of the Staff Manual provides that, if no
violation of laws or regulations is revealed in the initial
phase of the investigation, it shall be submitted for closing.
You must have some kind of information that you send back to
say, ``Hey, the Staff Manual says we are going to look at
this.''
My point is that you are already doing the work. It seems
like that would suffice for the report on the CLEAR Act.
Ms. Ramirez. We do communicate with companies, but it is
not necessarily in written form. And when we do have a formal
closing letter, those are posted to the Web site. Again, in our
experience, companies really would prefer to maintain our
current practice. I have not heard complaints, any significant
complaints, about this area.
Mr. Guthrie. OK. Well, thank you. My time has expired and I
yield back.
Mr. Burgess. The gentleman yields back. The Chair thanks
the gentleman.
The Chair recognizes the gentlelady from New York, Ms.
Clarke, 5 minutes for your questions, please.
Ms. Clarke. I thank the chairman and I thank our ranking
member.
And I thank the Chairwoman for her testimony here this
morning.
We all need to remember that the FTC exists not to attack
companies, but to protect consumers. Enforcement actions have
happened when a company or a person is committing unfair or
deceptive acts or practices that harm consumers.
Chairwoman Ramirez, in my view, a number of the bills we
are discussing today could have detrimental effects on the
FTC's ability to carry out its consumer protection mission. For
example, H.R. 5115 codifies select portions of the FTC's
statement on unfairness. The bill focuses on portions of the
statement that discusses substantial injury, but ignores other
portions of the statement, including a discussion of
circumstances in which public policy concerns will
independently support action by the FTC.
So, can you tell us a bit more about some cases in which
the Commission relied on public policy standards?
Ms. Ramirez. What we do when we apply our unfairness
authority is to apply that three-pronged test under Section
5(n) of the FTC Act. We have used that standard now for many
years, since the 1980s. I think that it provides a very solid
framework for analysis in which we focus on whether or not
there is likely substantial harm to consumers, whether
consumers can reasonably avoid that harm, and then, also, calls
for us to also weigh potential benefits to either competition
or to consumers from the practice that we are examining.
So, in my mind, that standard has provided a solid
analytical framework and the cases in which we have applied our
unfairness authority are ones that we have looked at very
seriously and very carefully. And so, we generally don't simply
look to general public policy considerations, although that may
be a factor that is examined. But I think that we have applied
its authority in a very careful and serious way.
Ms. Clarke. So, if this bill becomes law, would the
Commission be able to bring those types of cases in the future?
Ms. Ramirez. My worry is that it would create uncertainty
when it comes to applying our unfairness authority, and I have
a couple of concerns, in particular. One is that it could
operate to prevent the agency from taking action when harm has
yet to happen, but could happen in the future.
And let me just give you a very simple example that is
cited in the unfairness statement itself that the agency issued
back in the 1980s. There we had a case, and the Commission
cited it, the Philip Morris case which involved a defendant
that distributed free samples of razor blades in a way that
could potentially cause danger, particularly if small children
opened a package, as you can imagine.
My worry is that, in that kind of an instance because the
harms happens in the future, that kind of situation and others
could potentially be hampered. And I think the current
framework operates well, and I worry about creating
uncertainty. And that is just one example of the concerns I
have about this particular measure.
Ms. Clarke. Let me turn your attention to FR 5118 that
prohibits the FTC from taking enforcement action based on
noncompliance with agency-issued guidance. Does the FTC do that
now and are enforcement actions brought based on companies'
failure to follow guidance?
Ms. Ramirez. Guidance is an administrative interpretation,
of the law. It is not the law. And we, in order to bring an
enforcement action, always have to show, and to prevail, we
need to show that there has been a violation of the law.
My concern with that particular measure is that, on the one
hand, it allows companies to be able to rely on guidance as a
safe harbor, but at the same time reinforces this idea that
guidance is not the law. So, in my mind, the existing law is
the right approach to take. Companies can certainly point to
guidance and argue that they have fully complied with the law,
but does not provide for a safe harbor, which I think, in my
mind, could raise concerns. It could also lead the agency,
frankly, to provide less guidance than we currently do, for
fear that a company that we believe has engaged in unlawful
activity could on a post-hoc basis cling to a statement that is
made in some form of guidance.
Another question that this particular measure raises is how
one actually defines guidance.
Ms. Clarke. Correct. I was going to ask that.
Ms. Ramirez. There is a multitude of work product that is
out there that we put out, whether it is in business education,
blogs, as well as more formal forms of guidance that we put
out.
Ms. Clarke. Thank you. I yield back, Mr. Chairman.
Mr. Burgess. The Chair thanks the gentlelady., The
gentlelady yields back.
The Chair recognizes the gentleman from Florida, Mr.
Bilirakis, 5 minutes for your questions.
Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it.
Thanks for holding this very important hearing.
Chairwoman Ramirez, I want to thank you and the Commission
for your great efforts on behalf of the past on the campaign to
educate seniors on schemes that could affect them.
I am also supportive of the Commission's effort to identify
and bring enforcement actions against bad actors that
specifically target older Americans. Although the FTC has not
yet seen increased rates of fraud in older Americans versus
other populations, I am concerned that, as the population ages
and more older Americans begin using the internet regularly,
that these trends will be accompanied by fraud targeting
seniors.
It has been about 2 years since the Pass It On Campaign
began. Do you have any thoughts as to what has worked best in
this outreach campaign and what lessons other outreach
organizations might learn from the Commission's experiences
along the way?
Ms. Ramirez. Absolutely. I mean, we certainly have found
that outreach is an incredibly important tool in order to make
sure that consumers have information available to them, so that
they can avoid becoming victims. The Pass It On Campaign is one
of our incredibly successful campaigns.
One thing that inspired us to go in that direction was the
fact that we learned that consumers, in particular older
consumers, don't like to be told what to do or what not to do.
And what this campaign taught us is that, if we can pass
information, if we get information to consumers and ask them to
pass that information on to their friends and family, consumers
tend to be, all of us tend to be more receptive to receiving
that information and passing it on to others, as opposed to
being dictated to. So, that campaign has proven very effective.
I agree with you that making sure that we address the needs
of older Americans is incredibly important. So, in addition to
the law enforcement efforts that we undertake, we are very much
engaged when it comes to outreach and education.
Mr. Bilirakis. Well, thank you for focusing on that.
Your testimony also states that the Commission already
reports on its performance base for the following year and its
strategic plan, as required by the GPRA. This is a useful
document that provides some of the highlights of the
Commission's plans. However, is the FTC currently required by
statute to specifically list its planned workshops,
rulemakings, and plans to develop guidelines as far as a
strategic plan? If you can answer that question, I would
appreciate it.
Ms. Ramirez. So, when it comes to rulemakings, actually,
twice a year we publish a chart of information about all
upcoming rulemakings. What we aren't obligated to do is that we
aren't required to identify specific workshops that we may
decide to do over the course of an ensuing year. I think that
that is a good thing not to be required to do that because it
gives us a lot of flexibility to undertake workshops and
participate in other forums that address issues that we may not
have thought about, that we see as emerging trends that need to
be addressed.
At the same time, I think the proposed measure to provide
additional information about the work that we do in connection
with protecting older Americans, that is something that we
would be happy to provide information about. So, we are happy
to do that. But my worry is on being forced to identify, for
instance, workshops. I think it might have the unintended
consequence of eliminating the flexibility that we currently
have.
Mr. Bilirakis. Again, staying on this topic, the FTC's
strategic plan states that the Commission conducts workshops as
a form of research, stakeholder outreach, and to advance the
agency's understanding of certain issues. Again, how does the
Commission decide which topics to pursue in workshops? Who is
part of that decisionmaking process? Does the Commission
solicit any public feedback in determining what topics to cover
in its workshops?
Ms. Ramirez. We do. It is an agencywide endeavor, and we
are consistently engaging with industry, with consumer
advocates, with academics and other experts. Technology is an
area where we want to make sure that we stay current. So, when
we develop ideas for workshops, we will also not only make a
decision about a particular workshop, but we will also announce
it oftentimes months in advance and solicit input from experts
and other stakeholders to get their views about what topics we
ought to cover within the scope of a particular workshop.
So, we really do endeavor to provide a balanced approach to
the topics that we cover. Our aim with our workshops is to
learn, and we take that very seriously. So, we come at it with
an open mind and really do solicit a lot of input before we
proceed with an agenda.
Mr. Bilirakis. Thank you very much. It is very informative.
I appreciate it.
I yield back, Mr. Chairman.
Mr. Burgess. The Chair thanks the gentleman. The gentleman
yields back.
The Chair recognizes Mr. McNerney, 5 minutes for your
questions, please.
Mr. McNerney. Well, I thank the chairman. I thank the
chairman for allowing me to sit in on this hearing.
Ms. Ramirez, as you know, my bill, H.R. 5239, the
Protecting Consumers in Commerce Act of 2016, would lift the
common carrier exemption from the FTC's jurisdiction. Lifting
this exemption would have the effect of directing the FTC to
prevent common carriers from engaging in unfair and deceptive
practices against consumers.
Would you briefly explain what the common carrier exemption
is and what it means?
Ms. Ramirez. Sure. The common carrier exception to the FTC
Act is an exception that was part of our original statute back
in 1914. It does not allow the agency to take action with
regard to common carriers. One example of that would be
carriers that provide voice service. Today, in light of the
FTC's reclassification of broadband service as a common carrier
service, that also means that today we cannot take action
against internet service providers.
So, this is an area where another example where we at the
Commission feel that it creates a gap in our jurisdiction that
ought to be addressed. This particular exception is one that is
quite antiquated, that in our view no longer makes sense in
today's environment, where there has been significant
deregulation and where the roles that common carrier services
play in today's environment, that no longer makes sense. And
so, it is something that we would like to see eliminated.
Mr. McNerney. Well, what are some examples of the exemption
harm? What are some examples of how the exemption harms
consumers?
Ms. Ramirez. Well, it doesn't allow us to take action. Let
me give you one example. We have brought actions involving data
throttling where a carrier that is providing internet service
will reduce the speeds, will set certain thresholds for
consumers, and if they go beyond a particular threshold, reduce
their internet speed, which basically would hamper the ability
of a consumer to download certain information without having to
wait endlessly.
By example, we have litigation that is pending against AT&T
involving what we consider to be deceptive data-throttling
practices in light of the FTC's reclassification of broadband
service as a common carrier. That would be a type of action
that we would no longer be able to bring prospectively. So,
that is just, generally speaking, an example.
Mr. McNerney. What type of redress does the FTC provide to
consumers?
Ms. Ramirez. Generally speaking, there are various remedial
tools that we have. One is an injunction relief in order to put
a stop to unlawful activity. What we also try to do is to
obtain consumer redress, which would be to put money back in
the hands of consumers who have been defrauded, who have, for
instance, paid a particular premium as a result of deceptive
conduct. So, one of our significant aims is to get money back
in the hands of consumers who have been victimized.
Mr. McNerney. Well, how do the redress tools that the FTC
has differ from those that FCC?
Ms. Ramirez. I think that the FCC has a different
congressional mandate. We are, first and foremost, a law
enforcement agency. The FCC, for instance, has an ability to
get civil penalties. We have also brought enforcement actions
in cooperation with the FCC.
We had two actions that I will mention, AT&T and T-Mobile,
involving the practice of what is known as cramming, where
unauthorized charges are placed on a consumer's cell phone
bill. And in connection with that, our principal aim was to get
money back in the hands of consumers. The FCC obtained civil
penalties.
So, I think there are different congressional sets of
objectives and different mandates. Ours is to primarily seek
redress and put a stop to unlawful conduct.
Mr. McNerney. And there has been cooperation between the
two agencies?
Ms. Ramirez. Absolutely. We have cooperated in a number of
areas over the years, including the area of telemarketing. So,
yes, there has been significant cooperation, and we have a
history of cooperating not only with the FCC, but with a number
of other agencies. We share, for example, competition
jurisdiction with the Department of Justice. We have a long
history of being able to work effectively with other agencies.
Mr. McNerney. Very good.
Thank you, Mr. Chairman.
Mr. Burgess. The gentleman's time has expired. The Chair
recognizes the gentleman from Oklahoma, Mr. Markwayne Mullin, 5
minutes for your questions, please.
Mr. Mullin. Thank you, Mr. Chairman.
Ma'am, thank you for being here.
What I am wanting to focus on a little bit first is a bill
that we have. My legislation, the SURE Act, would build that by
qualifying additional portions of the policy statement. My goal
is to provide more clarity as to the consideration at play in
the unfairness cases without altering the FTC authority. It
seems my bill simply clarifies current language.
My question to you, ma'am, how does codifying a statement
that the FTC currently uses to guide its unfairness case take
away any authority?
Ms. Ramirez. First of all, I think the current standard
that has been codified works well, as I noted earlier.
Secondly, my concern is that, by codifying certain pieces of
what is in the unfairness statement, leads to a certain
emphasis that I worry would ultimately impede our ability to
effectively protect consumers.
If you look at the track record that we have in applying
our unfairness standard, I think that we have applied it in a
very even-handed way. We always look very carefully and ensure
that the three prongs of the standard are met, and the key
issue is always looking to protect consumers against
substantial injury. But we undertake a cost/benefit analysis.
Mr. Mullin. Well, my legislation doesn't alter current
statutory authority for the Commission to prohibit acts or
practices that are likely to cause substantial injury. It
doesn't alter any of that. It just helps clarify it.
Ms. Ramirez. My concern is that, in that effort to clarify,
I think it has the potential to create uncertainty that could
limit us.
Mr. Mullin. Well, my biggest concern is, ma'am, that all we
are trying to do is clarify something. It doesn't alter it. And
what we are afraid of is change. I mean, there is always room
for an improvement. I have been in business my whole adult
life. One thing we always do is look for better practices. And
so, we are sitting here saying that it doesn't need change or
there is no point in looking at it because we think everything
is working perfectly, can you really tell me that your agency
is working perfectly?
Ms. Ramirez. I wouldn't say that we are working perfectly,
but I would say----
Mr. Mullin. OK. So, what we are trying to do----
Ms. Ramirez. But I would say that we are working
effectively. And my concern is----
Mr. Mullin. Well, effectively is OK, but improving is
better. There is always room for improving. I mean, we used to
do debriefs all the time in a different line of work I used to
do, and we would do it after every situation because we always
looked to tweak the practices we were using because there is
always a better opportunity and a better way to do things.
And so, it concerns me when we are not even willing to
change. Ma'am, I am not here getting onto you at all. I am just
concerned about the FTC, by you simply saying that, ``No, we're
good,'' because that is basically what I am hearing.
Ms. Ramirez. With all due respect, I believe and I would
ask, what problem has been identified in connection with our
application of the unfairness standard? My serious concern is
that, while I understand the effort to clarify, my worry is
that it creates greater uncertainty----
Mr. Mullin. There is already uncertainty out there.
Ms. Ramirez [continuing]. More litigation that ultimately I
think will consume agency resources, and not to the benefit of
consumers. So, that is my----
Mr. Mullin. But it is so broad right now that people are
left to wonder what it is; whereas, it is only within the
agency's hands to determine to clarify. All we are trying to do
is just to make sure everybody is on the same page. Is that
wrong?
Ms. Ramirez. Again, I appreciate the effort. My worry is
that this will lead to uncertainty that could impede our
ability to be effective when----
Mr. Mullin. How? What is it that you are saying? How could
it impede it? Just give me an example of why you are concerned
about it.
Ms. Ramirez. I think it has the potential to create
difficulties for the agency when we seek to prevent/correct
wrong.
Mr. Mullin. Specifically, how does the language do that to
you?
Ms. Ramirez. I have already noted that. I believe that by
expressing a concern about speculative harm, it has the
potential to lead to a situation where it might make it
difficult for us to prevent----
Mr. Mullin. In which way?
Ms. Ramirez [continuing]. Prevent future harm by creating
uncertainty about how that applies.
Let me also give you another example, if I may.
Mr. Mullin. OK.
Ms. Ramirez. I also think that it elevates, in doing the
cost/benefit analysis of the third prong, to use a shorthand, I
think that it elevates the impact that our efforts might have
on consumers who are not injured, to the detriment of those who
might be injured.
Mr. Mullin. But, ma'am, in all due respect back, you are
making an assumption, and we really don't know because there
was already uncertainty. All we are trying to do is improve it.
If there is already uncertainty in it and we are trying to
improve the uncertainty, but yet, we are OK with the way that
it is, we move nowhere; there is no change. When we already are
trying to help a situation out, trying to make a subtle change
to it, it doesn't hurt the situation. It tries to improve it.
And next year or later on down the road, if we need to improve
some more, we will.
Thank you for your time.
Mr. Chairman, I yield back.
Mr. Burgess. The Chair thanks the gentleman. The gentleman
yields back.
The Chair recognizes the gentleman from Kansas, Mr. Pompeo,
5 minutes for your questions, please.
Mr. Pompeo. Thank you, Mr. Chairman.
And thank you, Chairwoman Ramirez, for being here today.
You had a discussion with Mr. Pallone about H.R. 5136 that
had to do with publishing the work of the Bureau of Economics.
The bill is pretty simple. It requires the Bureau of Economics
to point to a problem with your recommendation that it seeks to
solve, and then, requires the Bureau to say why the market and
public institutions are inadequate to take on that problem.
Your primary criticism was that it was going to impose a
burden, that you might not be able to do some other things you
do because of this burden. Did I understand that correctly?
Ms. Ramirez. Yes, my concern is that the requirement that a
comprehensive cost/benefit analysis be conducted prior to the
agency providing any form of comments on legislative action,
for instance, that would be my main concern, that it would be
resource-prohibitive and would impede our ability to provide
very useful comments to policymakers.
Mr. Pompeo. What is the budget for the Bureau of Economics
today?
Ms. Ramirez. I can give you our budget as a whole is
approximately $300 million.
Mr. Pompeo. For the Bureau of Economics, though, what is
your budget, the people that would be impacted by this?
Ms. Ramirez. I would have to give you that information. I
don't have a specific figure. But what I can tell you is that
my economists have very serious concerns about this proposal
because our resources, as you can imagine, are limited.
Mr. Pompeo. Fair enough. Fair enough. Fair enough.
I am trying to find out--you said it is an enormous
burden--I am trying to translate that to reality, because we
might provide the additional funding for that.
How many economists do you have today?
Ms. Ramirez. We have approximately 80 economists.
Mr. Pompeo. And so, how many additional economists would it
take, in your judgment, to comply with this? Because you said
it was an enormous burden, so you have obviously done some work
thinking about this. So, tell me how many more than 80 we would
need to fund in order to comply with it.
Ms. Ramirez. Well, sitting here right now, I couldn't
answer that question. But let me also just note a related
concern, which is that, by requiring that there be a full and
comprehensive cost/benefit analysis, we would also be inhibited
from commenting on a matter that would be outside of our
expertise. So, for instance, we may comment on a particular
legislation that may have health and safety implications, but
we will comment and note and ask policymakers to take into
account the competitive impact in that situation because we
don't have expertise when it comes to health and safety, for
instance. So, we comment a lot in connection with scope of
practice in the healthcare sector, by way of example.
We are not equipped to comment on health and safety pieces
of the equation. But this measure, again, while I think it has
a good intention, would impede our ability to provide any
comment there because we would not be able to assess the health
and safety part of the equation. That would be a related
concern.
Mr. Pompeo. All the more reason you should do it, in my
judgment, but I digress.
If you just took what they were doing today and published
that, what would be the harm there? So, they are already
providing, they are doing something, right? You are doing a
recommendation. The Bureau of Economics is doing something.
They are providing that to you, correct?
Ms. Ramirez. Yes. These are----
Mr. Pompeo. So, that you can provide your recommendation or
your blog post, or whatever it is, or your testimony here
today. Why couldn't we just publish that, no additional burden?
Ms. Ramirez. Ultimately, it is the responsibility of the
Commission to decide what action they----
Mr. Pompeo. But why couldn't you publish the underlying
data? What would be wrong----
Ms. Ramirez. Because, in my mind, we get input from various
parts of our agency. We take economic thinking into account.
But, ultimately, the people who are accountable, it would be
myself and my fellow Commissioners. And it is up to us, taking
into account the recommendations made by our staff. With all
due respect to them, ultimately, we are the ones to be held
accountable. And what we, then, do, any action that we take,
then, becomes public.
Mr. Pompeo. It just seems, as the consumer protection
agency, you would want consumers to have a chance to see your
economic analysis. Perhaps we just disagree about that.
I want to go on to the SHIELD Act. Is it the FTC's position
that a company's compliance with guidelines should not be
admissible as evidence, compliance to a statute?
Ms. Ramirez. I think that may be a relevant consideration,
and we certainly would take that into account. My concern is
that it not be a safe harbor.
Mr. Pompeo. Right. There is no dispute. That is fine. The
SHIELD Act doesn't propose that it become a safe harbor. It
simply says that you will not, that the FTC will not argue
against a company submitting their compliance with your
guideline as evidence that they have complied with a statute.
Do you find that acceptable?
Ms. Ramirez. Again, I think it would be a relevant
consideration, certainly something that we would consider
relevant. But my worry is that that would be tantamount to
creating a safe harbor for post-hoc reliance on guidance.
Mr. Pompeo. Fair enough.
I yield back.
Mr. Burgess. The gentleman yields back. The Chair thanks
the gentleman.
The Chair recognizes the gentlelady from Indiana, Ms.
Brooks, 5 minutes for your questions, please.
Mrs. Brooks. Thank you, Mr. Chairman. I also want to thank
you for holding this hearing.
As the chairman and others may know, Sunday is going to be
the 100th running of the Indianapolis 500. As you might
imagine, this garners a lot of attention, not only at home, but
across the country and the world. In fact, over 300,000 people
are expected to come from around the world to our great city
this weekend to witness the greatest spectacle in racing.
But our Indianapolis area hotels have been sold out since
March 15th and people are booking hotels as far away as South
Bend, which is about three hours away. And so, while demand is
high, there is, unfortunately, some who seek to take advantage
of this and other major sporting events to deceive or mislead
the race fans for a quick buck. Last week my office met with a
constituent from Shockett Hotels who told us that third-party
sites take payments from visitors and promise a room in return.
And then, this comes as news for the hotel that has not
contracted with these entities and is left to deal with
legitimate rage of a visitor who is showing up when they, the
hotel, has to break the news that they are booked and that that
visitor does not have a room. It can be a huge problem for us
this weekend.
That is why I am interested in examining my good friend Ms.
Frankel and Ms. Ros-Lehtinen's bill 4526 today that seeks to
strengthen the vital safeguards, increase consumer protections,
and bolster the enforcement efforts necessary to stop scammers
from mimicking legitimate Web sites. So, I am interested in
hearing about the benefits of the legislation and how we might
improve their legislation because, obviously, the backbone of
Hoosier hospitality relies on getting these types of things
right. We don't want a lot of angry visitors and race fans. It
is not a pretty picture when that happens.
So, Ms. Ramirez, according to the hotel industry, this type
of scam, close to 15 million reservations were made on such
deceptive Web sites and cost U.S. travelers upward of $1.3
billion. Forty-one thousand people every day are getting
scammed by these types of Web sites.
Are you aware of this and seeing this kind of fraud in the
hotel market? And what kind of numbers are you seeing, if not?
Ms. Ramirez. We certainly are aware of this concern, and I
have certainly engaged with the online travel industry to
address this. I can't give you any specific numbers, and I can
try to get you additional information following the hear.
But what I can tell you is that this is certainly a
concern, and we would certainly want consumers to be able to
access hotel reservations free of deception. I think that this
particular measure does have benefits. One concern that I would
have is that we would want to make sure that legitimate
businesses that are not deceiving consumers are not captured by
the measure. And so, one suggestion we have is that, rather
than imposing disclosure requirements, that there be a
prohibition on misrepresentations. But, generally speaking, it
is a concern that I certainly share and would be happy to
continue to work with you and the members of the subcommittee.
Mrs. Brooks. I am curious about that because that is what I
think I read in your written testimony. And so, you indicate
mainstream third-party online travel agencies generally do not
generate that kind of deception. Of course they don't. That is
why they have been so incredibly successful. And, of course,
this bill is not meant to impede companies like Expedia and
others.
But what is it that you actually think a company, a
deceptive company would be--how do we get a deceptive company
from operating? What are you suggesting? I am confused by your
written testimony and even this testimony.
Ms. Ramirez. It is, generally, we are supportive of the
measure.
Mrs. Brooks. OK.
Ms. Ramirez. However, we think that, rather than specifying
particular disclosures, that a better way to tackle the problem
would be to prohibit misrepresentations. Again, I think getting
to your point that a fraudulent site may not comply with law,
in our mind, it would be better to bar misrepresentations. It
also would not place undue burden on legitimate sites.
Mrs. Brooks. Is that not inherent, that companies like this
should not make misrepresentations on their Web sites?
Ms. Ramirez. I think the objective is the same. Our
preference would just simply be to word it differently and bar
misrepresentations rather than seeking to specify disclosures.
Mrs. Brooks. And you have authority currently to enforce
unfair and deceptive practices, correct? And are you
prosecuting any? Are you pursuing any?
Ms. Ramirez. We do. I can't comment on any specific
investigation, but it is an issue that I, personally, have met
with----
Mrs. Brooks. Can you answer yes or no whether or not you
are pursuing any right now?
Ms. Ramirez. It is a matter that we are looking into and
are aware of. That is all I can say----
Mrs. Brooks. So, you cannot say whether or not you are
pursuing any investigations of these deceptive Web sites, yes
or no? That is a yes or no, without going into details.
Ms. Ramirez. It is an issue that we are looking at. I can
tell you that.
Mrs. Brooks. Then, that----
Ms. Ramirez. I can tell you that.
Mrs. Brooks. That is certainly a deceptive answer. Thank
you.
I yield back.
Mr. Burgess. The Chair thanks the gentlelady. The
gentlelady yields back.
I would recognize myself for 5 minutes.
And, Chairwoman, again, I do want to thank you for being
here and thank you for your forbearance today.
I just have a couple of questions on the consent orders,
consent decrees. Is it fair enough to use those two terms
interchangeably, consent decree and consent order?
Ms. Ramirez. Yes.
Mr. Burgess. So, for people who are not lawyers who are
watching this, what does a consent decree or a consent order,
what does that entail? When you enter into a consent decree
with the FTC, as a business, what is the practical effect of
that?
Ms. Ramirez. Generally speaking, our primary remedial tool
is an injunction. So, a consent decree will oftentimes prohibit
the unlawful conduct that we were targeting. The consent decree
may also include monetary provisions. Other provisions that
also are typical of our consent decrees would be recordkeeping
requirements, so that that would allow us to ensure that a
company is, in fact, complying with our order.
Mr. Burgess. And how long will these orders typically run?
What is the lifespan of one of these orders?
Ms. Ramirez. Federal court orders are indefinite. An
injunction that would be in place, put in place by a federal
district court would be indefinite. Under our administrative
process, an administrative consent order would be generally in
place for 20 years, although the Commission certainly does have
flexibility to modify that and impose a different timeframe.
Mr. Burgess. And as a practical matter, is that flexibility
employed or are generally consent decrees through the Federal
Trade Commission going to exist for 20 years?
Ms. Ramirez. Most of them are for 20 years, but we have
modified that timeframe in certain instances. So, to give you a
couple of examples, we have certain data security cases where
we imposed a requirement that there be data security audits. I
can cite to you two examples of the Twitter case and the
investor case. There the requirements of a data security audit
lasts only 10 years rather than 20.
Mr. Burgess. Yes, having been in business before I came
here, I mean, 20 years is an enormous timeframe in the life of
a business. Most businesses don't last 20 years. I don't know
if you have noticed. So, I do worry about the fact that the
default position tends to be 20 years.
Now what do other agencies do? If the Federal
Communications Commission is going to issue a consent decree,
what is the timeline likely to be there?
Ms. Ramirez. Dr. Burgess, in all candor, we don't keep
track. I couldn't tell you, sitting here right now, what the
typical approach is by other agencies.
Mr. Burgess. Do you feel your agency is in line with what
other agencies are performing?
Ms. Ramirez. I can't speak to that. What I can tell you is
that I think that what the agency does or what the Federal
Trade Commission does is appropriate, and it is an important
tool. Our consent decrees are an important tool to ensure that
consumers are protected. An injunction tends to be our primary
remedial tool that we use. We don't have the authority to
impose civil penalties, and a good number, most of our cases
don't entail any form of consumer redress or other monetary
relief. And so, I think it is important as a matter of
deterrence to be able to have a tool that can be long lasting
and that protects consumers.
Mr. Burgess. Now you bring cases both on the
anticompetitive front and the consumer protection front. Is
there a difference in the consent decree for either one of
those subjurisdictions?
Ms. Ramirez. Sure. We do tailor consent decrees to the
particular facts. And so, just by way of example, an order in
connection with a settlement in a competition matter would
require a divestiture, and in that context the requirements of
the order would only last so long as it would take to
effectuate divestiture. So, they do vary because of the
different set of circumstances.
Mr. Burgess. Let me ask you this: just as a practical
consideration for a business that is under a consent decree,
are they required to obtain permission from the Federal Trade
Commission before they were to roll out a new product or
service if they are under a consent decree?
Ms. Ramirez. Certainly not, Dr. Burgess. The aim and the
predominant form of our injunctions is to prohibit violations
of law. So, there are a number of companies that continue to
innovate. This includes Google, Facebook, Apple. They continue
to innovate. They are operating just fine under our orders. I
think our orders are tailored to the particular circumstances
of a case, tailored to address the consumer harm that we have
identified. And I think that we do a good job of ensuring that.
Let me also just note that we also have flexibility to
modify and even terminate an order. So, a company, if it finds
that there are changed conditions, can always come to us and
make a request to modify or even terminate an order.
Mr. Burgess. I have some questions, and in the interest of
time, I am going to submit those questions for the record in
writing.
Seeing no further members wishing to ask questions, I do
want to thank the Chairwoman for being here, for answering our
questions, and being our witness today.
This will conclude the first panel, and the committee will
take a brief recess while we assemble for the second panel.
[Recess.]
Mr. Burgess. The subcommittee will come to order.
Welcome back. Thank you for your patience, and thank you,
again, for taking the time to be here today.
We are moving into the second panel for today's hearing. We
are going to follow the same format as the first panel. Each
witness will be given 5 minutes for an opening statement,
followed by questions from members.
For our second panel, we have the following witnesses: Mr.
Joshua Wright, University professor, Antonin Scalia Law School,
George Mason University; Ms. Abigail Slater, general counsel at
The Internet Association; Mr. David Vladeck, professor of law
at Georgetown; Mr. Geoffrey Manne, founder and executive
director at the International Center for Law and Economics, and
Mr. Daniel Castro, vice president for Information Technology
and Innovation Foundation.
We appreciate each of you being here today. We will begin
our panel with you, Mr. Wright. You are recognized for 5
minutes for an opening statement.
STATEMENTS OF JOSHUA WRIGHT, UNIVERSITY PROFESSOR, ANTONIN
SCALIA LAW SCHOOL, GEORGE MASON UNIVERSITY; ABIGAIL SLATER,
GENERAL COUNSEL, THE INTERNET ASSOCIATION; DAVID VLADECK,
PROFESSOR OF LAW, GEORGETOWN LAW SCHOOL; GEOFFREY MANNE,
FOUNDER AND EXECUTIVE DIRECTOR, THE INTERNATIONAL CENTER FOR
LAW AND ECONOMICS, AND DANIEL CASTRO, VICE PRESIDENT,
INFORMATION TECHNOLOGY AND INNOVATION FOUNDATION
STATEMENT OF JOSHUA WRIGHT
Mr. Wright. Thank you, and thank you for the invitation to
testify today.
Chairman Burgess, Ranking Member Schakowsky, and members of
the subcommittee, thank you for the opportunity to appear
before you today, in particular, to discuss those proposed
bills aimed at improving the FTC's processes and consumer
protection enforcement.
My name is Josh Wright, and I am a university professor at
the Antonin Scalia Law School at George Mason University and
senior counsel at Wilson Sonsini Goodrich & Rosati.
Until August 2015, I was Commissioner of the Federal Trade
Commission. During my career as an economist and lawyer, I have
been fortunate enough to enjoy four separate positions at the
FTC, ranging from a teenaged intern in the Bureau of Economics
to Commissioner.
Before diving into the subject of today's hearing, I want
to make clear that the views I express here today are my own.
In my written statement I discuss in greater detail a number of
the 17 bills that are the subject of today's hearing.
In my opening remarks I would like to discuss what I view
as the key institutional challenge facing the FTC and its
consumer protection mission, to more deeply integrate economic
analysis at all levels of decisionmaking from staff members to
the Commission. With this in mind, I would like to begin with a
brief discussion of the role of economics and the Bureau of
Economics at the FTC.
The Bureau of Economics provides guidance and support to
the agency's competition and consumer protection activities. It
is a separate unit from the Bureaus of Competition and Consumer
Protection and, thus, provides independent economic advice to
the Commissioners. Working within the Bureaus of Competition
and Consumer Protection, the Bureau of Economics participates
in the investigation of mergers and alleged anticompetitive,
deceptive, and unfair acts or practices. It also conducts
rigorous economic analyses of various markets and industries.
The FTC's success has been attributable in large part to
its flexible enforcement authority that allows it to adapt
quickly to changes in technology and business practices, its
commitment to integrating independent economic analysis to
guide the use of those enforcement tools, and the remarkably
high quality of its staff of PhD economists in the Bureau of
Economics. I have written elsewhere, and I think it's worth
repeating here, that the economists assembled within the Bureau
of Economics are simply the best team in any regulatory agency
in the United States.
Where the FTC has been mindful of integrating economic
thinking and research into its new enforcement and policy
endeavors, it has performed very well. When the agency's
enforcement priorities have become untethered from economic
analysis, it has faltered, overreached, and become the subject
of significant criticism.
As technology evolves and the FTC's consumer protection
shifts into digital markets, privacy regulation, the internet
of things, and the world of big data, it is more important than
ever that rigorous economic analysis anchors the FTC's
activities. With that in mind, I do want to specifically
acknowledge Chairwoman Ramirez for her leadership on these
issues and commitment to ensuring that economic analysis
remains a priority for the agency.
The Commission, however, does occasionally fail to tether
itself sufficiently to rigorous economic analysis in its
reports, recommendations, and enforcement actions. Consider the
Commission's application of its unfairness authority and its
recent action against Apple. The Commission issues an
administrative complaint alleging that Apple engaged in an
unfair act or practice because Apple's 15-minute window which
allowed consumers to void entry of a password a second time
after an initial purchase did not allow parents the opportunity
for express informed consent.
Apple's product design choices, including the nature of
these disclosures and its choice to integrate the 15-minute
window to enhance the user experience are a product of
considerable investment and innovation. And as most consumers
with smartphones know, this feature provides substantial
benefits for consumers who don't want to experience excessive
disclosures or enter passwords every time they make a purchase.
Yet, the FTC cursorily dismissed Apple's design decisions and
disclosures having zero benefits for consumers and only
imposing harm.
To be clear, while cases like Apple are relatively rare,
they are likely to be an increasing part of the FTC's
portfolio. Rigorous economic analysis is the best tool the FTC
has available to protect consumers against a risk of
erroneously condemning business practices that benefit
consumers. For example, in Apple, greater attention to economic
analysis would, in my view, have kept the FTC from a harmful
second-guessing of product design decisions in ways that might
damage innovation.
I would like to mention one specific suggestion to the
subcommittee concerning a proposal that would facilitate
greater incorporation of economic analysis into Commission
decisionmaking. Specifically, I would propose the subcommittee
consider amending the SURE Act to mandate that the Bureau of
Economics publish a separate explanation of the economic
analysis of its cost and benefits of the Commission's action
whenever it enters into consent decrees.
The primary benefit of this proposal would be to provide
the economists within the FTC a greater role in the development
of the agency's consumer protection enforcement priorities in
this era of increasingly-complex cases involving rigorous
analysis of policy tradeoffs.
Thank you very much for your time, and I am happy to answer
any questions.
[The prepared statement of Joshua Wright follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentleman.
The Chair recognizes Ms. Slater for 5 minutes for your
opening statement, please.
STATEMENT OF ABIGAIL SLATER
Ms. Slater. Thank you. Chairman Burgess, Ranking Member
Schakowsky, and members of the subcommittee, thank you for the
opportunity to testify before you today.
My name is Gail Slater, and I am the General Counsel at The
Internet Association. The Internet Association represents over
40 of the world's leading internet companies. As the voice of
the internet economy, part of our job is to ensure that all
stakeholders understand the benefits the internet brings to our
society.
Today I will highlight three issues for the committee which
my written testimony provides greater detail on. First, the
Federal Trade Commission plays an important and respected role
in our society. However, there is always room for modernization
and increased transparency at any agency.
Second, one FTC process bill, in particular, the TIME Act,
is important to The Internet Association's members. The
internet is a fast-moving and dynamic marketplace, and the
framework for FTC consent orders should recognize this reality.
Lastly, the Consumer Review Fairness Act will protect
consumers nationwide from meritless attempts to silence free
speech, in addition to bolstering the growing online economy.
Regarding FTC process, it is important, first, to
acknowledge the valuable role the FTC plays in promoting
competition and protecting consumers in our society. Beyond our
borders, the FTC plays an equally important role, most recently
in the extensive negotiations around the U.S.-EU Privacy Shield
with which the committee is familiar.
The Internet Association thanks Chairwoman Ramirez for her
leadership of the agency, both here in the U.S. and overseas.
However, while we recognize the FTC for the important work that
it does, there is always room for modernization and increased
transparency at a 100-year-old agency.
Although FTC consumer protection and substantive law and
policy commands most of the spotlight, Commission process can
be equally important to stakeholders, which brings me to my
second point. Of the bills before the committee today, the TIME
Act is of particular importance to Internet Association
members. The TIME Act would create an 8-year cap on consent
orders the FTC enters into; whereas, under current agency
practice, consent orders expire only after 20 years.
To put 20 years in context for internet companies, it might
be helpful for the committee, first, to cast their memories
back to the year 1996, if they can, and then, to fast-forward
to the year 2036. In 1996, AOL and CompuServe were the largest
internet platforms in the world. Facebook founder Mark
Zuckerberg was 12 years old, and Google was still just a
research project for two Stanford grads. Dumb mobile phones
barely existed, and smartphones were a figment of Steve Jobs'
imagination. In 2036, it is hard to even begin to predict the
ways in which we will use the internet.
This time travel exercise is a lighthearted way of
illustrating that the internet changes a lot in 20 years. Yet,
while internet markets are highly-dynamic, the FTC consent
orders applied to them are static. This matters because 20-year
consent orders serve to slow down the pace of innovation of the
companies involved and are often outstripped by marketplace
developments during their term. The TIME Act corrects this
imbalance by creating a presumptive 8-year limit on FTC consent
orders.
The third and final topic I wish to address today is the
Consumer Review Fairness Act, also known as CRFA, which will
protect consumers nationwide from meritless attempts to silence
free speech online, in addition to bolstering the growing
online economy. The FTC would play an important role in the
CRFA as backstop enforcer.
To put the CRFA in context, it may be helpful, first, to
talk about the importance of online reviews to consumers.
Included in the benefits the internet brings to our economy is
the so-called consumer surplus, which exists because the
internet empowers consumers to make smarter and quicker choices
about how and where they spend their money. This consumer
surplus is calculated to be valued at billions of dollars per
year.
A great example of the consumer surplus in action is
consumer reviews. Every day Internet Association members like
Amazon, Trip Advisor, and Yelp democratize purchasing and
access to information by crowdsourcing the experiences of
others in consumer reviews.
In today's digital economy, nearly 70 percent of consumers
rely on online consumer reviews for information on where to
eat, shop, travel, and more. However, although most businesses
have come to accept this shift in consumers' knowledge, a
minority of holdouts refuse to let consumers share their
experiences online through onerous contractual terms.
Consumers usually have no idea they are signing up for
contracts attempting to limit speech, which are usually only
provided in small print at the moment of check-in or purchase.
A patchwork of state laws, court decisions, and federal agency
actions, including the FTC's, have attempted to protect
consumers subject to non-disparagement clauses. However, we
must address the issue on a national level to ensure the
protection of all consumers online.
The CRFA, which would prohibit the use of these onerous
clauses, will protect consumers nationwide from meritless
attempts to silence free speech. The Internet Association
strongly supports this legislation's effort to protect online
reviewers of goods and services from clauses that inhibit
honest reviews, and commends the committee for examining this
issue during today's hearing.
I welcome your questions on these important topics. Thank
you.
[The prepared statement of Abigail Slater follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentlelady.
Mr. Vladeck, you are recognized for 5 minutes for your
opening statement, please.
STATEMENT OF DAVID VLADECK
Mr. Vladeck. Thank you. Thank you very much, Dr. Burgess,
Ranking Member Schakowsky.
I am David Vladeck. I teach at Georgetown Law School, and I
served as Director of the Federal Trade Commission's Bureau of
Consumer Protection from 2009 until 2012.
I thank you for inviting me to be here this morning. You
have my written statement which addresses many of the proposals
pending before this committee. I want to focus my remarks on
three particular bills.
And I want to start off by urging the committee to first do
no harm. There are a number of these bills that I think are, no
doubt, well-intentioned, but would hobble the agency's ability
to effectively protect consumers.
I want to start with the TIME Act which would overturn by
statute a carefully-considered, balanced, bipartisan view of
the Commission that consent decrees ought to last for 20 years,
absent some change in circumstance that warrants their
modification.
Now one thing to keep in mind is, if we sue in District
Court, those injunctions last in perpetuity until they are
modified or otherwise rescinded. And so, 20 years I understand
sounds like a long time, but it is the only remedy the
Commission has in virtually all of the cases. So, the proposed
bill would turn a 20-year consent decree into an eight-year
one, renewable only if the Commission can meet the standards
set out in the statute. It turns meaningful restraint into what
lawyers would call somewhat of a glorified slap on the wrist.
And it is particularly inapt here because the data breach cases
that the agency litigates and settles are really the only
economic incentive for companies to really have robust data
security.
So, let's look at the facts. In 2015, there were nearly
half a million complaints filed with the FTC about identity
theft. Identity theft is the debris of an internet economy that
does not take data security seriously enough.
The Department of Justice estimates that more than 17
million people, 7 percent of American adults, were victims of
at least one incident of identity theft in 2014, and this is
big business. The last statistics the Justice Department
compiled come from 2012, but there identity theft cost the U.S.
economy $24 billion, $10 billion more than all of the losses
attributable to property loss through crimes.
So, this is the one real tool the agency has. I don't
believe any of the companies under consent order have ever been
recidivists. And, you know, the argument is this is going to
stifle innovation. Well, look at the companies under order. Not
one has experienced any sort of speed bump in innovation.
Facebook, Twitter, Google, small companies like Chitika,
FrostWire, they are thriving.
And the reason is our consent decrees are tailored not to
stifle innovation. If you look at the Google order, it requires
the company don't lie; if you are going to change your data-
sharing practices, get the consent of the consumer first, and
give the agency audits every other year.
In data security cases the fundamental consent decree is do
what is reasonable; do what a reasonable company in your shoes
would do, and help keep us informed. Those are the nuts and
bolts of these FTC orders.
There is a lot of rhetoric here about stifling innovation.
I would like to see a case in which some company made a
credible claim that was true.
Next, I would like to talk about the changes to the
unfairness statement. Contrary to the remarks earlier, the
unfairness statement would substantially amend existing law.
There are no two ways about it. It would cherry-pick certain
provisions to the unfairness statement and make them the law,
and it would add others.
Congress has deliberated on this issue for 100 years, and
Congress has decided not to do what has been proposed, which is
to rigidify and take off the table options for the agency
simply because the marketplace changes. We could not have
conceived of unfair acts like what took place in DesignerWare
where people devised devices that you take into your home and
surreptitiously photograph you, your family, and your loved
ones. This is something that we didn't anticipate in 1980, but
it is true today. And this recodification of the unfairness
standard jeopardizes those kinds of cases.
The last point I want to make is the SHIELD Act. It may be
that the intent of the bill is simply to allow evidence of
compliance introduced as compliance with guidance documents,
but that is not the way the bill is written. Compliance with a
guidance document would be viewed as compliance with the law,
and it would serve as an absolute defense liability. This may
simply be a drafting problem, but the way it is written now, it
is a get-out-of-jail-free card for companies that have violated
the law, simply because they can find somewhere in the agency's
archives a statement from a guidance document that might
support its position in litigation. That doesn't protect anyone
that we want to protect. It certainly doesn't protect
consumers.
I see my time has expired. Thank you very much.
[The prepared statement of David Vladeck follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentleman.
Mr. Manne, you are recognized for 5 minutes for an opening
statement, please.
STATEMENT OF GEOFFREY MANNE
Mr. Manne. Thank you. Thank you, Chairman Burgess and
Ranking Member Schakowsky, and members of the subcommittee.
Thank you for the opportunity to appear today.
I am the executive director of the International Center for
Law and Economics, a nonprofit, nonpartisan research center; a
formerly law professor. I used to work at Microsoft. And I had
what I like to call the most illustrious FTC career ever
because, at approximately two weeks, it was probably the
shortest.
I am not typically one to advocate for active engagement by
Congress in anything, no offense, but the FTC is different. The
FTC is unique. Despite some congressional reforms, the FTC
remains the closest thing we have to a second national
legislature. People don't see it that way, but its jurisdiction
really does cover nearly every company in America. Section 5,
the heart of the FTC, the substantive part runs about 20 words.
That leaves an enormous amount of discretion for the Commission
to use in a way that is effectively making policy decisions
that are essentially legislative.
The courts were supposed to keep the agency on course, but
they haven't. As former Chairman of the FTC Muris has written,
the agency has traditionally been beyond judicial control.
So, it is up to Congress to monitor the FTC's progress, to
tweak them when the FTC goes off-course, which is inevitable.
That is not a condemnation of the FTC's dedicated staff. It is
just that this one-way rachet of ever-expanding discretion is
simply the nature of the beast.
Yet, too many people lionize the status quo. They see any
effort to change the agency from the outside as an affront. It
is as if Congress was struck by a bolt of lightning in 1914 and
the perfect platonic agency sprang forth and there is nothing
we can do to improve it.
But in the real world an agency with such massive scope and
discretion needs oversight and feedback on how its legal
doctrines evolve. So, why don't the courts play that role?
Well, it turns out companies essentially always settle with the
FTC in its consumer protection work because of its
exceptionally-broad investigatory powers, its relatively-weak
standard for voting out complaints, and the fact that those
decisions effectively aren't reviewable in federal court.
And then, there is the fact that the FTC sits in judgment
of its own prosecutions. So, even a company that doesn't settle
and actually wins before the administrative law judge, even in
those cases, when the FTC staff comes back to the Commission on
appeal, it wins 100 percent of the time. Well, able, though,
the FTC staffers are, this cannot be from sheer skill alone.
So, whether by design or neglect, the FTC has become a
largely unconstrained agency, again in Tim Muris' words. But
please understand, I say this out of love. To paraphrase
Churchill, the FTC is the worst form of regulatory agency
except for all the others.
Eventually, Congress did, of course, have to course-correct
the agency, to fix the disconnect, to apply its own pressure to
try to refocus this evolution of Section 5 doctrine. A heavily
Democratic Congress pressured the Commission to adopt the
unfairness policy statement. The FTC promised to restrain
itself by balancing the perceived benefits of its actions, of
its unfairness actions against the costs, not acting when an
injury was insignificant or consumers could have reasonably
avoided the injury on their own. This was inherently an
economic sort of calculus.
But, while the Commission certainly pays lip service to
this test, you would be hard-pressed to identify or even know
whether it is being implemented in practice. Meanwhile, the
agency has essentially nullified the materiality requirement
that it volunteered in its 1983 deception policy statement.
Worst of all, Congress failed to anticipate that the FTC--
not the omniscient Congress of 1914, this was later--Congress
failed to anticipate that the FTC would resume exercising its
vast discretion through what it now proudly calls its common
law of consent decrees in data security cases. Combined with a
flurry of recommended best practices and reports that function
as quasi-rulemakings, these settlements have enabled the FTC to
circumvent both congressional rulemaking reforms and meaningful
oversight by the courts.
The FTC's data security settlements aren't an evolving
common law. They are a static restatement of reasonable
practices repeated about 55 times over the past 14 years. At
this point, it is reasonable to assume that they apply to all
circumstances, kind of like a rule would, which is more or less
the opposite of the common law.
Congressman Pompeo's SHIELD Act would help curtail this
practice, especially if amended to include consent orders and
reports within its scope. It would also help focus the
Commission on the actual elements of an unfairness policy
statement. Those should, indeed, be codified through
Congressman Mullin's SURE Act. Mr. Vladeck and I will have some
words about that, I suspect.
Significantly, only one data security case has actually
gone before the court, an Article III Court, one. The FTC
trumped its Wyndham as an out-and-out win, but it wasn't. In
fact, the court agreed with Wyndham that prior consent orders
were of little use in trying to understand the requirements of
Section 5.
More recently, the FTC suffered another rebuke. While it
won its product design suit against Amazon, the Court rejected
the Commission's fencing-in request to permanently hover over
the company and micromanage practices that Amazon had already
ended.
As the FTC grapples with the cutting-edge legal issues of
today, it is drifting away from the balance it promised
Congress. Congress can't fix these problems simply by telling
the FTC to take its bedrock policy principles more seriously.
Congress must regularly reassess the process that has allowed
the FTC to avoid meaningful judicial scrutiny. The FTC requires
significant course correction, and significant course
correction over time, if its model is to move closer to a true
common law.
Thank you.
[The prepared statement of Geoffrey Manne follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentleman.
Mr. Castro, you are recognized for 5 minutes, please.
STATEMENT OF DANIEL CASTRO
Mr. Castro. Thank you. Chairman Burgess, Ranking Member
Schakowsky, and members of the subcommittee, I appreciate the
chance to discuss the opportunity Congress has to modernize the
FTC, so that it better protects consumers from harm while
minimizing regulatory cost and better enabling robust
innovation in the U.S. economy.
The FTC's actions send important signals to the private
sector about how it should allocate its resources to comply
with federal regulations. Ideally, these signals should
encourage business to take actions that protect consumers,
discourage actions that harm consumers, and not interfere with
the private sector risk-taking that underpins innovation.
Unfortunately, that is not always the case. Let me provide two
examples.
In 2014, the FTC entered a consent decree with Apple over
complaint that the company had charged consumers millions of
dollars for charges incurred by children without their parents'
consent. The key fact in this case was that Apple did not
inform customers that, once they enter their password, they
opened a 15-minute window during which further charges could be
made without additional verification from the account-holder.
As part of the consent decree, Apple agreed to stop this
practice.
However, for many users, not having to enter their password
repeatedly was a convenient feature, not a bug. After all, only
a tiny fraction of Apple's customers are children making
purchases without their parents' permission. Thus, on balance,
it is unlikely that there is even a net harm. It is even
possible that the FTC's actions made consumers worse off, since
users who are forced to enter their password too frequently may
choose to use simpler and, thus, weaker passwords, and thereby
increase their risk of a data breach.
These types of unintended consequences happen when
government is put in charge of product design. My fellow
panelists ask how consent decrees impact innovation. This is
exactly how it does it.
As a second example, consider the FTC's case against Nomi.
Nomi ran into trouble because it misstated in its privacy
policy that customers had the option to opt out of its in-store
retail analytic service at its partners' stores. To be clear,
the FTC did not object to the tracking itself and the company
was under no obligation to provide this additional opt-out
feature. Moreover, the FTC could not find any evidence that a
single consumer actually suffered any harm. Therefore, the FTC
ultimately chose to use its regulatory authority to take action
against the company for what was possibly a lawyer's mistake in
drafting Nomi's privacy policy, despite no evidence that any
consumers were actually harmed.
By formally taking action when there is no injury to
consumers, the FTC has signaled to companies that they should
spend more time on corporate lawyers and less time delivering
value to consumers, including through developing privacy- and
security-enhancing technologies. After all, companies like Nomi
would be better off providing no privacy guarantees to their
consumers, so they will not fall victim to ``gotcha''-style
regulatory enforcement actions. Rather than bringing a case and
settlement against Nomi, the FTC should have shown some
regulatory restraint by simply notifying the company of the
problem and verifying that it had been corrected.
There are a number of changes that Congress should make to
the FTC, so as to avoid these types of perverse outcomes and
unintended consequences. First, the FTC should not take
enforcement actions against companies for acts or practices
unless the FTC can show substantial injury that is more than
trivial or merely speculative. Instead, the FTC should focus
its resources on cases where there is a direct and tangible
consumer harm. Doing so will incentivize companies to
prioritize internal actions that can actually prevent consumer
injury.
Second, the FTC should publicly disclose when it decides to
not pursue an investigation. This information would help the
private sector better understand how the FTC is enforcing its
policies and allow businesses to better comply with the law.
Third, the FTC should stop its practice of using 20-year
terms for its consent decrees. By almost any standard, this is
an extraordinary amount of time. Most states do not even
require sex offenders to register for this long. And there does
not appear to be any legitimate reason for this length. This is
a waste of time and money for all parties and an avenue for
backdoor rulemaking.
Finally, when making policy recommendations, the FTC tends
to focus disproportionately on speculative harms while ignoring
the tangible benefits for both consumers and businesses and the
cost of overly-restrictive regulations. The FTC should only
make evidence-based policy recommendations that include a cost/
benefit analysis.
If Congress does not address the FTC's approach to consumer
protection, compliance may become either a check-the-box
activity or, worse, interfere with business practices that
would make consumers better off and increase innovation in the
U.S. economy.
Thank you for the opportunity to share with you my thoughts
on how to transform the FTC into a more modern, innovation-
friendly regulatory agency. I look forward to your questions.
[The prepared statement of Daniel Castro follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentleman, thanks all of
our panelists for your forbearance today and for your
testimony.
I would like to recognize Mr. Olson of Texas for 5 minutes
for questions, please.
Mr. Olson. I thank the Chair.
And welcome to panel two.
My questions will focus on one bill, the FTC package, my
bill, the FREE Act, H.R. 5116. It appears from you all's
opening comments I am batting 400. Two of five have mentioned
my bill in your opening statements, Mr. Wright and Mr. Castro.
So, my questions will be largely for them, but to the other
three, if the spirit moves you, please feel free to jump in.
Mr. Wright and Mr. Castro, current rules and three
Commissioners forced the FTC Commissioners to forego most
direct communications and communicate through staff playing
telephone. What are the consequences of playing telephone on
the efficiency of the FTC? Mr. Wright?
Mr. Wright. Thank you, and I appreciate the question, and
will say, as I did in my testimony, that I am fully supportive
of the bill. As a former Commissioner, I can certainly testify
to the fact that the limitations placed on communication
between Commissioners by the Sunshine Act, for all of its other
virtues, are a real drag, I think, on the type of collegial
decisionmaking that Congress envisioned when they put the FTC
together. The idea of the five-person Commission and bipartisan
Commission is to encourage precisely those types of
communications, especially in case--I was here for the exchange
with Chairwoman Ramirez, but I would like to add to her
concerns. It is not just when it is three Commissioners; when
it is four Commissioners, when it is five Commissioners, and
one is recused or there is a vacant seat, even when the
Commission has its full complement, I think there are
considerable virtues to the bill that arise on a regular basis.
Mr. Olson. Thank you.
Mr. Castro, if two FTC Commissioners meet at Starbucks for
coffee, they could wave at each other, say, ``How was your
weekend? How is the family?'', complain about the Nats and the
Redskins, the Capitals, whatever, but they can't talk about the
job at all, risking some violation of this Open Records Act.
How does this hurt the FTC in terms of making sure they are
efficient at protecting consumers, their No. 1 job? How does
this impact their ability to do their job?
Mr. Castro. I think this is a very important proposal
because, when we look at the types of Commissioners that we
want, we want those that are very engaged with each other, that
are able to collaborate and work through problems, that are
constantly in communication. The digital age that we live in,
that is how you do business.
This bill is so important because it really gets to that
fundamental problem that is arising, obviously, right now. It
arises in situations, as my colleague just mentioned, when
Commissioners recuse themselves. And it will certainly arise in
the future when there are vacancies.
And so, this is the kind of issue where we want to fix it
now because we expect the FTC to be fast and responsive and
able to deal with problems as they arise, and you can't do that
if you can't talk among leadership. And so, this will, I think,
move us in that right direction while still preserving the
goals of the Sunshine Act, so we are not losing those
opportunities.
Mr. Olson. Thank you.
Back to you, Mr. Wright. You mentioned some amendments to
my bill, the FREE Act, that I am curious about. One would
redefine ``bipartisan majority'' to ``any bipartisan
combination of Commissioners.'' Enlighten me. What does that
do? How does that improve the bill?
Mr. Wright. I think what it does, as I read the current
bill, bipartisan majority is defined as a group of three or
more. In my mind, the modification to any bipartisan
combination of Commissioners would free situations to allow
one-on-one communications.
Mr. Olson. So, No. 3 is the issue there? Just wipe out the
No. 3? Just put ``majority of Commissioners''?
Mr. Wright. Yes. So that, when I see a colleague at
Starbucks, I can grab them and talk to them or, if I walk into
the parking garage, I don't have to leave.
Mr. Olson. Yes, sir.
And finally, questions for you, Mrs. Slater. I will get it
here. How do you think the FREE Act will add greater disclosure
and collaboration among Commissioners? How would it streamline
the decisionmaking process going forward?
Ms. Slater. Thank you for the question. Although I didn't
address in oral remarks, I think the FREE Act is a very
important piece of legislation before the Committee.
Some context on me. I worked for the FTC for 10 years prior
to my current job. The last three years I spent as an attorney
advisor to a Commissioner. So, I am quite familiar with the
process that Commissioner Wright also was familiar with.
I would say that, when you take a step back and look at the
statute of design of the FTC, the Commissioners were intended
by Congress as the board of directors. Given the vagaries of
the Sunshine Act, they are often inhibited from acting like a
board of directors. And it is sometimes the case that the power
devolves from the Commissioners to Bureau Directors, to
attorney advisors. I was one. I need to be a little bit careful
because we are sitting next to a former Bureau Director here.
[Laughter.]
Mr. Olson. We're all friends here.
Ms. Slater. But I don't think that was the actual intent of
Congress. And so, I see in your Act measures to course-correct
back to the original design for the Commission, which is a good
thing.
Mr. Olson. The panacea is the FREE Act, H.R. 5116.
I yield back.
Mr. Burgess. The gentleman yields back. The Chair thanks
the gentleman.
The Chair recognizes the gentlelady from Illinois, Ms.
Schakowsky, the ranking member of the subcommittee, for 5
minutes for questions, please.
Ms. Schakowsky. I thank all of you for your testimony.
Mr. Vladeck, I just wanted to start by asking if you had
any reaction--and I know that you have been sitting here--to
some of the questions that were asked by my colleagues during
the first panel or other things that were on your mind to say?
Mr. Vladeck. Well, again, there are parts of these
proposals that I think make great sense. Certainly, there needs
to be reform of the common carrier exception. There needs to be
reform in terms of the exception for bonafide nonprofits
because that exemption really seriously impairs a lot of our
antifraud work, nonprofits only in name, but scams in practice.
The anti-disparagement provision I think is really an important
step forward.
But there are a number of concerns I have. For example,
requiring BE to vet any public pronouncement the agency may
make to Congress, to state legislatures, to state regulators,
the clear impact of that provision, put aside its intent, will
be to muzzle the FTC. And why would want to restrain the FTC
from simply giving its views, when, of course, the state or
Congress can disregard them, just doesn't make sense. To
perform a real cost/benefit analysis of the kind contemplated
in the statute would drain very scarce resources.
And part of that is we are an under-resourced agency. My
job was to do triage. Even though we were the largest component
of the FTC, my job was to figure out what matters we would
proceed with and which ones we would let go. And so, I am very
sensitive to the resource constraints the agency has, and I
would urge you to avoid placing additional constraints, unless
there was enormous bang for the buck, unless we were getting
something seriously out of it.
Ms. Schakowsky. Well, do you think that this tips the
balance to less consumer protection? Who is the winner? Who are
the winners and the losers in these process changes, by and
large, that have been recommended?
Mr. Vladeck. Oh, the American consumer will be the loser.
Each of these provisions drains agency resources or gives
people who violate the law an out. Termination of
investigations because we miss a six-month deadline, really? No
matter how egregious the conduct was, no matter what
justification was there for missing a deadline? It seems
utterly disproportionate to an agency that has got many matters
in place simply for missing a deadline. I mean, there is no one
here who wins other than lawbreaker, and there is no one here
who loses other than the American people.
Modifying the unfairness doctrine will constrain the
agency. There is just no question about it. It amends the
unfairness standard. It adds components that will make it more
difficult to bring actions to prevent harm, which, of course,
has been the agency's mission since its founding. And it will
make it difficult to do cases where, like DesignerWare, you
have people engaged in immoral, unscrupulous conduct, but the
conduct does not cause economic harm.
So, yes, I think there are many, many difficulties with
some of these proposals.
Ms. Schakowsky. So, not causing economic harm? I think you
definitely did talk about this, but I am also particularly
concerned about the fact that one of the bills does require now
the Bureau of Economics, as you mentioned, to conduct an
economic analysis for every recommendation provided by the
Commission. It doesn't matter who the recommendation is for or
whether the recommendation affects American business or
American consumers. All recommendations require a detailed
cost/benefit analysis.
You mentioned a number of times in your written testimony
that some of these bills are a solution in search of a problem.
And so, in your experience at the FTC, was the Bureau of
Economics ignored?
Mr. Vladeck. Oh, the Bureau of Economics is involved in
every matter that goes before the Commission. Every case I
worked on, there was a BE economist assigned to it. Every
policy, the paper that we generated, a BE economist was
assigned to work on that. Every workshop that we held, much of
the important reports that the agency generates were largely
generated by BE. We did a huge report on the debt buyer
industry, a very important report, which was done by BE. And
so, it is a constant presence and powerful force within the
agency.
Ms. Schakowsky. Thank you. I appreciate that.
I yield back.
Mr. Burgess. The Chair thanks the gentlelady. The
gentlelady yields back.
And the Chair recognizes Mr. Guthrie of Kentucky, 5 minutes
for your questions, please.
Mr. Guthrie. Thank you, Mr. Chairman.
I thank the panel for being here today, the second panel.
A first question for Mr. Wright: the FTC used to issue
closing letters indicating why it closed investigations without
taking formal agency action. Could you explain how an analysis
of why something is not legal is different from complaints
which lay out what activities are legal?
Mr. Wright. Sure. So, I am a law professor. I teach the
common law to my students all the time. And one of the things
that is sort of the first lesson that they learn in contract
law, or what have you, is to understand where the line is, you
need to know something that falls on each side of it.
And so, I have been occasionally frustrated with the
perception that, when the FTC puts out a pile of consent
decrees that come through a process, it looks a little bit
different, like the process in front of an Article III judge,
that we can refer to those as having the virtues of a common-
law-type process.
I think for parties to understand quite simply where the
line is, it is critical that the agency be transparent, both
with respect to its views on what violates the law and what
does not. And to the FTC's credit, on many instances the FTC is
sort of on the right side of promoting transparency with
respect to standards. Just a year ago, the agency put forth
guidance on its unfair methods of competition statute, policy
statement, which I think some had been asking for for decades
and decades.
Merger guidelines, the unfairness statement, the deception
statement, the agency has been on the right side of this for
some time. I do think, as the economy shifts into digital
markets, privacy regulation, the internet of things, more
complicated business practices that involve tradeoffs, that
involve costs and benefits--they are not simple fraud cases
that are all harms, no benefits--as we increasingly shift into
those areas, I think it is more important now than ever that
the agency continue that trend and maybe even extend it more
strongly in those areas where I think guidance is especially
needed.
Mr. Guthrie. OK. Thanks.
I also have H.R. 5109. Well, H.R. 5109 specifically applies
to unfair or deceptive acts or practices. But I have introduced
a related bill with a colleague on the Judiciary Committee,
with Chairman Burgess, that would also require CLEAR Act
disclosures for investigations of unfair methods of
competition. In your opinion, would adding this layer of
disclosure also be valuable for companies?
Mr. Wright. Yes, I think adding information with respect
to--it is true I did hear the answer on the earlier panel. The
FTC does disclose some of this information already.
In my view, some form of aggregated disclosure, so as to
avoid some of the confidentiality concerns that arise, some
sort of aggregated information that would tell companies these
are the types of characteristics of cases where we close, these
are the types of characteristics. You can get the other side or
you can read the complaints and say, ``I understand the types
of characteristics that lead the agency to bring a case.''
In my view, while we do this sometimes, I think we are a
little short of the mark at the FTC in terms of providing some
aggregated information to give a sense of when we do not bring
cases or when we close. To the extent that the bill furthers
that, I think that it is a step in the right direction.
Mr. Guthrie. Thank you.
And based on your first answer leads me to my next
question, Mr. Castro. We talked about common law, and you teach
common law. So, Mr. Castro, do you believe there is a true
common law created by the FTC's published consent orders?
Please explain why you believe that or not believe it.
Mr. Castro. So, I believe there shouldn't be. I believe
what we are seeing is that there are a number of avenues aside
from official rulemaking where the FTC is making policy through
its guidelines, through its consent orders.
As I said in my statement, these are the signals that
industry is interpreting about what they should do, and they
matter as much as any formal rules they create. The problem is,
when you don't go through these formal rulemaking processes, I
think we subvert the democratic processes that we intended to
create.
And so, if we want to have effective rules, if we want to
have full participation and an open, transparent process to do
it, we need to have a process that we all agree is the right
process. And so, that is why I think it is bad for innovation,
it is bad for consumers if we are using these other avenues to
create these rules.
Mr. Guthrie. In just a couple of seconds, Mr. Manne, if I
can get it in real quick, what value do you see in adding
transparency to the FTC's closed process of any investigations
where companies have not engaged in unfair or deceptive acts?
And, of course, how would the CLEAR Act improve the current
state of affairs at the FTC? Mr. Manne, yes?
Mr. Manne. You said that last part so fast, I couldn't hear
what you said, but I got the first part.
Mr. Guthrie. OK. How would the CLEAR Act improve the
current state of affairs at the FTC?
Mr. Manne. Well, I think an important source of guidance
that is often neglected--Josh may have just mentioned this--
which is the reasons that a case is closed, right? That, in and
of itself, is actually extremely informative guidance. As Josh
said, you can certainly convey that information in a way that
doesn't disclose any confidential information and would be
particularly useful. It used to be done that way at the
Commission. Even when you didn't have an incredibly fulsome
sort of closing letter, there are examples of closing letters
that at least would enumerate the bases on which the
investigation was closed, sort of the issues that they looked
at. Well, that in itself is huge.
Now I could suggest a whole welter of more things that
should have been asked in that letter and that should be looked
at. This is the kind of situation--I am not saying we would
have to do it here--where economists, as with pretty much
everything at the agency, are incredibly useful. And despite
Mr. Vladeck's claims to the contrary--I believe he said
something to the effect that it would be enormous cost and no
gain--I tend to believe, especially in an agency of the sort
like the FTC where in the unfairness context it is asked to
take on an essentially economic calculation, that having some
economists actually help with that calculation would be
particularly useful. I think it would be enormously useful, but
I certainly think I could identify positive value to it.
The fact that there may be a cost to it is not a reason not
to do it. There are tradeoffs to everything, right? I think,
well, that is what economists would say, I guess.
Mr. Guthrie. Thank you. I am out of time.
Mr. Burgess. The gentleman's time has expired.
Mr. Guthrie. My time has expired. I appreciate it.
Mr. Burgess. The Chair recognizes Mr. Rush, 5 minutes for
your questions, please.
Mr. Rush. Thank you, Mr. Chairman.
Mr. Vladeck, I introduced a bill that will give the FTC the
authority to protect consumers from unfair and deceptive
practices by nonprofit organizations. And we heard the
Chairwoman earlier testify that the Commission supports
repealing the nonprofit exemption. You also testified that you
support repealing the nonprofit exemption.
How do you see, me repealing this exemption, how do you see
it being of benefit to consumers?
Mr. Vladeck. This is an enormously important area because
often fraudsters, people who are scamming, fake health
insurance, they hide under the shield of being a nonprofit. So,
one of the first major sweeps I worked on when I got to the FTC
involved collaboration with state insurance commissioners,
state attorneys general, to go after dozens and dozens and
dozens of fake insurers and health providers. And the principal
objection we found as a jurisdiction threshold was we don't
have any authority because we are organized as a nonprofit.
That is a showstopper. If we don't have jurisdiction, we can't
proceed. We can't proceed with our investigations. We certainly
can't proceed with litigation. And so, the first and important
point about this, this will take away a devise scammers and
others intent on stealing people's money use to hide from the
agency.
Second, we have seen a lot of very serious data breaches by
entities that are essentially unregulated, colleges,
university, nonprofit healthcare providers. The nonprofit
healthcare corporations may have some obligations under HIPAA,
but they are not regulated elsewhere.
Time and again, we see massive data breaches involving very
sensitive information, health records, education records, and
there is no remedy. We did a peer-to-peer sweep to find out
what kinds of information were available from unsecure
networks. And many of the most egregious problems were with
hospitals, nonprofit hospitals, and with state universities.
Yes, we let them know they had vulnerabilities on their system,
but we had no leverage to force them to upgrade their systems
or to do a better job protecting highly-sensitive data.
And so, this is a very important reform. I urge your
colleagues to give this the most careful consideration. It
really is essential to enable the FTC to better protect
consumers in this space.
Mr. Rush. On the flip side, I have heard of concerns from
the nonprofit community that FTC jurisdiction could lead to
increased regulation and increases in the cost of doing
business. Do you agree with this statement? How accurate do you
believe this statement is? And also, do you believe that the
increase in consumer protection would justify these costs if
any exist?
Mr. Vladeck. Thank you for the question. I am calling on my
economist friends on the panel to do the cost/benefit analysis,
but I have no--this was a joke.
[Laughter.]
But there is no question that better regulation will
ultimately serve the economy. A level playing field, consumer
protection, the cost of data breach and identity theft are an
enormous strain on the economy, partly because institutions can
externalize their cost on the consumers, who are stuck with the
bill.
And so, I think ex-ante regulation makes a whole lot of
sense, more than ex-post consumer cost, in trying to restore
their credit. If it is a medical facility, medical ID theft has
skyrocketed, and there is no easy way to restore your identity.
You have to go provider by provider to prove who you are and to
get the benefits that you are paying for.
And so, anything that we can do to place at least some
market discipline on these actors I think is really critical,
and I think this is a very important measure that I urge the
committee to seriously consider.
Mr. Rush. Thank you, Mr. Chairman. I yield back.
Mr. Burgess. The Chair thanks the gentleman. The gentleman
yields back.
The Chair recognizes Mr. McNerney for 5 minutes for your
questions, please.
Mr. McNerney. Well, I thank the chairman.
And I apologize that I missed your testimony.
Professor Vladeck, in your testimony you mentioned that the
FTC has long asked Congress to lift the common carrier
exemption. What are the justifications for this prior to the
FCC's Title II reclassification of broadband internet services
common carrier?
Mr. Vladeck. So, the FTC and the FCC share jurisdiction in
most of the consumer protection issues involved in providing
these kinds of telecommunication services. So, a lot of what we
did were cases involving false or deceptive advertising,
improper marketing claims, billing abuses such as cramming,
forcing unauthorized charges onto consumer bills, privacy, data
security. These were spaces that we occupied jointly. We
collaborated very closely on enforcement.
But with the common carrier exception, and particularly the
reclassification under Title II of internet services, the
agency is threatened with losing some of that authority. I
think it is very important for consumers to have a consumer
protection agency in that space.
The FCC is essentially a regulatory agency. It has a very
short statute of limitations. It can collect civil penalties.
It does not do consumer redress. The FTC puts money back in the
hands of consumers. The FCC does not.
Consumers deserve better in this space, and repealing this
archaic common carrier exception, which is really an artifact
of a different time when monopolies were regulated by the FCC,
is long overdue. This is a measure the Commission on a
bipartisan basis has urged Congress to take for decades, and
the time really is now.
Mr. McNerney. Well, if the common carrier exemption is not
lifted, what are some of the abuses that we would be seeing?
Mr. Vladeck. So, for example, AT&T and TracFone were
throttling consumers. They promised unlimited data, but they
didn't tell them that, after a certain setpoint, they would get
data; they would just get it one grain of sand at a time.
It was incredibly frustrating for consumers. They
complained to both agencies. The FTC sued both AT&T and
TracFone over this throttling. We got substantial redress for
consumers which will go back into their wallets.
This is the sort of thing that the FTC has historically
done. We do it well. We certainly did it in cooperation with
the FCC. These were investigations that were jointly conducted,
but we managed to both stop the practice and to return money to
consumers' wallets for a service they did not get.
Mr. McNerney. So, throttling, for example, do you think
that was intentional? Do you think they intentionally misled?
Mr. Vladeck. Well, the throttling was intentional.
Mr. McNerney. Right. Well, couldn't it have been the
broadband limitations or some other technical limitations?
Mr. Vladeck. Well, for example, I think it is fair to say
the Commission took a very hard look at advertised rates of
delivery of broadband service. We did this in collaboration
with the FCC. We did not bring enforcement actions, but this is
the sort of issue that the Commission, prior to
reclassification, took a very hard look at. Post-
reclassification our authority to do that, I think, is in some
doubt.
Mr. McNerney. Well, I think we agree that the FTC has the
expertise in protecting consumer privacy. Would lifting the
common carrier exemption lead to better privacy protections?
Mr. Vladeck. Well, again, I think that the FTC has had
enormous success in developing a reasonable privacy program
that protects consumers' expectations without putting a speed
bump on the road to innovation. And I think that we are well-
equipped to do that. We have worked jointly with the FCC on all
sorts of things ranging from mobile apps to investigations on
these kinds of issues. I think there ought to be overlapping
jurisdiction here, just the way the FTC has overlapping
jurisdiction with the FDA, the SEC, the Commodities Future
Trading Commission, and virtually every other agency in the
city. We play well, but we also do a very good job of
protecting consumers because that is our only mission, unlike
the FCC which has the mission of making sure the industry
delivers the services it does.
Mr. McNerney. Thank you, Mr. Chairman.
Mr. Burgess. The Chair thanks the gentleman. The gentleman
yields back.
I recognize myself for 5 minutes for questions. These are
going to be questions regarding the 20-year lengths on the
consent decrees, the consent orders.
Mr. Manne, let me just start with you. Even though your
tenure at the FTC was very brief, are you aware of any factors
that went into the Federal Trade Commission's decision to set
the duration of consent orders at 20 years? Should it be a one-
size-fits-all program?
Mr. Manne. Well, yes, you hit on what is the real problem.
To my knowledge--David and Josh can correct me if this isn't
right--to my knowledge, there isn't a set 20 years for
everything, but that is what it effectively is. It is not a 20-
year program, as far as I know. It is just that, miraculously
somehow, all of these companies that are wildly divergent,
engaged in wildly different activities, different sizes--
sometimes you have got deception cases and, then, you have
unfairness cases. You have situations that it is sort of begs
belief to think that they would entail precisely the same
remedy.
If you cared about getting your remedy right, so if you had
some economists talking to you--apologies--they might say
something like you want your remedy to lead to an appropriate
optimal level of deterrence. You want the right level of
punishment. Because you want to deter the bad conduct, you
don't want to overdeter the good conduct, right? You know,
everyone sort of understands this stuff.
It cannot be the 20 years is appropriate in every single
one of those situations.
Mr. Burgess. So, you think there are variables that should
be considered in the negotiation process?
Mr. Manne. Well, yes, of course. It is one of the elements
that should be considered, just like every other element should
be considered. Now it happens that, actually, these consent
decrees, at least in the data security cases, they pretty much
all look identical. Never mind all of those differences that I
mentioned, they all look at least extraordinarily similar. And
that strikes me as problematic, too.
Now it is possible. It is possible that, when the FTC
adopted the Safeguards Rule under Gramm-Leach-Bliley, to relate
to data security issues at financial institutions, it is
possible that they hit upon the optimal menu of data security
practices for every company that has ever come in front of the
FTC. It is possible. I think it is really unlikely, though.
And I could take three days talking about what I think is
going on here; I will try not to.
Mr. Burgess. Please.
Mr. Manne. But I don't think it is what we want to be going
on.
Mr. Burgess. And I agree. That is one of the reasons we are
having this panel and this discussion.
Mr. Wright, let me just ask you, if a company is under a
consent order, they have probably got a lot of stuff to do to
be in compliance with that order. Is that a fair statement?
Mr. Wright. Yes, that is a fair statement.
Mr. Burgess. So, what is the practical effect of a 20-year
compliance or 20-year consent agreement with having to produce
documentary evidence that they are behaving by the guidelines
that have been set out? Is there a cost to having to comply
with the 20-year length of time on the consent decree?
Mr. Wright. Sure. You are talking to an economist. So,
there is a cost to everything. Most of my students would tell
you there is a big cost of being in my classroom.
Mr. Burgess. One of my fondest fantasies is to have a group
of doctors on this panel and ask them how economists should be
paid.
[Laughter.]
But that is another story. Carry on.
Mr. Wright. I will tell you when the microphone is not on.
[Laughter.]
So, there is certainly a cost to consent orders. There is a
cost to compliance. There is a cost to injunctive relief that
changes behavior that is in the consent order. Sometimes we
want to incur those costs because we are getting, as Professor
Vladeck said, a big bang for the buck in terms of consumer
return. We are stopping fraud.
Sometimes, whether it is competition or consumer
protection, we are stopping behavior that we are really not
sure about what its effects on consumers are. We are sort of
drawing a big fence around the firm's behavior and hoping for
the best. This is the reason, precisely the reason, you want
economists in the room who are trained, sort of by definition,
to think about those tradeoffs. If you start from the premise
that everything the agency does is good for consumers, this is
a really easy hearing. Just do more of all the things.
Mr. Burgess. Well, let me ask you a question. You heard the
Chairwoman testify. I mean, I asked her, are we asking a
company to ask permission before it rolls out a new good or
service? And her answer was the essentially negative. But do
you agree with that answer that she gave?
Mr. Wright. I agree that most of the time our consents
don't necessarily ask the firms to get prior permission from
the agency, but sometimes they do. The Apple consent, the line
of consents that comes from those inapt purchase cases do
exactly that. Those are product design cases that say, if you
want to change your product in a particular way, either you
can't or you must get permission. That is precisely what those
do.
And I think something for the committee to consider is
those types of cases I think are going to be an important and
increasing part of the agency's portfolio over time. If you go
back 20 years, most of what the agency did was fraud, and
frauds are relatively easy cases. Fraud is bad. You don't need
a PhD economist to write you a 20-page memo on fraud, right?
You need them to write it once and, then, copy it every time.
But the types of activities where the agency is applying
its enforcement authority are different. They are complicated.
There are tradeoffs. There may well be harm in these inapt
purchase cases with disclosures, but there may also be benefits
to the 15-minute window. And that is precisely where you need
some sort of calibration, where you need economic analysis to
have a bigger seat at the table within the agency than it did
10 years ago, 20 years ago, or probably ever.
And I will say one small point, if I may, which is I have
been following the FTC since I was intern in the Bureau of
Economics. I pay pretty close attention to what the Bureau of
Economics does. In my view, since I have followed the agency,
contrary to some of the remarks that I have heard, while they
may perform an input into most of the cases, I can't bring
myself to say ``all,'' my own view is BE right now is less
influential than it has been over the past three decades.
Mr. Burgess. Well, I just really want to thank all of our
panelists for being here today.
Seeing no other members wishing to ask questions, we will
conclude the second panel. And we take the briefest of brief
recesses to set up for the third panel.
This panel is adjourned.
[Recess.]
Mr. Burgess. Well, welcome back, and thank you all for your
patience and taking time to be here today.
We will move into the third panel for today's hearing. We
are going to follow the same format as the first and second
panel. Each witness will be given 5 minutes for an opening
statement, followed by questions from members.
For our third panel we have the following witnesses: Mr.
Richard Hendrickson, the President and CEO of Lifetime
Products; Dr. Greg O'Shanick, President and Medical Director
for the Center for Neurorehabilitation Services; Mr. Steven
Shur, President of Travel Technology Association; Mr. Robert
Arrington, President of the National Funeral Directors
Association; Mr. John Breyault, Vice President of Public
Policy, Telecommunications, and Fraud, the National Consumers
League; Mr. Gil Genn, Maryland Sports and Entertainment
Industry Coalition; Ms. Jamie Pena, Vice President, Revenue
Strategy and Global Distribution, Omni Hotels & Resorts, and
Mr. Michael Best, Senior Policy Advocate of Consumer Federation
of America.
We appreciate you all being here today.
We will begin the panel with you, Mr. Hendrickson. You are
recognized for 5 minutes to give a summary of your opening
statement, please.
STATEMENTS OF RICHARD HENDRICKSON, PRESIDENT AND CEO, LIFETIME
PRODUCTS; GREG O'SHANICK, PRESIDENT AND MEDICAL DIRECTOR, THE
CENTER FOR NEUROREHABILITATION SERVICES; STEPHEN SHUR,
PRESIDENT, TRAVEL TECHNOLOGY ASSOCIATION; ROBERT ARRINGTON,
PRESIDENT, THE NATIONAL FUNERAL DIRECTORS ASSOCIATION; JOHN
BREYAULT, VICE PRESIDENT OF PUBLIC POLICY, TELECOMMUNICATIONS,
AND FRAUD, THE NATIONAL CONSUMERS LEAGUE; GIL GENN, MARYLAND
SPORTS AND ENTERTAINMENT INDUSTRY COALITION; JAMIE PENA, VICE
PRESIDENT, REVENUE STRATEGY AND GLOBAL DISTRIBUTION, OMNI
HOTELS & RESORTS, AND MICHAEL BEST, SENIOR POLICY ADVOCATE OF
CONSUMER FEDERATION OF AMERICA
STATEMENT OF RICHARD HENDRICKSON
Mr. Hendrickson. Thank you, Chairman Burgess and Ranking
Member Schakowsky, committee members.
As CEO of Lifetime Products, it is an honor to appear
before you today and address the Reinforcing Made-in-America
Act of 2016, H.R. 5092.
Lifetime Products is a wonderful example of the American
dream made in the USA. It was started 30 years ago by a father
who wanted to build a better basketball hoop for his children.
Today we employ over 1900 people in the U.S. and work hard
every day to keep those jobs here in the United States of
America. It isn't easy, as you can imagine, when your key
competitors are taking advantage of lower labor and material
cost in other countries around the world. However, by investing
large amounts of capital, vertically-integrating our factory,
we have been able to keep the majority of our manufacturing
jobs here in the U.S.
Data shows that 78 percent of Americans, if given the
choice, prefer to purchase made-in-the-USA products. Consumers
want to support American manufacturing and believe that
American-made goods are generally of higher quality and
supportive of American jobs.
Since 1997, the Federal Trade Commission has enforced a
stringent national labeling standard that requires products
marked ``Made in the USA'' to be all, or virtually all,
manufactured in the U.S. While providing the necessary consumer
protection, it also gives companies a slight, but necessary
amount of leeway, permitting them to import negligible or de
minimis components for their products. However, the
manufacturing process must always take place in the U.S., and
vital components for the product's core function must also be
domestically-produced.
Today, currently, one of a state's laws has upended really
the FTC labeling system. A 50-year-old California State statute
held that products bearing the ``Made in USA'' label had to be
composed of 100 percent domestic content. This really rendered
the USA FTC label impossible for many companies like us to use.
Companies like Lifetime had no idea that we were in
violation of the State's labeling law and were unexpectedly
sued, which resulted in multimillion dollar settlements based
on infractions as insignificant as a 50-cent net suspended from
a $500 made-in-the-USA basketball system.
Now, as companies try to choose whether to follow the FTC's
federal guidelines or the California State statute, many USA
companies, like ourselves, have decided not to use the made-in-
USA label mark at all on the majority of our products, even
though they are, indeed, made in the USA. And this really
leaves the consumer ill-informed with regard to a product's
origin.
Despite continued efforts over the last 3 years to amend
the California statute, it is now even more confusing, inviting
more opportunities for the California State statute and the FTC
rule to clash. The FTC made-in-the-USA standard is robust, it
is meaningful, it is difficult to meet. It challenges
manufacturers to source and manufacture domestically and it
conveys a clear unified message to consumers in the United
States and around the world.
The FTC's made-in-the-USA standard requires significant
investment in American manufacturing and in American jobs. As
such, when consumers choose products marked ``made in the
USA,'' they can feel confident that they are supporting
American manufacturing and American jobs.
About 15 years ago, our main competitor in the basketball
industry decided to pack up and leave the U.S. They relocated
to Asia, began lowering prices with less-expensive labor and
materials. After a great deal--and I mean a great deal--of
deliberation, we chose to stay. We stayed committed to made in
the USA. Had we known then that the FTC standard did not create
a unified standard and the potential of California lawsuits to
follow, we may have made a different decision at that time. Why
invest millions in capital to manufacture in the U.S. if you
are not allowed to tell the consumer ``made in the USA''?
Thank you for your time. Thank you for the time you give to
serve our country, and thank you for your efforts in helping
keep manufacturing alive in the United States of America.
[The prepared statement of Richard Hendrickson follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentleman.
Dr. O'Shanick, you are recognized for 5 minutes for your
opening statement, please.
STATEMENT OF GREG O'SHANICK
Dr. O'Shanick. Thank you. Chairman Burgess, Ranking Member
Schakowsky, and members of the subcommittee, good afternoon and
thank you for the opportunity to provide testimony on the
important issue of protecting our nation's youth from
concussion. I commend Chairman Upton and Ranking Member Pallone
and members of the committee for their ongoing investigation
into concussion.
As stated, my name is Dr. Greg O'Shanick, and I am the
president and medical director of the Center for Neurorehab
Services in Richmond, Virginia. I am also the medical director
emeritus of the Brain Injury Association of America, the
nation's oldest and largest brain injury patient advocacy
organization.
Today I am here to discuss the Youth Sports Concussion Act,
H.R.4460, sponsored by Congressman Bill Pascrell, Jr., and
Congressman Thomas J. Rooney, Co-Chairs of the Congressional
Brain Injury Task Force.
The Brain Injury Association of America and 35
organizations submitted a letter to the committee in support of
this legislation. I would like to submit this letter for the
record.
[The information appears at the conclusion of the hearing.]
Dr. O'Shanick. The Youth Sports Concussion Act would help
ensure that safety standards for sports equipment are based on
the latest science and curb false-advertising claims made by
manufacturers to increase protective sports gear sales.
An extensive National Academy of Sciences report previously
found a lack of scientific evidence that helmets and other
protective devices designed for young athletes reduced
concussion risk. Yet, some manufacturers continue to use false-
advertising claims that prevent athletes, parents, and coaches
from making informed safety decisions.
In 2012, the FTC warned nearly 20 sports equipment
manufacturers that they might be making deceptive concussion
prevention claims, but the FTC's actions thus far have not
deterred companies from making these claims. The Youth Sports
Concussion Act would empower the FTC to seek civil penalties in
such cases.
As parents and grandparents, we want to do our best to
educate ourselves to protect our children while they are
competing in sports. Companies that claim they protect a child
from a concussion with their sporting goods equipment when they
cannot should be prevented from using this tactic while
advertising their product to the American public.
In my clinical practice, every day I see children and
adolescents who have sustained a concussion whose parents are
torn between wanting to encourage their child's physical
activity in team sports, but simultaneously are fearful of what
we are now recognizing as the immediate and long-term risk of
concussive injury in the developing brain.
Effective coaching and adult supervision of these
activities by individuals who understand and have themselves
been trained in concussion protocols is one element of this
prevention and awareness process. And while we have solid data,
for example, regarding the benefits of helmets in the
prevention of bicycle-related concussions, my patients' parents
are being bombarded with a host of misleading and false claims
that allow other manufacturers to financially capitalize on
these fears.
My advice to these parents is typically, if it seems too
good to be true, it most likely is. For the kids, education,
awareness, proactive planning are the elements I encourage in
both their return-to-learn and return-to-play activities.
The Brain Injury Association of America has a Concussion
Information Center that is located at www.biausa.org. This
information is designed to shed further light on concussion-
related issues to help families, individuals, educators,
healthcare professionals, and others to be more mindful of the
signs of a concussion, how to respond accordingly, and to
identify resources to assist following a concussion, also known
as a mild traumatic brain injury.
BIAA is launching a concussion certificate for
professionals this fall. Awarding the concussion certificate
demonstrates that the individual responsible for return-to-
work, learn or play decisions has acquired the requisite
knowledge base needed to make sound, informed decisions.
Prevention is important in reducing concussion in our
youth, and safety equipment is a key component of prevention.
States have enacted several measures designed to reduce
fatalities and brain injuries, including seatbelt legislation,
distracted driving laws, drunken driving laws, and return-to-
play laws with regard to sports-related concussions.
Individuals can take several measures designed to reduce
the risk of brain injury. These include wearing protective gear
such as helmets when bicycling, motorcycling, snowboarding,
riding a horse, skiing, riding, diving, ATVs, or playing
sports; wearing seatbelts when driving or riding in vehicles;
ensuring that living areas for seniors and young children are
free of trip hazards and have sufficient barriers for stairs,
and maintaining physical activity to improve lower body
strength and balance.
Your efforts to prevent mild traumatic brain injury in our
nation's youth are needed and welcomed. Thank you, and I look
forward for your questions.
[The prepared statement of Greg O'Shanick follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentleman for his
testimony.
Mr. Shur, you are recognized for 5 minutes for your opening
statement, please.
STATEMENT OF STEPHEN SHUR
Mr. Shur. Thank you, Chairman Burgess, Ranking Member
Schakowsky, and all members of the subcommittee.
My name is Steve Shur. I am the president of Travel Tech.
The association represents online travel agents, global
distribution systems, and short-term rental platforms.
Our online travel agent members, OTAs as they are known,
have created the marketplace where consumers can shop for all
aspects of travel in a single platform. Travelers have
benefitted immeasurably from the ability to search, compare,
and book hotels through the technology created and operated by
the members of Travel Tech.
When suppliers have to compete in a dynamic marketplace,
consumers benefit in the form of lower prices and better
service offerings. The scale and popularity of third-party
online booking sites illustrates consumers' preferences and
confidence. Last year Expedia helped travelers book over 200
million room nights. Trip Advisor reaches 340 million unique
monthly visitors and hosts more than 350 million reviews.
Priceline partners with over 370,000 hotels in 170 countries.
Integrity in the hotel booking marketplace is critical.
Without it, companies that fail to deliver reliable customer
service and seamless transactions with their hotel partners
will not survive. OTAs thrive on ensuring that customers have a
positive experience every time they book. Each of our members
has 24-hour customer service teams ready to assist travelers
who choose to book on their platforms.
Travel Tech strongly opposes H.R. 4526 on all fronts. We
categorically reject the premise of a need for such
legislation. This bill would impose new, burdensome
requirements on online travel sites without any justification
for doing so. Online travel companies would needlessly have to
provide additional notification to the consumer that they are
``not affiliated with'' the hotel with which the consumer is
about to book his stay. However, online travel companies are
absolutely affiliated with hotels. Hotels willingly sign
contracts with OTAs to take advantage of this very effective
marketing and distribution channel. Further, it is unclear why
this heightened standard for intermediaries or distributors is
needed for online hotel bookings, but not for the online
purchase of any other goods.
H.R. 4526 would authorize the FTC to study whether the new
disclosure requirements are necessary and if consumers are,
indeed, confused about where they are booking their hotel
rooms. It seems illogical to apply new, onerous regulations on
American businesses without a demonstrable record of consumer
harm, while simultaneously acknowledging that a study is needed
to confirm whether these regulations are necessary in the first
place.
H.R. 4526 would amend the Restore Online Shoppers'
Confidence Act, a bill that was passed several years ago to
address a practice in which people were truly harmed by
companies sharing credit card information with other entities
without their knowledge or consent. Associating an entire
reputable industry with this activity addressed in the Restore
Online Shoppers' Confidence Act is a gross misappropriation of
the facts and an assault on our industry's reputation and
integrity.
There is no tangible record of consumer complaints
justifying any part of this legislation, only unsubstantiated
claims offered by the hotel industry in an effort to scare
consumers into booking direct. We have all seen the book-direct
advertising campaigns by the hotel chains. The motivations here
are clear.
The hotel lobby claims that 15 million Americans are
scammed every year by third-party booking sites. Fifteen
million, that is 41,000 Americans every day showing up at a
hotel, only to find that their reservation was lost and that
they were scammed. Where are these numbers coming from? Where
is the evidence?
The FTC has no record that such complaints have been
lodged. The nation's leading consumer groups are not aware of
fraud, certainly not at this level. Bloggers and reporters who
root out issues like this have no record of such activity
taking place.
According to the hotel lobby, 41,000 people every day have
been scammed by third-party booking sites, and the only place
you have heard about this problem is from the trade association
representing the largest hotel chains. The hotel lobby is
fabricating a problem as a means to boost its members' margins
by scaring consumers into thinking that booking anywhere other
than direct is risky and riddled with fraud. It is just not
true. It is insulting to consumers.
Any government action in this regard should be predicated
on a tangible record of consumer harm, rather than anecdotes
provided by a trade association that wants to dismantle the
transparency of a marketplace where consumers can compare
prices and services across brands.
I urge the members of the subcommittee not to wade into
what is essentially a contractual battle between the hotel
industry and their own distribution partners. OTAs are proud to
offer consumers a safe, effective, and transparent marketplace
where hotel properties compete on price and service.
Thank you for the opportunity to speak in opposition to
H.R. 4526. I look forward to your questions.
[The prepared statement of Stephen Shur follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentleman for his
testimony.
Mr. Arrington, you are recognized for 5 minutes for an
opening statement, please.
STATEMENT OF ROBERT ARRINGTON
Mr. Arrington. Mr. Chairman and members of the
subcommittee, thank you for the opportunity to testify this
afternoon.
I am Bob Arrington, founder and president of Arrington
Funeral Directors in Jackson, Tennessee. I am honored to be
serving as the president of the National Funeral Directors
Association, referred to as NFDA.
Over the years, I have served my community and my
profession by taking on leadership roles with the Tennessee
Funeral Directors Association. I was appointed to a 4-year term
by the governor of the State of Tennessee to serve on the
Tennessee State Board of Funeral Directors and Embalmers, and I
served the last year of my term as president of this State
regulatory board.
I am testifying today on behalf of the nearly 20,000
funeral directors who are members of NFDA. Together, we
represent more than 10,000 funeral homes in the United States
and 39 countries worldwide.
NFDA is the world's leading and largest funeral service
association, a trusted leader, a beacon for ethics, and the
strongest advocate for the profession and the families we are
called to serve.
I want to thank Congressman Rush for his efforts to protect
consumers. Like the Congressman, NFDA members were horrified at
the illegal activity that was discovered in 2009 at Burr Oak
Cemetery in Illinois. In the findings section of this
legislation, two other incidents involving a cemetery and a
crematory are mentioned, Tri-State Crematory in Georgia and
Menorah Gardens in Florida.
There is no doubt these were criminal and vile acts by a
few bad apples, but I must state my profession, the profession
that I love and have dedicated my life to, should not be cast
in a disparaging light because of three incidents in the last
15 years which were handled appropriately by each state.
NFDA works closely with state associations to improve state
laws governing the profession, ensuring they reflect the
evolving needs of consumers and the funeral professionals that
serve them. Over the last several years, states have continued
to provide oversight and increased protections for the
deceased, their families, and the providers of funeral
services.
Therefore, it is the belief of the NFDA and its members
that state regulation of the funeral profession is sufficient.
There is no need for further regulation by the federal
government at this time.
While we applaud Congressman Rush's concern for grieving
families, a concern that is equal to our own, we oppose H.R.
5212 because we believe it is not the best way to address the
illegal and immoral activities I previously described.
Next year the FTC is scheduled to begin a comprehensive
review of the funeral rule, something that happens on a regular
basis. NFDA feels this review offers a better alternative to
H.R. 5212, which would merely expand a rule that is already
flawed. In NFDA's opinion, the funeral rule needs to be
redesigned and redrafted, not simply expanded.
While the funeral rule offers important consumer
protections, it is a not a one-stop-shop solution. When the FTC
reviews the funeral rule next year, everyone who has a concern
about the funeral rule will be able to make their voice heard.
NFDA is confident that the review will produce an updated
funeral rule that protects consumers in today's market. And in
NFDA's opinion, the funeral rule is far too important to be
expanded without a full exploration of the complex issues
involved, something that may not happen in Congress.
NFDA is dedicated to ensuring this review process will
result in positive changes for both families and funeral
service. We wholeheartedly agree with Congressman Rush that
changes need to be made, but we feel the funeral rule needs to
be redesigned and clarified to address the realities of the
funeral market in 2016. It would be better to do this through a
comprehensive rulemaking process where all interested parties
can be heard rather than through a congressional mandate.
I am sure many of you know funeral directors in your
community. You probably have been served by some. What we do is
for the good of others, not for the good of us. We dedicate
ourselves that families have one mother that is going to die
one time and we are going to have one funeral. Our dedication
is to do that one time because we have only one opportunity.
The last thing we want is to do that wrong.
I thank you for the opportunity to be here, and I look
forward to your questions.
[The prepared statement of Robert Arrington follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentleman for his
testimony.
The Chair recognizes Mr. John Breyault for 5 minutes for
your opening statement, please.
STATEMENT OF JOHN BREYAULT
Mr. Breyault. Good afternoon, Chairman Burgess, Ranking
Member Schakowsky, and members of the subcommittee.
My name is John Breyault, and I am the vice president of
public policy, telecommunications, and fraud at the National
Consumers League.
Founded in 1899, NCL is the nation's pioneering consumer
organization. Our nonprofit mission is to advocate for social
and economic justice on behalf of consumers and workers in the
United States and abroad.
Thank you for giving us the opportunity to speak today on
the important issue of live event ticketing fairness. The
modern ticket-buying experience is rigged and it is too often
an exercise in frustration for millions of fans that simply
want to see their favorite artist or sports teams at a fair
price.
Consumers trying to buy tickets at general on sale to
popular events are almost always competing without knowing it
against secret insider sales and scalpers who use special
software to electronically cut in line. This leads to
considerable frustration when consumers are shut out of the box
office and anger when resale markets immediately have hundreds
of tickets available at inflated prices.
A little publicized fact about tickets is that artists,
promoters, and venues often make only a small percentage of
tickets available to the general public. For example, of the
750,000 tickets for Adele's 2016 North American Tour, fewer
than 300,000 were made available to the general public.
According to the New York Attorney General, less than half,
46 percent, of tickets to the most popular events are ever made
available to public on sale. Most tickets, 54 percent on
average, are diverted to fan club and premium credit card
presales and holds for industry insiders. These diverted
tickets often make their way to the secondary market, where
they typically fetch a price far above face value.
For example, at a January 2013 Justin Bieber show in
Nashville, Tennessee, 90 percent of the tickets were set aside
for presales and insiders. Many of the tickets allocated to
Bieber's management company were later listed on ticket resale
Web sites at hugely-inflated prices.
These examples are just the tip of the iceberg. Artists of
every type from rap to rock, country to comedy, hold back
tickets. We think the system is rigged against average
consumers. We don't believe artists should have the right to
hide how many tickets are to be made available to the general
public, so they can trumpet quick saleouts that hype their
events; that they, then, often take advantage of their fans by
anonymously reselling tickets, often for several multiples of
face value, while blaming scalpers for their fans' inability to
get tickets, is the height of Chutzpah.
Undisclosed ticket allocations are not the only way that
consumers find themselves at a disadvantage at the box office.
Fans must also compete against ticket brokers employing
sophisticated ticket-buying software known as bots. Bots allow
brokers to purchase tickets at lightning-fast speeds, helping
them acquire hundreds or thousands of tickets in minutes or
even seconds. These are, then, listed on resell Web sites,
often at outrageous markups.
Evidence of rampant abuses by ticket bots abound. One bot
was used to purchase 1,012 tickets in one minute to U2's July
2015 show at Madison Square Garden. That same day two bots were
used to purchase more than 15,000 tickets in 24 hours for
several performances on the same U2 tour.
Between 2002 and 2009, one bot operator, Wiseguys Tickets,
Inc., bought more than 1.5 million tickets and netted more than
$25 million in profit when tickets were resold to brokers who,
then, resold them to fans.
Ticketmaster has stated that ticket bots can account for as
much as 90 percent of the traffic to its Web site and 60
percent of sales for the most desirable seats to some shows.
To address the broken ticket marketplace for popular
concert tours and many sporting events nationwide,
congressional action is sorely needed. Both the BOSS Act and
the BOTS Act crack down on robotic ticket-buying software.
However, only Congressman Pascrell's BOSS Act offers
comprehensive solutions that collectively will significantly
improve fans' ticket-buying experiences. By requiring greater
transparency in the primary ticketing market, prohibiting
egregious broker practices like undisclosed speculative
selling, and limiting the ability of connected insiders to
surreptitiously divert tickets to the secondary market, the
BOSS Act would lead to beneficial reforms in the ticketing
marketplace.
To conclude, it is clear to us, and to millions of fans,
that the ticket-buying experience is rigged. All too often
buying a ticket is an exercise in frustrations for fans that
simply want to see their favorite artist or sports teams at a
fair price. To this end, we urge the subcommittee to support
Congressman Pascrell's common-sense pro-consumer bill.
Chairman Burgess and Ranking Member Schakowsky, thank you
again for inviting NCL to speak today. I look forward to
answering your questions.
[The prepared statement of John Breyault follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentleman for his
testimony.
Mr. Genn, you are recognized for 5 minutes for your opening
statement, please.
STATEMENT OF GIL GENN
Mr. Genn. Thank you, Chairman Burgess, Ranking Member
Schakowsky, members of the subcommittee. Thank you for allowing
me to testify in support of H.R. 5104, the BOTS Act.
I am testifying today on behalf of the Maryland Sports and
Entertainment Industry Coalition, a coalition of diverse
players in the live entertainment business, including
professional sports teams, large and small musical and
theatrical venues, and providers of live entertainment shows.
The sports and entertainment industry is a huge source of
pride in Maryland, and hundreds of millions of dollars have
been invested in venues, sporting events, concerts, and other
live productions in the State, significantly contributing to
the employment of thousands of Maryland residents.
Our coalition brings some experience to your debate, as we
were instrumental in recently enacting legislation in Maryland
similar to the BOTS Act. While we are grateful to our state
legislatures for enacting that legislation, we recognize the
limits of its effectiveness.
The underground industry that uses BOTS to hack ticketing
Web sites is clearly an interstate business. Interstate
commerce transactions require federal solutions, and H.R. 5104
is a substantial solution to the problem of ticket bots.
As you know, for most live entertainment events, there is a
restriction on the number of seats one purchaser can buy,
usually in the four-to-eight-ticket range. It is often the case
that during the opening minutes of the on sale for a
championship game or a premier entertainment show the Web site
of the ticketing agent is overwhelmed by hundreds or thousands
of requests for tickets placed by computer programs pretending
to be real fans.
These bots, as they are called, seize up substantial
portions of the ticket inventory. Their software is
sophisticated enough to recognize which tickets are the best
tickets that wills fetch the highest resale price on the
secondary market. Once the botsters have the tickets they want,
they release the others back into the on-sale pool.
When people use bots to violate the terms and conditions of
ticketing Web sites to buy up large blocks of tickets and
resell them at a markup on the secondary market, they are
effectively stealing that investment. H.R. 5104 at least
provides a clear civil remedy for this abuse. The bipartisan,
pro-consumer BOTS Act would create a dual enforcement mechanism
to stop that theft. It would make it an unfair and deceptive
practice to use a bot to hack a ticketing Web site and allow
the FTC to enforce against people who do. It would also create
a private right of action by which any affected party, an
artist team, an agent, a fan could sue a botster under a clear
federal standard and recover damages.
Bruce Springsteen, Paul McCartney, Taylor Swift, and others
don't come to Washington, D.C., every year or your
congressional districts. It is unfair to the younger fans who
have discovered these legends to have to pay exorbitant prices
to secondary ticket sellers when they are also concerned about
their first job salary, saving for college, even paying off
student loans, and other life expenses.
We are hopeful that the dual threat of FTC enforcement and
private litigation will serve as a deterrent against people who
use bots and help restore the ability of real fans to get good
tickets at face value.
This hearing is also examining legislation that more
extensively regulates the primary ticketing market, requiring
inventory disclosures of proprietary business information and
prohibiting restrictions on resale of tickets. Many states have
looked at adopting such policies, and nearly all of them have
rejected them. Legislators realize that these bills, while
well-intentioned, would only empower scalpers at the expense of
real fans.
In recent years, Maryland considered and rejected
legislation that would prohibit restrictions on the resale of
tickets from the primary ticket-seller. One of those
restrictive provisions would have prohibited making tickets
non-transferrable. This is similar to what is in Congressman
Pascrell's draft on page 5, lines 12 through 15.
Think of all the times when you may have attended an event
with the Speaker of the House, the Cabinet officials, or even
the President. One of the reasons these tickets are non-
transferrable is because of security. Taking away the right of
the primary ticket-seller to restrict tickets could lead to
anyone getting those tickets on the secondary market. In such a
case, it would be a very bad policy for obvious security
reasons.
I hope Congress will enact H.R. 5104, the BOTS Act, and
refrain from adding controversial and burdensome measures to
regulate the primary ticketing marketplace.
Once again, thank you, Congressmen Blackburn and Tonko for
sponsoring and the cosponsors for introducing this legislation.
I look forward to your questions.
[The prepared statement of Gil Genn follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentleman for his
testimony.
The Chair now takes great pleasure in recognizing a
constituent, Ms. Pena, 5 minutes for your opening statement,
please.
STATEMENT OF JAMIE PENA
Ms. Pena. Thank you. Chairman Burgess, Ranking Member
Schakowsky, and members of the subcommittee, thank you for the
opportunity to speak to you today about addressing deceptive
hotel booking Web sites.
My name is Jamie Pena, the vice president of revenue
strategy and global distribution for Omni Hotels, located in
Dallas, Texas. As Mr. Burgess mentioned, I am also a proud
constituent of Chairman Burgess.
I am here today representing the over 18,000 employees and
associates of Omni Hotels. Omni Hotels is a proud member of the
American Hotel and Lodging Association, which represents 2
million employees of the lodging industry.
It is an honor to appear here before your committee to
discuss the need for Congress to pass the Stop On-Line Booking
Scams Act, H.R. 4526. I would like to thank the 18 bipartisan
cosponsors for their leadership on this issue as well.
I am here today to discuss the growing problem of deceptive
hotel booking Web sites that are scamming customers and the
need for legislation to address this issue. The ever-evolving
online channels for booking hotel rooms from desktops to mobile
phones and internet-enabled devices like tablets have
transformed the way guests book their hotel rooms and at the
same time created new customer-facing business models.
Amid these transformations, the lodging industry continues
to put guests and customers first. We are focused on educating
consumers on how to avoid being victimized by these scam Web
sites.
It is with that purpose that we can bring to the committee
the growing problem of misleading scam Web sites that deceive
customers into thinking they are making a legitimate booking
directly with the hotel company. They use pictures and graphics
and other unique images from the hotel. They even set up 800-
number call centers where the guest calls and the agent answers
in a way that leads the customer to believe they are talking
directly to the hotel.
Further, as customers increasingly move to mobile booking,
smaller screens make it even more difficult for them to discern
between the hotel's Web site and the URL of these scammed Web
sites. Customers are definitely harmed and the result is we get
different complaints from lost reservations, incorrect
accommodations, loss of hotel loyalty program benefits, and
simply the customers are confused.
By AHLA's estimates, these scams are impacting 15 million
online bookings a year in the U.S. Omni customers have
certainly fallen victim to these scams. I have two specific
examples that I would like to share with you that are very
recent.
One is a guest that was booking at the Omni Parker House in
Boston. They called our call center to add an accompanying
guest name to their reservation that she thought she booked on
omnihotels.com. However, our agent was unable to assist her
because, unknowingly, she had booked with a third party. She
was very upset that her credit card information was in the
hands of strangers since she thought she had booked directly
with our hotel.
Another example comes from the Omni Houston Hotel. We had a
similar scenario where the guest realized after the fact that
they had clicked on a link and booked their reservation with
one of these third-party rogue Web sites. To her surprise, it
was not booked direct with us. I was able to get the 800 number
from the Web site myself that the lady had spoken with, and the
agent even continued to insist to me that he was an agent of
Omni Hotels, which he was not.
These are not just problems for customers trying to book
with Omni. No ordinary customer would be able to realize that
these are fake Web sites. And make no mistakes, these Web sites
are designed to deceive consumers.
Thankfully, the hotel industry is one of many voices
concerned about this growing problem. The Federal Trade
Commission, AAA, and the Better Business Bureau have all issued
formal alerts warning consumers of these scams, and the hotel
industry is also working on better methods of tracking the
expansive nature of this program.
Many times the instances where consumers are frauded are
not formally reported because the front desk agents just take
care of the customer and they just make it right for them at
their expense.
Congress has a role. So, to better quantify this issue, we
are beginning a pilot program in three states to better train
the front desk personnel to report these instances of fraud
directly to the states' attorney general office. But Congress
has a role to play as well, and that is why I am here today to
express our support for H.R. 4526.
This bill is narrowly tailored to address only the
unscrupulous sites that purposely deceive the customers. The
bill simply requires online travel Web sites who do not have
direct contracts with hotels to clearly disclose that they are
not the actual hotel property.
Because it is directed only at non-affiliated third-party
Web sites, it excludes our partner OTAs. These OTAs we have
direct relationships with design their Web sites in a manner
that distinguishes their site from our hotels. In addition, our
partner OTAs are very quick to address instances of confusion
and they are very transparent on their Web sites that they are
not the actual hotel.
As you can see, H.R. 4526 is a targeted bill to address a
serious problem for U.S. consumers.
Thank you for the opportunity to testify here, and I look
forward to answering your questions.
[The prepared statement of Jamie Pena follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[The addendum to Ms. Pena's testimony has been retained in
committee files and can be found at: http://docs.house.gov/
meetings/IF/IF17/20160524/104976/HHRG-114-IF17-Wstate-PenaJ-
20160524.pdf.]
Mr. Burgess. The Chair thanks the gentlelady for her
testimony.
Mr. Best, you are recognized for 5 minutes, please.
STATEMENT OF MICHAEL BEST
Mr. Best. Thank you, Chairman Burgess, Ranking Member
Schakowsky, and other members of the Commerce, Manufacturing,
and Trade Subcommittee.
I am Michael Best, senior policy advocate for the Consumer
Federation of America. CFA is a nonprofit association of more
than 250 pro-consumer, not-for-profit groups that was
established in 1968 to advance the consumer interest through
research, advocacy, and education.
The Funeral Consumers Alliance is a nonprofit organization
with more than 70 local educational groups that was founded in
1963 to protect the consumer's right to choose a meaningful and
affordable funeral. CFA and FCA appreciate this opportunity to
provide testimony on H.R. 5212, the Bereaved Consumers Bill of
Rights Act of 2016. I would like to outline our support of H.R.
5212 and, also, urge you to call on the Federal Trade
Commission to modernize its funeral rule.
For consumers, funeral and cemetery services are not
discretionary. Everyone will die and require performance of
some kind of service, and it will be a large expense for many
households. In 2014, the median cost of a funeral with viewing
and burial was $7,181. Yet, according to a 2011 study, about
half of all households in the country would have difficulty
paying an unexpected expense of $2,000. This expense is also
often incurred at a time when we are all especially vulnerable
and disinclined to undertake a careful search involving
different types of services and service providers.
The bill would, among other things, extend the consumer
benefits of the FTC funeral rule to all death-related
businesses and codify that rule, establish minimum standards
and a culture of accountability for the cemetery industry, and
give the FTC and states attorneys general additional tools to
ensure the marketplace for funeral and burial services is truly
competitive.
We are aware of and not unsympathetic to the claims of some
nonprofit providers of cemetery services, particularly
individual churches, that they would have difficulty complying
with some requirements of the bill. Therefore, we did not
oppose the amendment that sought to ease requirements on some
of the small nonprofits.
We also would not object to the FTC ensuring that any rules
that were written were informed by an understanding of the
different types of service providers, from large for-profits at
one end of the continuum to individual churches operating
nonprofit services at the other end.
Both CFA and FCA support H.R. 2212 because it would provide
stronger and broader protection to consumers of funeral and
burial services. High cost, vulnerable consumers, and changing
markets are also why the FTC needs to modernize its funeral
rule to include online disclosures. The rule worked well for a
long time and it was even supported by industry.
Randall L. Earl, in his capacity as an elected officer of
the National Funeral Directors Association, testified before
this committee about a previous version of H.R. 2212 stating
``Many NFDA members have reported that the rule has made them
better businessmen and women.''
But the rule needs to reflect how consumers now shop. The
rule requires written disclosures, but as far back as 2010, 97
percent of consumers used the internet when searching for local
products or services. The FTC, in its consumer information web
pages, also touts internet search as a way to get the best
product and deal.
The cost to consumers of antiquated disclosure requirements
of the funeral rule were evident in a survey of funeral home
services undertaken and released last year by CFA and FCA. The
price information we needed to accurately price services was
found on the Web site of only about one-quarter, 38, of the 150
funeral homes we surveyed.
In the absence of a requirement to offer complete online
disclosures, some funeral businesses that do post prices online
mislead consumers and directly contradict the intent of the
funeral rule. Those businesses in our survey that did post
prices online usually posted only all-inclusive packages and
failed to alert consumers that they have the right to buy a la
carte and to decline any unwanted goods or services.
If the same funeral home offered this incomplete
information on a paper price list, that would be a violation of
the federal rule. But, because the rule does not contemplate
online transactions, these omissions are legal.
In our study, prices for the same funeral services within
individual areas almost always varied by at least 100 percent,
and often varied by more than 200 percent. For example, right
here in D.C., prices among 15 funeral homes for a full-service
funeral ranged from $3,770 to $13,800. That variation would be
difficult to sustain at a market with easy-to-research prices.
Thank you for the opportunity to support H.R. 2212 and
explain why the federal rule needs to be updated, and I look
forward to your questions.
[The prepared statement of Michael Best follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentleman. The Chair
thanks everyone for their testimony today, and we are going to
move into the members' questions portion of the hearing.
I wish to yield 5 minutes to Ms. Schakowsky of Illinois,
ranking member of the subcommittee, 5 minutes for questions,
please.
Ms. Schakowsky. Thank you, Mr. Chairman.
Dr. O'Shanick, I have been involved in this issue of brain
injury. I asked the question of the NFL about the connection
between CTE and brain injury.
First of all, do you do research, also, on sub-concussive
brain trauma?
Dr. O'Shanick. No, ma'am. My job is a clinical practice. I
take care of sick folks on a daily basis. I was in academics
for a decade. That was 20 years ago.
Ms. Schakowsky. OK, but you are testifying today about
brain trauma, no?
Dr. O'Shanick. Yes, ma'am.
Ms. Schakowsky. Yes. OK.
Dr. O'Shanick. That is correct.
Ms. Schakowsky. OK. So, studies have shown that children
and teens are more likely than adults to get a concussion and
that they take longer to recover. What explains the difference
in concussion risk and recovery between children and adults,
and what can we do to guarantee children's brains are protected
while they engage in youth contact sports?
Dr. O'Shanick. Thank you very much for the question and for
your support in terms of this area.
Children are not just small adults. Unfortunately, for too
long, the type of information we have been using to look at
kids has been extracted from the adult literature, both in
terms of the brain development--frontal lobes of the brain
start developing in utero, aren't fully developed until 25-26
years of age. In that situation, what you are doing
fundamentally with any type of insult or injury is you are
damaging a developing brain and you are slowing down and
causing an ultimate loss of full attainment of what they can
ultimately achieve. They never literally catch up with their
age-mates.
So, the issue relates to one of being appropriate in terms
of minimal types of issues of concussive tackling before a
certain age. It relates to effective coaching. It requires,
also, more vigilance in terms of the sideline staff.
Ms. Schakowsky. So, you were testifying in support of
legislation that would prevent claims for protective gear that
are false. Is that right?
Dr. O'Shanick. Correct. One of the issues that my patients
and their families have is how do you allow your kids to
participate in activities and yet have them be safe. Quite
honestly, much of the information that they read on the
internet or the Web sites that they visit to try to protect
their kids simply has misleading information, incomplete
information, and at times, frankly, erroneous information. Many
places are more concerned about the colors that they offer, and
offer one size adult, one size child, as opposed to really
looking at the science and investing in what is going to be
protective.
Ms. Schakowsky. So, we had a hearing on this subject of
brain injury, and Dr. Tom Talavage, a witness at that hearing,
testified that current helmet designs prevent massive trauma,
like skull fracture. They do not, however, according to him,
prevent the brain from moving around inside the skull, which
results in a concussion. Is that true?
Dr. O'Shanick. Absolutely correct, yes. What we are looking
at is kind of the same concept as airbags. Airbags do not
prevent concussion or do not prevent brain injury. They prevent
catastrophic brain injury. The abbreviated injury scale for
airbags is designed so you can still be rendered unconscious
for 30 minutes and it meets the current federal standards.
So, what we are looking at is the prevention of a
catastrophic injury. However, we know, especially in the
developing brain, that sub-concussive and other concussive
injuries that would be relatively innocuous for an adult with a
fully-developed brain are much differently managed----
Ms. Schakowsky. And over time?
Dr. O'Shanick. Exactly, the exposure over time.
Ms. Schakowsky. Right. Some have suggested narrowing the
bill to only youth sporting equipment, but I am concerned that
the bill would no longer cover sporting equipment used by all
young athletes. Some younger players are wearing adult-sized
helmets, for example.
So, I wondered, Dr. O'Shanick, if you share my concern and
if you have seen young athletes who are grown out of the so-
called youth sporting equipment.
Dr. O'Shanick. Absolutely. Very astute observation,
especially when you get into high school and some of the middle
school kids. I mean, I am not sure where these kids come from,
but they look like full-grown adults. I want to check their
driver's license.
But the issue is that, whenever it is going to be used by a
child, whenever it is going to be used by somebody of an age
where we are responsible for protecting them and their brain, I
think this needs to be the policy that we exhibit.
Ms. Schakowsky. Thank you. I want to thank all of the
witnesses. There is so much richness here, that I could ask
about all of these. So, thank you so much. I listened carefully
to all your testimony. Thank you.,
Dr. O'Shanick. Thank you.
Mr. Burgess. The Chair thanks the gentlelady. The
gentlelady yields back.
Unfortunately, we do have a vote on the floor. So, the
committee is going to take a recess while we vote, and we will
reconvene immediately after the vote series concludes.
Ms. Schakowsky. Mr. Chairman, may I ask permission to
insert these letters from the minority into the record?
Mr. Burgess. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Mr. Burgess. We stand in recess.
[Recess.]
Mr. Burgess. I call the subcommittee back to order.
We will resume where we were with member questions of the
third panel. I would like to recognize Mr. Harper of
Mississippi for 5 minutes for his questions, please.
Mr. Harper. Thank you, Mr. Chairman, and I appreciate the
opportunity.
And thank you to each one of you for being here. This is
some very important issues, obviously. And thanks for what each
of you deals with in the arena of these important pieces of
legislation.
Mr. Hendrickson, I would like to ask you a few questions,
if I may. And specifically, we are discussing some things that
are very important to us. One of those, of course, is the
Reinforcing American-Made Products Act of 2016.
A nice tie, by the way.
Mr. Hendrickson. Thank you very much. I picked that out
special today.
Mr. Harper. There you go.
If other states begin instituting their own made-in-America
labeling standards, as California has done, how would that
impact the manufacturing sector broadly and specifically?
Mr. Hendrickson. Thank you, Congressman Harper, and thank
you for your work on this bill.
We have been very troubled with the addition of another
state, and especially the potential of additional states after
that, taking up their own definition of made-in-America. Our
experience, and just a slight bit of background about us, we
are a very, very vertically-integrated factory, meaning we
don't just make the basketball hoops, but we actually make the
tubing that goes into the basketball hoops. We manufacture the
plastic bases for the portable portion of it. And beyond that,
we have a tooling facility that manufactures the tools to make
the parts and oftentimes even the automated equipment beyond
that. So, extremely vertically-integrated.
Yet, with separate state laws and a separate approach and a
different definition of made-in-USA, it leaves even a company
like ours, as vertical as we are and as 100-percent made-in-
America as we are, unable to make that claim because we don't
have the ability to meet multiple litmus tests or multiple
definitions of made-in-USA.
And so, the outcome of that is, frankly, we don't get to
tell the consumer that it is made in America. Our people who
work every day to make the products and keep them in the USA
don't get to see ``made in America'' on the boxes that they
know they produced right here in America. And it takes away
just one more element of manufacturing in the U.S., which is
extremely important.
You know, the significance of manufacturers here in the
United States of America has impacts all across the country.
And so, confusion in this area is just one more detriment to
those of us who are fighting so hard to keep those jobs in the
U.S.
So, this Reinforcement Act allowing us to abide by what is
a very, very strong test, a very demanding made-in-USA
definition that the FTC holds, it allows us to meet that and,
then, be able to properly and accurately communicate to the
consumer where the product was made.
Mr. Harper. Right, and I think it is very appropriate, if
you are manufacturing basketball equipment, that it be
vertically-integrated.
[Laughter.]
Mr. Hendrickson. Thank you. I think you are absolutely
correct.
Mr. Harper. So, those go very well together.
Do consumers prefer that products be made in the United
States?
Mr. Hendrickson. You know, I referred to in my testimony 78
percent. That came from a Consumer Reports test that was
conducted in 2013. If given the opportunity and it is a similar
product, there is an understanding and a belief that not only
should it be a very respectable and, hopefully, even higher
quality many of the times, but it also allows them to say, yes,
I am spending my dollars in a way that supports the nation,
that supports the jobs, my neighbor, my friends, my families.
And so, the consumer does care, and they should be able to
accurately be notified if it has been made in the U.S., and
that has been very difficult for us to have to remove ``made in
the USA'' from products that we have fought for decades to keep
in the USA.
Mr. Harper. So, obviously, consumers would prefer to buy it
with that label and it would benefit manufacturers if you can
display that. How would a uniform national standard, as we are
discussing, for made-in-America labels help strengthen the
manufacturing sector in the United States?
Mr. Hendrickson. Well, there are certain national retailers
that are actually pushing marketing campaigns of made in USA.
If those of us who are manufacturers in the U.S. can't
communicate that to the consumer nor to the retailer, then we
miss out on those opportunities for growth. So, this unified
standard by the FTC allows manufacturers to benefit from the
increased demand and from the consumer desire to seek out and
purchase made-in-the-USA products.
Mr. Harper. Regrettably, my time has expired. I am going to
yield back.
But thank you so much for your testimony, what your company
is doing, and we hope for resolution that will help you and
many others. Thank you.
Mr. Hendrickson. Thank you very much, Congressman.
Mr. Burgess. The Chair thanks the gentleman. The gentleman
yields back.
The Chair recognizes Mr. Rush of Illinois, 5 minutes for
your questions, please.
Mr. Rush. Again, I want to thank you, Mr. Chairman, for
this panel.
I want to welcome the witnesses.
The funeral industry, Mr. Chairman, is a mystery to most
people. The vast majority of consumers arrange only one or at
most two funerals during their lifetime. And, generally, they
do this at a time of much grief and duress.
In the eighties, the FTC recognized the opportunity for
consumer abuse and issued a, quote, ``funeral rule'' containing
disclosures to consumers at the funeral homes.
Mr. Best, I want to ask you how have prices at funeral
homes evolved since the rule was enacted back in the early
eighties? Have you seen any improvements in the transparency of
this kind of business arrangement with consumers?
Mr. Best. Thank you, Mr. Rush.
I mean, I think our research showed that, while there is
good enforcement of the current rule, it is very much, as you
said, in the eighties and nineties, it is about written price
lists and doesn't reflect how consumers now shop, which is
through the internet, and they want to quickly compare prices
across a broad variety of businesses in their area, especially
when they are under this duress.
We see a huge a variation in the price within localities,
and we think that that is in no small part because it is very
hard for consumers now with the way they shop to find out what
the prices are because there is no requirement to disclose
funeral home prices on the web, sir.
Mr. Rush. So, you would agree that very fine sellers of
funeral services such as caskets and monuments and cemeteries
that do not have an onsite funeral home are not covered by the
funeral rule? Is that right?
Mr. Best. That is correct, sir, and we agree that more and
more the entities not covered by the funeral rule are
interacting with the public as part of the funeral services
industry and should be covered by the same disclosure
requirements, absolutely.
Mr. Rush. Would you also agree that consumers seeking any
type of funeral goods or services would stand to benefit from
the FTC's protection from unfair and deceptive acts?
Mr. Best. Absolutely, sir, and we feel that your bill was
very well-drafted and it is a really good, balanced approach to
that.
Mr. Rush. You mentioned the use of the internet when
researching local products and services. Can you provide any
information on how consumers use the internet to purchase
products and services from outside of their local area?
Mr. Best. From outside their local area, I am not sure. In
preparation for this testimony, I looked up statistics for
within your local area because I imagine that is generally how
people procure funeral services. I mean, within the local area,
it is over 96 percent of consumers use the internet to do that
kind of research and price comparison. I don't have exact
numbers, but I imagine it is quite high, no matter what. I
mean, I know I certainly use the internet to price everything
at this point.
Mr. Rush. The funeral rule also covers some aspects of pre-
need contracts which allow complete payment for all their own
funeral needs, including caskets and burial plots and funeral
services. It seems that most people would buy these prepaid
services to provide a sense of peace of mind and ease the
burden on their family members without an instance of fraud and
financial mismanagement surrounding premium contracts that led
to services in this area maybe being misguided. Do you think
that H.R. 5212 would give some sense of relief and safety and
give a sense of comfort to some of these consumers?
Mr. Best. I absolutely do, sir. I mean, I think this is
going to go a long way to setting a good, solid floor of
requirements that are easy to understand for consumers and
businesses both.
Mr. Rush. Mr. Chairman, I see that my time has expired.
Mr. Burgess. Indeed, it has. The gentleman yields back. The
Chair thanks the gentleman.
Mr. Rush. You didn't have to say it like that, Mr.
Chairman.
[Laughter.]
Mr. Burgess. The Chair thanks the gentleman.
I am going to recognize myself, finally, for 5 minutes for
questions. I have deferred and let all members go first. So, I
am not taking extra time.
It occurs to me that my first term on this subcommittee
some 10 years ago Mr. Rush was the chairman of the
subcommittee, sat here. I sat way down there on the minority
side.
And we had a hearing on some problem with toys that were
coming in from China and the yellow paint on the toys
apparently had more lead in it than the law allowed. And we had
an executive from one of the major manufacturers sitting here
at the desk. And I remember when it finally came my time to
question, I said, ``I just simply do not understand. I think if
you marketed your toys with made in the USA, had a little
American flag on the bottom of that truck or duck,'' or
whatever it was, ``that those things would fly off the shelves.
And if you even went one step further and said made in Ft.
Worth, Texas, and had a little Texas flag on the bottom, those
things, you know, they would be collectors' items the day they
went on the shelves.'' He didn't agree with me.
But, Mr. Hendrickson, I feel the same way you do. I think
there is value to being made in America. And I just want to ask
you a question because most things that I buy--and I am not
even sure what the rules are governing this--will have ``made
in China,'' ``made in Mexico,'' not that I buy things made in
China, but, I mean, you look at packages and there is a country
of origin.
So, if you are not allowed to put ``made in the USA'' on
your basketball hoop, what does it say, ``made nowhere''?
Mr. Hendrickson. Now previous to our incident and lawsuit
in California, we had ``made in the USA,'' obviously, on there.
Today we don't claim where it is made. However, products that
do come from other countries, some of our products that come
from another country will represent that country. Today--and it
is very unfortunate--the products that we have fought the
hardest to keep in the U.S., we are unable to claim where they
are made, for fear of additional negative impact lawsuits.
And we are very pleased to see H.R. 5092 come through
because I think the U.S. manufacturing needs it, and it is
going to help us. I think it is at the same time protecting the
consumer because today they don't get to see that it was made
in the U.S. and they deserve to know that.
Mr. Burgess. I couldn't agree more.
Ms. Pena, how do people fall into the trap that you have
laid out for us that they think they are booking on a reputable
site and they are actually booking--they have gone through the
looking glass and they are booking in a different dimension?
How does that happen?
Ms. Pena. Typically, in my experience, it happens when the
customer uses a search engine and types in the name of the
hotel. And the top few listings, they appear to be genuine Omni
hotels, and in some cases they actually use our name in their
URL to trick the customer. And then, they go to that Web site,
assuming that they clicked on our Web site, and make the
reservation.
Mr. Burgess. But the transaction does not go through the
hotel's registry? It is going through something else?
Ms. Pena. Sometimes we receive it and that they had onward
from somebody we are partners with. And sometimes we don't
receive the reservation at all. Most of the time, we receive it
through another party that we are contracted with.
Mr. Burgess. And then, what is the bottom line for the
consumer when they go to check in?
Ms. Pena. Well, there are times where we don't have--if we
have the reservation, sometimes we don't have the right request
from them. Maybe they need two beds, and we didn't know. Or
maybe they wanted to get their loyalty benefit rewards and they
can't now. Maybe their payment information, they need to change
payment, and we weren't the ones that took their money, so it
is we are unable to assist them. So, it causes a lot of
frustration.
Mr. Burgess. I see.
And, Mr. Genn, let me just ask you briefly, the ticket
sales issue, a lot of states have state laws around this. Why
wouldn't this just remain a state issue? Why is it necessary to
do something at a federal level?
Mr. Genn. Mr. Chairman, thank you for the question.
Because of interstate issues. Or I will give you a good
example. I contacted the Consumer Affairs Division of our
attorney general in Maryland yesterday and I said, ``What
complaints have you received since we passed the BOTS Act?''
And they said, ``We have received a raft of complaints about
the Bruce Springsteen concert being held at Nats Park September
1st, and we cannot do anything because the people complained.''
They said they went online, just all the testimony you heard.
It wasn't accessible. A couple of hours later, it was on the
secondary market.
The Maryland attorney general said, ``Well, I can take the
complaint, but it is jurisdictional issues. This is out of D.C.
I don't have jurisdiction to act.'' And that is exactly why
H.R. 5104 is a necessary remedy to deal with this at the
federal level.
Mr. Burgess. Very well.
Well, once again, I want to thank all of you for your
testimony today. It has been a long day, but I think it has
been very, very informative.
And seeing there are no further members wishing to ask
questions of this panel, I want to say before we conclude I do
have the following documents that I want to submit for the
record by unanimous consent:
A letter from the American Society of Association
Executives; a letter from the National Sporting Groups
Association; a letter from the Joint Association of H.R. 4460;
a letter from Ashford, Incorporated; a letter from Delta
Airlines; a letter from the United States Chamber of Commerce;
a letter from the American Academy of Pediatrics; a letter from
the Consumer Review on H.R. 5111; a letter from Consumer Review
on FTC process; a letter from the Brain Injury Association of
America; a letter from the Retail Industry Leaders Association;
a letter from Safe Kids Worldwide; a letter from the National
Association of State Head Injury Administration; a blog posting
from the Sunlight Foundation; a letter from the medical
stakeholders on the Youth Sports Concussion Act; a letter from
the California Hotel and Lodging Association.
[The information appears at the conclusion of the hearing.]
Mr. Burgess. Pursuant to committee rules, I will remind the
members that they have 10 business days to submit additional
questions for the record, and I ask that our witnesses submit
their responses in a timely fashion.
Mr. Best. With that, the subcommittee again thanks the
panel for their forbearance today. Again, it has been a long
day, but I think we have gotten a lot of information.
And the subcommittee now stands adjourned.
[Whereupon, at 3:09 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Prepared statement of Hon. Fred Upton
Across the House of Representatives, committees are
constantly addressing new technologies. And as part of the
Majority Leader's Innovation Initiative, we are collectively
taking a fresh look at how technology interacts with
regulation, how we can modernize federal agencies for the 21st
century, and promote jobs and the economy.
This subcommittee in particular has taken a deliberative
approach through the Disrupter Series by examining the
continual unsettling of industries and governmental roles
caused by novel technologies and business models.
The task is different depending on the nature of the
agencies and industries affected. In the case of the FTC, the
agency is a technology-forward and creative agency. So our work
is more focused on future-proofing the commission and keeping
it focused on after the fact enforcement.
This may mean prompting more input from economists and more
participation at the commissioner level. It may also mean
making sure that if the concern is only possible harms, we are
also examining possible benefits and treading carefully.
Needed certainty requires that everyone understand both the
legal theories that do and those that do not give rise to an
enforcement action. We are looking at a combination of these
approaches with our process and transparency reform bills
today. However, sometimes specific problems do develop that
must also be addressed. For example, hackers have taken
advantage of ticket sellers for too long, robbing consumers of
an opportunity to see their favorite musical acts or sports
teams.
It is hard enough to get a ticket for Hamilton or a
postseason Cubs game. It is time to give the FTC some
additional tools and put a federal enforcer on the beat in this
area.
In 1994, when the most recent statutory changes were made
to the FTC's general Section 5 authority, spirited disagreement
yielded a solid compromise. Where the Senate sought to ban all
advertising rules under FTC ``unfairness'' authority, the House
disagreed and the compromise yielded the statutory
``unfairness'' balancing test.
Codifying this test was a positive advancement and over
twenty years later, we seek to build on it. As the FTC
encounters new technologies and is incentivized to prevent new
harms to further its consumer protection purpose, there must be
countervailing incentives not to thwart innovation. It cannot
be overstated that hindering innovation is often the same thing
as hindering consumer welfare.
Many of the bills we unveiled are a step forward and an
invitation to begin the real work of reconciling differences.
We commit to honest and open inquiry with the commission,
experts, and industry and to consider all options to achieve
our shared goals of protecting consumers, competition, and
innovation. These thoughtful solutions that modernize the FTC
for the 21st century and put innovation first will greatly
benefit folks in Michigan and across the country. I thank the
witnesses and look forward to testimony.
----------
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[all]