[Senate Hearing 116-625]
[From the U.S. Government Publishing Office]
S. Hrg. 116-625
OVERSIGHT OF
THE FEDERAL TRADE COMMISSION
=======================================================================
HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
AUGUST 5, 2020
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available online: http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
52-824 PDF WASHINGTON : 2023
SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
ROGER WICKER, Mississippi, Chairman
JOHN THUNE, South Dakota MARIA CANTWELL, Washington,
ROY BLUNT, Missouri Ranking
TED CRUZ, Texas AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas BRIAN SCHATZ, Hawaii
DAN SULLIVAN, Alaska EDWARD MARKEY, Massachusetts
CORY GARDNER, Colorado TOM UDALL, New Mexico
MARSHA BLACKBURN, Tennessee GARY PETERS, Michigan
SHELLEY MOORE CAPITO, West Virginia TAMMY BALDWIN, Wisconsin
MIKE LEE, Utah TAMMY DUCKWORTH, Illinois
RON JOHNSON, Wisconsin JON TESTER, Montana
TODD YOUNG, Indiana KYRSTEN SINEMA, Arizona
RICK SCOTT, Florida JACKY ROSEN, Nevada
John Keast, Staff Director
Crystal Tully, Deputy Staff Director
Steven Wall, General Counsel
Kim Lipsky, Democratic Staff Director
Chris Day, Democratic Deputy Staff Director
Renae Black, Senior Counsel
C O N T E N T S
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Page
Hearing held on August 5, 2020................................... 1
Statement of Senator Wicker...................................... 1
Statement of Senator Cantwell.................................... 3
Statement of Senator Fischer..................................... 25
Statement of Senator Klobuchar................................... 27
Statement of Senator Moran....................................... 29
Statement of Senator Blumenthal.................................. 31
Statement of Senator Blackburn................................... 33
Statement of Senator Schatz...................................... 35
Statement of Senator Capito...................................... 36
Statement of Senator Udall....................................... 38
Statement of Senator Thune....................................... 40
Statement of Senator Baldwin..................................... 41
Statement of Senator Scott....................................... 43
Statement of Senator Peters...................................... 45
Statement of Senator Lee......................................... 47
Statement of Senator Tester...................................... 49
Statement of Senator Sinema...................................... 51
Statement of Senator Rosen....................................... 54
Witnesses
Hon. Joseph J. Simons, Chairman, Federal Trade Commission........ 4
Prepared statement........................................... 5
Hon. Noah Joshua Phillips, Commissioner, Federal Trade Commission 7
Prepared statement........................................... 9
Hon. Rohit Chopra, Commissioner, Federal Trade Commission........ 11
Prepared statement........................................... 12
Hon. Rebecca Kelly Slaughter, Commissioner, Federal Trade
Commission..................................................... 13
Prepared statement........................................... 15
Hon. Christine S. Wilson, Commissioner, Federal Trade Commission. 17
Prepared statement........................................... 19
Appendix
Letter dated August 11, 2020 to Hon. Roger Wicker and Hon. Maria
Cantwell from Tamra Kennedy, President, Twin City's T.J.'s,
Inc. and Chair, International Franchise Association Franchisee
Forum.......................................................... 59
OVERSIGHT OF
THE FEDERAL TRADE COMMISSION
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WEDNESDAY, AUGUST 5, 2020
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10 a.m., in room
SR-254, Russell Senate Office Building, Hon. Roger Wicker,
Chairman of the Committee, presiding.
Present: Senators Wicker [presiding], Thune, Blunt,
Fischer, Moran, Sullivan, Blackburn, Moore, Lee, Young, Scott,
Cantwell, Klobuchar, Blumenthal, Schatz, Udall, Peters,
Baldwin, Tester, Sinema, and Rosen [presiding].
OPENING STATEMENT OF HON. ROGER WICKER,
U.S. SENATOR FROM MISSISSIPPI
The Chairman. Good morning. The meeting will come to order.
And welcome to today's hearing on the oversight of the Federal
Trade Commission, FTC. I extend a special welcome to our
distinguished panel of witnesses and thank them for appearing.
They will all appear remotely this morning, including FTC
Chairman Joe Simons, Commissioner Noah Phillips, Commissioner
Rohit Chopra, Commissioner Christine Wilson, and Commissioner
Rebecca Slaughter.
The FTC is the Nation's primary consumer protection agency.
Established in 1914 by the Federal Trade Commission Act, the
FTC is chiefly responsible for protecting consumers from
unfair, deceptive, or fraudulent business practices in the
marketplace. This includes protecting consumers' privacy and
the security of their data, preventing harmful uses of
technology, and combatting deceptive advertising and illegal
robocalls among other issues. The FTC is also responsible for
educating consumers about fraudulent activity and predatory
business practices. Consumer education is an essential part of
the FTC's mission and it is intended to inform customer choices
and help prevent Americans from falling victim to scammers,
fraudsters, cybercriminals, and other bad actors.
As was recently discussed at Chairman Moran's subcommittee
hearing on COVID-19 scams last month, the coronavirus has
created a new avenue for scammers to take advantage of
consumers. The surge in Internet usage, in particular, because
of stay-at-home orders has been a prime target for
exploitation. I appreciate the Commission's ongoing efforts to
protect consumers from identity theft, e-mail phishing schemes,
and other online dangers during this public health crisis.
Today's hearing is an opportunity to discuss what more can be
done to protect Americans from deceptive and unfair commercial
practices. This work begins by ensuring the FTC has the proper
authority and resources at its disposal to carry out its broad
statutory mandate.
The FTC's authority under the U.S. SAFE WEB Act, for
example, empowers the agency to work with foreign law
enforcement agencies to combat international crimes. This law
has provided critical cross-border enforcement tools to the FTC
to take swift action against criminal activity, such as
Internet pyramid schemes and data theft. The reauthorization of
this Act was favorably reported out of this committee in March
and soon we will have a finalized committee report.
Once this is completed, I urge Congress to reauthorize the
U.S. SAFE WEB Act quickly before it expires next month. There
have also been challenges to the scope of the FTC's authority
under Section 13(b) of the FTC Act, which the Supreme Court
plans to address in its next term. The Commission has long
relied upon this section of the law to require scammers to give
money back to those who have been defrauded. I look forward to
examining how Congress can clarify the statute to empower the
FTC not only to enjoin improper behavior, but also to
compensate victims for their losses. The FTC's ability to
protect the privacy and security of data is also essential. I
hope we can all agree that the COVID-19 pandemic further
underscores the need for strong, uniform national data privacy
legislation. Such a law would provide all citizens with more
transparency, choice, and control over their data. It would
also provide certainty and clear, workable rules for businesses
across all 50 states.
I hope the Commissioners will discuss the scope of their
existing authority to protect the privacy and security of
personal data and outline additional tools that are needed to
safeguard information from misuse and unauthorized access. I am
sure Commissioners will also want to discuss the potential
impact of the recently invalidated EU, U.S. Privacy Shield
Framework. The Privacy Shield provided a method for companies
to transfer personal data back and forth between the United
States and the European Union in compliance with EU data
protection requirements and in support of transatlantic
commerce.
The FTC has played a critical role in enforcing compliance
with the Privacy Shield since it was established in 2016.
Today's hearing is an opportunity to review how the FTC is
working with the Department of Commerce to develop interim
guidance for thousands of U.S. companies, including many small-
and medium-sized businesses impacted by this recent decision.
Finally, some policymakers are proposing that the FTC take a
more active role in overseeing unfair or deceptive commercial
practices with respect to issues ranging from Section 230 of
the Communications Decency Act to compensating collegiate
athletes for the use of their name, image, or likeness.
I look forward to hearing more about the FTC's authority
and expertise to address these matters, as well as whether it
has sufficient tools to protect consumers engaging in these
commercial activities. Clearly, with the FTC there is much to
discuss. I thank the Commissioners again for their testimonies.
And I now turn to my friend and the Ranking Member for her
opening remarks. Senator Cantwell.
STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Thank you, Mr. Chairman, and thank you
for holding this important hearing today as we invite the
Commissioners to come before Congress to talk about the impacts
of this pandemic on our constituents, the amazing impact that
it is having on our economy and on our health care system. My
view of the FTC is simple, you should be doing everything in
your power to help Americans during this time of crisis.
The mission is of extreme importance and our Nation
continues to reel from one of the worst health emergencies and
one of the biggest economic crises we have ever faced. And so,
we have seen that the COVID-19 pandemic has attracted bad
actors, and scam artists, including those who take advantage of
people's fear and dire circumstances. I am sure every member of
this committee has heard from their constituents on these
issues about buying ineffective face masks or being subject to
COVID-19 phishing attacks or seeing advertisements for miracle
coronavirus cures. Thousands of people have reported sky high
prices for goods and services from their family.
And just like the spread of COVID-19, these scams are
happening in every part of the state. There was a recent story
in the Seattle Times about sanitizer for $150 for $7 sanitizer.
So, price gouging and the issues related to price gouging
continue to pile up. So just like the spread of COVID-19, these
virus scams are happening everywhere. They are impacting rural
communities, urban communities, and hurting Americans young and
old. Certainly that is the case in my state of Washington where
according to the FTC, people have been scammed out of over $2.5
million since the pandemic began, and more than 3,500 reports
of fraud.
And while many of the Attorneys General have gone after
these profiteers, I believe the FTC is holding back. You could
be doing more. We must move beyond warnings and threats in
response to these unconscionable scams. We must see the FTC
exercising real enforcement with real consequences to protect
consumers and families when they are most vulnerable. That is
why I believe the FTC needs clear price gouging legislation to
go after these scammers.
We must not allow unscrupulous merchants to exchange
exorbitant prices sometimes for life saving supplies like
personal protective equipment or medical equipment simply
because their families are desperate. And trust me, on the
frontlines of the epidemic in Kirkland, Washington was
Evergreen Hospital. And I can tell you it is not a good thing
to get calls from emergency room doctors who were saying they
are getting price gouged on essential equipment when they were
at the front lines of this pandemic.
So we need to make it clear that it is illegal to peddle
defective masks or fake COVID cures and we need to empower our
states' Attorneys General to go after these bad actors to
buttress the argument and the FTC enforcement. So this is
especially true, given our crisis today. So with many sales
happening online, Internet sale platforms should also be
working with the Federal and local law enforcement to identify
price gouging. So, Mr. Chairman, I plan to introduce in the
coming days Federal legislation to do two things, to move both
on price gouging definition to make sure the law is clear that
consumers can be protected in this area, and to enforce civil
penalties for deceptive COVID scams.
It is time for us to act on these important pieces of
legislation. It is time for us to protect our consumers from
these very important issues during the time of crisis. People
need help and support. They don't need deception and schemes,
and we need an FTC that will be more aggressive. Thank you, Mr.
Chairman.
The Chairman. Thank you, Senator Cantwell. And we look
forward to seeing that legislation once you get it drafted and
introduced. We now turn to testimony--summaries of testimony
from our witnesses. Written testimony has been submitted and
will be admitted into the record in full at this point. And we
ask each member of the Commission to summarize testimony in 5
minutes if possible. We begin with the Chair, the Honorable
Joseph J. Simons, again, who joins us remotely along with all
of the other members. Chairman Simons, you are recognized, sir.
STATEMENT OF HON. JOSEPH J. SIMONS, CHAIRMAN,
FEDERAL TRADE COMMISSION
Chairman Simons. Thank you so much, Chairman Wicker,
Ranking Member Cantwell, and members of the Committee. It is an
honor to be with you today even if it is virtual and especially
alongside my fellow Commissioners. Despite the challenges
presented by the pandemic, the FTC has remained active, open,
and aggressive. We are using every tool in our arsenal on
COVID-related initiatives while simultaneously handling our
everyday efforts to protect consumers' privacy and data
security, to stop fraud, and to ensure that advertising claims
are truthful and not misleading, and to combat illegal
robocalls. And what is truly extraordinary, the Commission
staff has accomplished this while quickly transitioning from
nearly 100 percent office space work to nearly 100 percent
telework.
I want to take a moment to focus on one of my priorities,
privacy and data security. Our enforcement in these areas,
including cases against Facebook, Google and YouTube, and
Equifax has been highly successful within the limits of our
authority. But as I have said before, Section 5 is a 100 year
old statute that is an imperfect tool for this purpose. We
believe we need more authority, which is why I urge you to
continue your hard work to enact privacy and data security
legislation that would be enforced by the FTC. As policymakers,
it is appropriate for you to make the difficult value based
decisions underlying new privacy protections. From an
enforcement perspective, I ask that the legislation give us
three things, one, the ability to seek civil penalties, two,
jurisdiction over nonprofits and common carriers as well as
everybody else, and three, targeted APA rulemaking authority to
ensure that the law keeps pace with changes in technology and
the market.
This is similar to the approach Congress took under COPPA.
We will continue to vigorously enforce existing privacy
statutes and we will use our extensive experience and expertise
to enforce aggressively any new privacy or data security laws
that you pass. We also need your help to clarify our authority
under 13(b) of the FTC Act which is our principal means of
getting money back for consumers. Using this authority as it
has been interpreted for decades, the FTC has returned over $10
billion to consumers in just the last 4 years. Recent court
decisions, however, threaten this essential authority and this
issue is now before the Supreme Court.
So, I strongly urge you to clarify the law on 13(b). I want
to thank the Committee for advancing legislation to reauthorize
SAFE WEB which is an indispensable tool in combating cross-
border fraud. However, without further action, SAFE WEB will
sunset on September 30. So I would really like your continued
support in pushing this effort across the goal line and keeping
SAFE WEB in our enforcement arsenal. Though I am asking for
more help, please know how grateful I am for what you have
already done on these issues. And I am very thankful for the
financial support that Congress has given the FTC this year.
The $20 million increase averted FTE reductions and instead
allows us to hire more people for some of our most critical
work. I also want to mention the recent EU ruling on Privacy
Shield and that we are studying its effects. We stand ready to
support the Administration's efforts in this area. But at the
same time, we will continue to hold companies accountable for
their privacy commitments including privacy promises made under
the Privacy Shield. I will end by briefly highlighting our
antitrust enforcement. We are on pace for the highest number of
merger enforcement actions in 20 years since Fiscal Year 2000.
We have brought four monopolization cases in the last two
years.
Last year we formed the Technology Enforcement Division,
what we call TED, which is currently pursuing a number of very
significant investigations involving big tech platforms. And we
have used our study authority to issue special orders to
Alphabet, Amazon, Apple, Facebook, and Microsoft, requiring
them to provide information about prior acquisitions not
reported under the HSR Act.
We are committed to using every resource as effectively as
we can to protect consumers and to promote competition, and we
certainly look forward to continuing to work with you. And I
would be happy to answer your questions. Thank you so much.
[The prepared statement of Chairman Simons follows:]
Prepared Statement of Hon. Joseph J. Simons \1\, Chairman,
Federal Trade Commission
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\1\ These remarks reflect my own views. They do not necessarily
reflect the views of the Commission or any other individual
Commissioner.
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Chairman Wicker, Ranking Member Cantwell, and Members of the
Committee, I am Joe Simons, and I am the Chairman of the Federal Trade
Commission (``FTC'' or ``Commission''). It is an honor to be with you
today, especially alongside my fellow Commissioners.
Despite the challenges presented by the pandemic, the FTC has
remained open, active, and aggressive. We have used every tool in our
arsenal on COVID-related initiatives,\2\ while simultaneously handling
our everyday efforts to protect consumers' privacy and data security,
stop fraud, ensure that advertising claims are truthful and not
misleading, and combat illegal robocalls. And--what is truly
extraordinary--Commission staff has accomplished this while quickly
transitioning from nearly 100 percent office-based work to nearly 100
percent telework.
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\2\ See generally www.ftc.gov/coronavirus.
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I want to take a moment to focus on one of my top priorities:
privacy and data security. Our enforcement in these areas--including
cases against Facebook,\3\ Google and YouTube,\4\ and Equifax \5\--has
been highly successful within the limits of our authority.\6\ But, as I
have said before, Section 5 \7\ is a 100-year-old statute that is an
imperfect tool for this purpose. I believe we need more authority,
which is why I urge you to continue your hard work to enact privacy and
data security legislation that would be enforced by the FTC. As
policymakers, it is appropriate for you to make the difficult value-
based decisions underlying new privacy protections. From an enforcement
perspective, I ask that the legislation give us: (1) the ability to
seek civil penalties, (2) jurisdiction over non-profits and common
carriers, and (3) targeted Administrative Procedure Act (``APA'')
rulemaking authority to ensure the law keeps pace with changes in
technology and the market. This is similar to the approach Congress
took under the Children's Online Privacy Protection Act (``COPPA'').\8\
We will continue to vigorously enforce existing privacy statutes,\9\
and we will use our extensive expertise and experience to enforce
aggressively any new privacy or data security laws that you pass.
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\3\ FTC Press Release, FTC Imposes $5 Billion Penalty and Sweeping
New Privacy Restrictions on Facebook (July 24, 2019), https://
www.ftc.gov/news-events/press-releases/2019/07/ftc-imposes-5-billion-
penalty-sweeping-new-privacy-restrictions. In April 2020, a court
approved the record-breaking $5 billion penalty the FTC negotiated with
Facebook. FTC Press Release, FTC Gives Final Approval to Modify FTC's
2012 Privacy Order with Facebook with Provisions from 2019 Settlement
(Apr. 28, 2020), https://www.ftc.gov/news-events/press-releases/2020/
04/ftc-gives-final-approval-modify-ftcs-2012-privacy-order-facebook.
\4\ FTC Press Release, Google and YouTube Will Pay Record $170
Million for Alleged Violations of Children's Privacy Law (Sept. 4,
2019), https://www.ftc.gov/news-events/press-releases/2019/09/google-
youtube-will-pay-record-170-million-alleged-violations.
\5\ FTC Press Release, Equifax to Pay $575 Million as Part of
Settlement with FTC, CFPB, and States Related to 2017 Data Breach (July
22, 2019), https://www.ftc.gov/news-events/press-releases/2019/07/
equifax-pay-575-million-part-settlement-ftc-cfpb-states-related.
\6\ See, e.g., FTC Press Release, FTC Releases 2019 Privacy and
Data Security Update (Feb. 25, 2020), https://www.ftc.gov/news-events/
press-releases/2020/02/ftc-releases-2019-privacy-data-security-update.
\7\ 15 U.S.C. Sec. 45.
\8\ 15 U.S.C. Sec. Sec. 6501-6506.
\9\ The Commission also enforces sector-specific statutes
containing privacy and data security provisions, such as the Gramm-
Leach-Bliley Act (``GLB Act''), Pub. L. No. 106-102, 113 Stat. 1338
(1999) (codified as amended in scattered sections of 12 and 15 U.S.C.),
and the Children's Online Privacy Protection Act (``COPPA''), 15 U.S.C.
Sec. Sec. 6501-6506.
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We also need your help to clarify our authority under Section 13(b)
of the FTC Act,\10\ which is our principal means of getting money back
for consumers. Using this authority as it has been interpreted for
decades, the FTC has returned over $10 billion to consumers in just the
last four years.\11\ Recent court decisions, however, threaten this
essential authority, and this issue is now before the Supreme
Court.\12\ I strongly urge you to clarify the law.
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\10\ 15 U.S.C. Sec. 53(b).
\11\ See https://public.tableau.com/profile/
federal.trade.commission#!/vizhome/Refunds_15797
958402020/RefundsbyCase.
\12\ See FTC v. Credit Bureau Center, 937 F3d. 764 (7th Cir. 2020),
petition for cert. granted, 2020 WL 3865251 (July 9, 2020) (No. 19-
825); see also FTC Press Release, Statement of FTC General Counsel
Alden F. Abbott regarding Supreme Court Orders Granting Review of Two
FTC Matters (July 9, 2020), https://www.ftc.gov/news-events/press-
releases/2020/07/statement-ftc-general-counsel-abbott-regarding-
supreme-court.
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I want to thank the Committee for advancing legislation to
reauthorize the U.S. SAFE WEB Act \13\--an indispensable tool in
combatting cross-border fraud. However, without further Congressional
action, SAFE WEB will sunset on September 30. I would like your
continued support in pushing this effort across the goal line, and
keeping SAFE WEB in our enforcement arsenal.
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\13\ 15 U.S.C. Sec. Sec. 41 et seq.
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Though I am asking for more help, please know how grateful I am for
what you already have done on these issues. I am also very thankful for
the financial support Congress has given the FTC this year. The $20
million increase averted full-time employee reductions, and instead
allows us to hire more people for some of our most critical work.
I also want to mention the recent European Union (``EU'') ruling on
the EU-U.S. Privacy Shield and note that we are studying its
effects.\14\ We stand ready to support the administration's efforts in
this area, but at the same time we will continue to hold companies
accountable for their privacy commitments, including promises made
under the Privacy Shield.
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\14\ See FTC Business Center, Update on the Privacy Shield
Framework (July 21, 2020), https://www.ftc.gov/tips-advice/business-
center/privacy-and-security/privacy-shield.
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I will end by briefly highlighting our antitrust enforcement. We
are on pace for the highest number of merger enforcement actions in 20
years (since FY 2000). We have brought four monopolization cases in the
last two years.\15\ Last year we formed the Technology Enforcement
Division (``TED''),\16\ which is currently pursuing a number of very
significant investigations involving big tech platforms, and we have
used our study authority to issue special orders to Alphabet, Amazon,
Apple, Facebook, and Microsoft requiring them to provide information
about prior acquisitions not reported under the HSR Act.\17\
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\15\ FTC Press Release, FTC and NY Attorney General Charge Vyera
Pharmaceuticals, Martin Shkreli, and Other Defendants with
Anticompetitive Scheme to Protect a List-Price Increase of More Than
4,000 Percent for Life-Saving Drug Daraprim (Jan. 27, 2020), https://
www.ftc.gov/news-events/press-releases/2020/01/ftc-ny-attorney-general-
charge-vyera-pharmaceuticals-martin; FTC Press Release, FTC Challenges
Illumina's Proposed Acquisition of PacBio (Dec. 17, 2019), https://
www.ftc.gov/news-events/press-releases/2019/12/ftc-challenges-
illuminas-proposed-acquisition-pacbio; FTC Press Release, Reckitt
Benckiser Group plc to Pay $50 Million to Consumers, Settling FTC
Charges that the Company Illegally Maintained a Monopoly over the
Opioid Addiction Treatment Suboxone (July 11, 2019), https://
www.ftc.gov/news-events/press-releases/2019/07/reckitt-benckiser-group-
plc-pay-50-million-consumers-settling-ftc; FTC Press Release, FTC
Charges Surescripts with Illegal Monopolization of E-Prescription
Markets (Apr. 24, 2019), https://www.ftc.gov/news-events/press-
releases/2019/04/ftc-charges-surescripts-illegal-monopolization-e-
prescription.
\16\ FTC Competition Matters Blog, What's in a Name? Ask the
Technology Enforcement Division (Oct. 16, 2019), https://www.ftc.gov/
news-events/blogs/competition-matters/2019/10/whats-name-ask-
technology-enforcement-division.
\17\ FTC Press Release, FTC to Examine Past Acquisitions by Large
Technology Companies (Feb. 11, 2020), https://www.ftc.gov/news-events/
press-releases/2020/02/ftc-examine-past-acquisitions-large-technology-
companies.
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We are committed to using every resource to effectively protect
consumers and promote competition. We look forward to continuing to
work with you, and I would be happy to answer your questions.
The Chairman. Thank you very much, Mr. Chairman. And now we
turn to Commissioner Noah Phillips. You are recognized.
STATEMENT OF HON. NOAH JOSHUA PHILLIPS, COMMISSIONER, FEDERAL
TRADE COMMISSION
Commissioner Phillips. Thank you, Mr. Chairman. Chairman
Wicker, Ranking Member Cantwell, members of the Committee,
thank you for the opportunity to appear before you. I am
honored to be with you today and to testify alongside my fellow
Commissioners about the important work that we do at the FTC. I
also want to thank you for your flexibility on format. It is
always good to be back at the Senate, even if that means
virtually. There is a lot to cover and I look forward to our
discussion. But I want to take a moment to highlight an
important issue, which I know is a focus for many of you, data
security. Hardly a week goes by without Americans learning
about another major cyber-attack, breach, or vulnerability.
Accounts on a major social media platform were exploited 3
weeks ago. Last week, researchers reveal the vulnerability on
devices running Windows and Linux operating system, which could
impact billions of devices. Consumers get this. A 2018 Commerce
Department study showed identity theft as the number one
privacy and security issue concerning Americans. Considering
the harms Americans have in mind when they think about privacy,
data security legislation is one of the best things that we can
all do for privacy. The endemic use of data in our economy is
not going away and it supports not only the new ways----
The Chairman. OK. Commissioner, your video froze there for
a moment so we want to make sure at that point we can iron out
these technical difficulties and you can resume at that very
point in the testimony. So we will just pause for a moment and
rely on the advice of our technical experts.
Commissioner Phillips. Can you hear me?
The Chairman. We can now hear you.
Commissioner Phillips. Thank you. My apologies. I am having
some connectivity issues.
The Chairman. OK, so if you could just back up a sentence
or two there and we will hear you. We don't see you.
Commissioner Phillips. My apologies.
The Chairman. OK. Good.
Commissioner Phillips. While the vast majority of attacks
are thwarted, in 2019 there were still over 1,400 reported data
breaches in the U.S. exposing over 160 million records. The
loss, corruption, and ransoming of these data can pose serious
harm to businesses, including identity and IP theft, exposure
of sensitive data, years of expensive litigation, and so on.
And of course, inadequate data security is a profound National
Security issue.
At the FTC, we investigate and bring actions against
companies that fail to maintain reasonable data security or
mislead consumers about it. Recent examples include our
enforcement against DealerBuilt, an auto dealer management
software provider Retina-X, a stalkerware app which also raised
other profound privacy problems, and of course Equifax, the
credit bureau we allege neglected to fix an Apache Struts
vulnerability, resulting in a theft of records of over 145
million Americans.
We are also imposing new requirements for defendants and
data security orders like certifications of compliance by
senior officials and a better third-party assessor process.
Statutes like COPPA and Gramm-Leach-Bliley give us data
security authority in areas of heightened sensitivity, like
kids and financial services, but the regime today has gaps
including in areas of particular vulnerability. Consider the
Internet of Things. The proliferation of connected devices is
good for consumers and the economy but it creates risks. The
manufacturer of a $15 device may not have adequate incentives
to secure it. We grappled with this issue in a 2017 suit
against the Wi-Fi router company D-Link, and again just a few
months ago in our settlement with Tapplock, a maker of smart
locks.
The Department of Homeland Security's Cybersecurity and
Infrastructure Security Agency, CISA, which builds up
cybersecurity defenses in partnership with public and private
entities is also active on IoT. We regularly consult with CISA
and refer to them as a resource in our consumer and business
education. We also view use of CISA's tools, such as those that
help businesses identify risks, favorably in our data security
investigations. I think we ought to go further, and consider
carrots and sticks to encourage participation with CISA through
mechanisms like integrating their work into our orders. Today,
though, I want to stress the importance of the Commission's
call for data security legislation.
We need to be flexible to deal with rapid technological
development, and mindful of the fact that defendants in data
security cases are often themselves victims of felonies. But a
specific Congressional mandate and additional incentives to
protect data are critical.
As a report issued just days ago about many large public
companies still failing to patch known vulnerabilities showed,
those who could most efficiently address data security problems
often fail to do so. Data privacy is something on which many of
you have been working hard and it is an important part of our
mission and priority. Data security legislation is one of the
best things I think we can do----
The Chairman. OK, just so you will know, on that sentence
about data privacy, that is when your video froze up, Mr.
Commissioner. So perhaps we can iron that out. Well, let's see.
Can you hear us now, sir?
Commissioner Chopra. Commissioner Phillips, I believe the
Chairman is addressing you.
Commissioner Phillips. Forgive me, Mr. Chairman, I did not
hear the question. Can you repeat it, please?
The Chairman. Commissioner Phillips, you were in the middle
of a sentence about data privacy and your screen froze up
again. So if you could restart there at about the minute 2040
mark----
Commissioner Phillips.--Mr. Chairman. I believe that data
security legislation is one of the most important things we can
do for privacy.
The Chairman. Very good. If you will just complete your
statement then, we will appreciate it.
Commissioner Phillips. Yes, thank you. And of course, I
will submit a copy for the record.
[The prepared statement of Commissioner Phillips follows:]
Prepared Statement of Hon. Noah Joshua Phillips \1\, Commissioner,
Federal Trade Commission
---------------------------------------------------------------------------
\1\ This written statement, my oral testimony, and my responses to
questions reflect my views and do not necessarily reflect the views of
the Commission or any individual Commissioner.
---------------------------------------------------------------------------
Chairman Wicker, Ranking Member Cantwell, Members of the Committee,
thank you for the opportunity to appear before you. I'm honored to
testify with my fellow Commissioners about the important work we do at
the FTC. I also want to thank you for your flexibility on format. It is
always good to be back at the Senate, even if that means virtually.
There is a lot to cover, and I look forward to our discussion; but
I want to take a moment to highlight an important issue, which I know
is a focus for many of you: data security.
Hardly a week goes by without Americans learning about another
major cyberattack, breach, or vulnerability. Accounts on a major social
media platform were exploited three weeks ago.\2\ Last week,
researchers revealed a vulnerability on devices running Windows and
Linux operating systems, which could impact billions of devices.\3\
Consumers get this: a 2018 Commerce Department study showed identity
theft as the number one privacy and security issue concerning
Americans.\4\ Considering the harms Americans have in mind when they
think about privacy, data security legislation is one of best things we
can do for privacy.
---------------------------------------------------------------------------
\2\ Euirim Choi and Robert McMillan, Widespread Twitter Hack
Reaches Bill Gates, Kanye West, Elon Musk, Joe Biden, and Barack Obama,
the wall street journal (July 15, 2020), https://www.wsj.com/articles/
twitter-accounts-of-bill-gates-jeff-bezos-elon-musk-appear-to-have-
been-hacked-11594849077.
\3\ Tim Starks, Billions of Windows, Linux devices at risk from
vulnerability that could give hackers ``near total control,''
researchers say, politico (July 29, 2020), https://
subscriber.politicopro.com/article/2020/07/billions-of-windows-linux-
devices-at-risk-from-vulnerability-that-could-give-hackers-near-total-
control-researchers-say-3982874.
\4\ Rafi Goldberg, Most Americans Continue to Have Privacy and
Security Concerns, NTIA Survey Finds, national telecommunications and
information administration (Aug. 20, 2018), https://www.ntia.doc.gov/
blog/2018/most-americans-continue-have-privacy-and-security-concerns-
ntia-survey-finds.
---------------------------------------------------------------------------
The endemic use of data in our economy is not going away, and it
supports not only the new ways that we all are working, worshiping,
learning, and shopping, but countless jobs. Americans are putting an
increasing amount of data online, a lot of which is sensitive. My view
is that attempts broadly to roll back these trends are unlikely to
succeed, and also would hurt consumers and the economy; so we need to
focus on how to enjoy the fruits of progress while protecting
Americans' data.
The data we put online are targets for criminals and hostile
states. While the vast majority of attacks are thwarted, in 2019 there
were still over 1,400 reported data breaches in the U.S., exposing over
160 million records.\5\ The loss, corruption, and ransoming of these
data can pose serious harm to people and businesses, including identity
and intellectual property (IP) theft, exposure of sensitive data, years
of expensive litigation, and so on. And, of course, inadequate data
security is a profound national security issue.
---------------------------------------------------------------------------
\5\ 2019 End-of-Year Data Breach Report, identity theft resource
center (Jan. 28, 2020), https://www.idtheftcenter.org/identity-theft-
resource-centers-annual-end-of-year-data-breach-report-reveals-17-
percent-increase-in-breaches-over-2018/.
---------------------------------------------------------------------------
At the FTC, we investigate and bring actions against companies that
fail to maintain reasonable data security, or mislead consumers about
it. Recent examples include our enforcements against DealerBuilt, an
auto dealer software provider\6\; Retina-X, a stalkerware app (which
also raised other privacy problems)\7\; and Equifax, the credit bureau
we allege neglected to fix an Apache Strutts vulnerability, resulting
in the theft of records of over 145 million Americans.\8\ We're also
imposing new requirements for defendants in data security orders, like
certifications of compliance by senior officials and a better third-
party assessor process.\9\
---------------------------------------------------------------------------
\6\ Lightyear Dealer Technologies, LLC, d/b/a DealerBuilt, No. C-
4687 (Sept. 6, 2019), https://www.ftc.gov/enforcement/cases-
proceedings/172-3051/lightyear-dealer-technologies-llc-matter-0
(``DealerBuilt'').
\7\ Retina X Studios, LLC, and James N. Johns Jr., No. C-4711 (Mar.
27, 2020), https://www.ftc.gov/enforcement/cases-proceedings/172-3118/
retina-x-studios-llc-matter.
\8\ FTC v. Equifax Inc., No. 1:19-cv-03297-TWT (N.D. Ga. July 23,
2019), https://www.ftc.gov/enforcement/cases-proceedings/172-3203/
equifax-inc.
\9\ See, e.g., Statement of the Federal Trade Commission, Regarding
Unizix, Inc. d/b/a/i-Dressup.com, and Zhijun Liu and Xichen Zhang
individually & James V. Grago Jr., d/b/a ClixSense.com (Apr. 24, 2019),
https://www.ftc.gov/system/files/documents/cases/2019-03-
19_idressupclixsense_statement_final.pdf; DealerBuilt.
---------------------------------------------------------------------------
Statutes like COPPA \10\ and Gramm-Leach-Bliley \11\ give us data
security authority in areas of heightened sensitivity, like kids' data
and financial services; but the regime today has gaps, including in
areas of particular vulnerability. Consider the Internet of Things. The
proliferation of connected devices is good for consumers and the
economy, but it creates risks--the manufacturer of a $15 device may not
have an adequate incentive to secure it. We grappled with this issue in
our 2017 suit against the Wi-Fi router company D-Link \12\, and again
just a few months ago in our settlement with Tapplock, a maker of smart
locks.\13\
---------------------------------------------------------------------------
\10\ 15 U.S.C. Sec. Sec. 6501-6506.
\11\ Pub. L. No. 106-102, 113 Stat. 1338 (1999) (codified as
amended in scattered sections of 12 and 15 U.S.C.).
\12\ FTC v. D-Link Systems, Inc., No. 3:17-CV-39-JD (N. D. Cal.
July 2, 2019), https://www.ftc.gov/enforcement/cases-proceedings/132-
3157/d-link.
\13\ Tapplock, Inc., No. C-4718 (May 20, 2020), https://
www.ftc.gov/enforcement/cases-proceedings/192-3011/tapplock-inc-matter.
---------------------------------------------------------------------------
The Department of Homeland Security's Cybersecurity and
Infrastructure Security Agency (CISA), which builds up cybersecurity
defenses in partnership with public and private entities, is also
active on IOT. We regularly consult with CISA, and refer to them as a
resource in our consumer and business education.\14\ We also view use
of CISA's tools, such as those that help businesses identify risks,
favorably in our data security investigations. I think we ought to go
further, and consider carrots and sticks to encourage participation
with CISA through mechanisms like integrating their work into our
orders.
---------------------------------------------------------------------------
\14\ Lisa Weintraub Schifferle, Free vulnerability scanning for
your business, federal trade commission (Dec. 4, 2019), https://
www.ftc.gov/news-events/blogs/business-blog/2019/12/free-vulnerability-
scanning-your-business.
---------------------------------------------------------------------------
Today, though, I want to stress the importance of the Commission's
call for data security legislation. We need to be flexible to deal with
rapid technological development, and mindful of the fact that
defendants in data security cases are often themselves victims of
felonies. But a specific congressional mandate and additional
incentives to protect data are critical. As a report issued just days
ago about many large public companies still failing to patch known
vulnerabilities showed,\15\ those who could most efficiently address
data security problems often fail to do so.
---------------------------------------------------------------------------
\15\ National/Industry/Cloud Exposure Report (NICER) 2020, RAPID7
(July 2020), https://www.rapid7.com/research/report/nicer-2020/.
---------------------------------------------------------------------------
Data privacy is something on which many of you have been working
hard; and it's an important part of our mission and a priority. Data
security legislation is one of the best things we can do to advance the
goal of privacy.
Thank you, and I look forward to addressing your questions.
The Chairman. Alright. Do you have do you have more of your
written statement that you would like to--of your verbal
statement that you would like to complete? I tell you, why
don't we just go ahead then to the next witness because we have
these difficulties. We thank you, Commissioner Phillips. And
now we turn to Commissioner Chopra.
STATEMENT OF HON. ROHIT CHOPRA, COMMISSIONER, FEDERAL TRADE
COMMISSION
Commissioner Chopra. Thank you, Chairman Wicker, Ranking
Member Cantwell, and members of the Committee for this
opportunity to appear before you today with my colleagues. The
Federal Trade Commission's responsibilities are wide and far
reaching with so many that directly relate to the crisis we
face, healthcare and pharmaceuticals, disinformation and fake
reviews, abuse and misuse of data, and so much more. But there
is one area in particular that the FTC can and should
prioritize that I want to emphasize today, which is protecting
America's small businesses.
According to a survey by the Society of Human Resource
Management, 52 percent of small businesses believe that they
are likely to fail due to the effects of COVID-19. And if this
comes true, millions of businesses and many more millions who
work for them could lose their livelihoods, devastating local
economies in the process. The FTC has an important role to play
to protect small businesses from abusive practices. First, we
must crack down on small business loan sharking. Many small
businesses are struggling to access credit, including through
the Paycheck Protection Program, and this is giving an opening
to bad actors that target restaurants, stores, and other local
businesses with predatory loans.
Many of these Wall Street affiliated lenders provide funds
to businesses in exchange for future credit card receipts, but
the terms often set those small businesses up to fail. In these
contracts, small businesses must agree to confessions of
judgment where borrowers automatically plead guilty if the
lender sues them for payment. These clauses are illegal in
consumer contracts, but are being unfairly weaponized against
America's small business owners.
The FTC is the only Federal agency with authority to crack
down on these non-bank small business lending practices. And we
have taken some important actions and we must look to
systemically eliminate these illegal practices before it is too
late. Second, the FTC must safeguard operators of franchised
businesses from abusive practices by franchisors. Franchised
businesses encompass a broad swath of businesses across the
economy, from auto repair to real estate to fitness centers to
fast food and so much more. Operators of franchised businesses
employ millions of Americans and they are also more likely to
be minority-owned compared to other small businesses.
However, there are signs that franchisors may be using the
pandemic to impose new policies that are exacting more economic
pain on franchise operators. For example, Subway and 7-Eleven
franchisees are fighting back against attempts by franchisors
to gain more control and implement practices that ship more
cost and risk to local business owners. The FTC administers the
franchise rule and enforces laws that prohibit unfair business
practices by franchisors. This responsibility is critical given
the threats faced by so many operators of franchised businesses
today.
And finally, the FTC will need to police markets for anti-
competitive mergers that scoop up scores of small businesses.
One common acquisition strategy is called a roll up. This is
when a buyer, often a private equity fund, acquires a
substantial number of small players in the market and combines
them into a single large one. For example, many independent
medical practitioners are seriously struggling right now and
many believe they will need to sell their practices to an
investment fund or a hospital system due to the dire economic
straits they face.
The slow extinction of independent physician practices in
particular may have a serious impact on cost and quality of
care due to diminished competition. Many of these deals are not
subject to merger reporting because they are relatively small
but when buyers acquire dozens or even hundreds of these small
businesses, this can kill competition and make it more
difficult for new players to enter the market. The FTC will
need to use its authority to halt any anti-competitive
acquisitions freeze or monopolization schemes that stamp out
competition.
In closing, we face unusual and extraordinary times for our
economy and society, and the FTC needs to continue to sharpen
its focus on the impact of the pandemic and the crisis on small
businesses. Thank you again for the opportunity and I look
forward to your questions.
[The prepared statement of Commissioner Chopra follows:]
Prepared Statement of Hon. Rohit Chopra, Commissioner,
Federal Trade Commission
Chairman Wicker, Ranking Member Cantwell, and Members of the
Committee, thank you for the opportunity to appear before you.
The Federal Trade Commission's responsibilities are wide and far-
reaching, with many directly relating to the crisis we face. Health
care and pharmaceuticals, disinformation and fake reviews, abuse and
misuse of data, and so much more. But, there is one area in particular
that the FTC can and should prioritize: protecting America's small
businesses.
According to a survey by the Society of Human Resource Management,
52 percent of small businesses believe that they are likely to fail due
to the effects of COVID-19. If this comes true, millions of
businesses--and many more millions who work for them--could lose their
livelihoods, devastating local economies in the process. The FTC has an
important role to play to protect small businesses from abuse.
First, we must crack down on small business loan sharking. Many
small businesses are struggling to access credit, including through the
Paycheck Protection Program. This is giving an opening to bad actors
that target restaurants, stores, and other local businesses with
predatory loans. These lenders provide funds to businesses in exchange
for future credit card receipts, but the terms often set the small
businesses up to fail. In these contracts, small businesses must agree
to ``confessions of judgment,'' where borrowers automatically plead
guilty if the lender sues them for payment. These clauses are illegal
in consumer contracts, but are being unfairly weaponized against small
businesses.
The FTC is the only Federal agency with authority to crack down on
these nonbank small business lending practices. We have taken some
important actions, and we must systemically eliminate these illegal
practices before it's too late.
Second, the FTC must safeguard operators of franchised businesses
from abusive practices by franchisors. Franchised businesses encompass
a broad swath of businesses across the economy, from auto repair to
real estate to fitness centers to fast food and more. Operators of
franchised businesses employ Americans across the country, and they're
also more likely to be minority-owned, compared to other small
businesses.
However, there are signs that franchisors may be using the pandemic
to impose new policies that are exacting more economic pain on
franchise operators. For example, Subway and 7-Eleven franchisees are
fighting back against attempts by franchisors to gain more control and
implement practices that shift more cost and risk to local business
owners.
The FTC administers the Franchise Rule and enforces laws that
prohibit unfair business practices by franchisors. This responsibility
is critical, given the threats faced by operators of franchised
businesses today.
Finally, the FTC will need to police markets for anticompetitive
mergers that scoop up scores of small businesses. One common
acquisition strategy is called a ``roll up.'' This is when a buyer,
often a private equity fund, acquires a substantial number of small
players in a market and combines them into a single large firm.
For example, many independent medical practitioners are seriously
struggling, and many believe they will need to sell their practices to
an investment fund or a hospital system, due to the dire economic
straits they face. The slow extinction of independent physician
practices, in particular, may have a serious impact on cost and quality
of care.
Many of these deals are not subject to merger reporting, because
they're relatively small. However, when buyers are acquiring sometimes
dozens or even hundreds of these small businesses, this kills
competition and can make it more difficult for new players to enter the
market. The FTC will need to use its authority to halt anticompetitive
acquisition sprees and monopolization schemes that stamp out
competition and small players.
In closing, we face unusual and extraordinary times for our
economy, and the FTC will need to sharpen its focus on the impact of
the pandemic on small businesses. Thank you for again for the
opportunity and I look forward to your questions.
The Chairman. Thank you very much, Commissioner Chopra. And
now we turn to Commissioner Rebecca Kelly Slaughter.
STATEMENT OF HON. REBECCA KELLY SLAUGHTER, COMMISSIONER,
FEDERAL TRADE COMMISSION
Commissioner Slaughter. Thank you, Mr. Chairman. And thank
you, Ranking Member Cantwell and members of the Committee for
inviting me here today.
The Chairman. Who is your guest?
Commissioner Slaughter. Oh, this is Hattie. She is my new
baby. She is 2 months old and like many Americans I am home
with my kids so she is with me today.
The Chairman. She seems very relaxed about your position on
the issues.
[Laughter.]
Commissioner Slaughter. Well, hopefully. She is popping her
head up right now so I am hoping she----
The Chairman. And her name is now in the Committee record
forever and ever.
Commissioner Slaughter. She will be very proud. Let me
start over so I can address the Committee. Thank you so much
for having us here today. Like most Americans and yourselves,
fallout from the coronavirus is front of mind for me these days
so I am going to confine my oral remarks to that topic. I worry
most about the burden borne by three groups in particular:
kids, workers, and patients.
As a working parent with four young children at home who
has been struggling to manage distance learning for her kids
even with the best circumstances and resources, I am especially
sensitive to education issues. The pandemic has exacerbated the
existing deep disparity in educational equity in this country.
From day one, we saw well-resourced schools transition
relatively seamlessly to online models with continued learning.
Families with access to broadband and devices and the
flexibility for a parent to be available at home muddled
through. But for millions of America's kids from vulnerable
communities, school simply stopped. As many as one in six kids
lack the equipment necessary to participate in distance
learning and nearly one-quarter of kids lack reliable Internet
access, conditions that particularly affect rural, urban, and
low-income families.
The solutions parents and school districts are considering
pose increased risks of privacy harm to kids, particularly kids
in communities already battling the equity gap. We need to
acknowledge that privacy and data issues are also equity and
civil rights issues. Hybrid and in person learning models will
require unprecedented collection of personal data to facilitate
contact tracing, quarantines, and family choices. Online
learning demands rapid adoption of a suite of technologies that
may be unvetted and used without supervision. Where wealthy
children's families can pay for privacy protective services,
poor kids may pay by sacrificing their privacy. The FTC should
help mitigate these potential harm. I was glad the agency
worked quickly to put out guidance on how to protect student
privacy.
The FTC must aggressively use COPPA and general Section 5
authority to hold companies accountable if the solutions
offered to fill the education gap violate current law. But I
want to be realistic about the best-case scenario many families
face for the current Academic year, shared devices hastily
filled with emerging apps and platforms being used by kids for
hours with little oversight by adults. Current law provides
very little protection in these circumstances, particularly for
applications targeting teenagers and general audience. A need
for comprehensive data privacy legislation with meaningful
limitations on the collection and use of data, and prohibitions
on discriminatory practices, dark patterns, and data abuses has
never been greater.
The FTC stands ready to enforce a Federal privacy law, and
my hope is that the pandemic's catastrophic consequences for
children will serve as the final push for such legislation.
Until then, I believe the mounting data harms emerging from the
crisis demand that the Commission consider instituting a
rulemaking under Magnuson-Moss to identify and address serious
data abuses. In addition 0 to supporting kids, we must support
workers. I recognize how fortunate I am to navigate the
challenges of child care and online learning from the
privileged position of employment. At least eleven percent of
my fellow Americans do not share that good fortune. I echo
Commissioner Chopra's calls for the FTC to focus on supporting
small businesses which are a significant source of employment
and may be particularly squeezed right now.
I believe the FTC must also use its competition authority
to better protect our workforce by sharpening our attention on
anti-competitive conduct and mergers that harm workers.
Employers ought to compete to attract workers by providing the
highest wages, most attractive benefits, and especially today,
the most robust health and safety measures. We should focus on
these issues in our enforcement action and also consider
whether and how our rulemaking authority might be applied to
address them. The most fundamental challenge we all face of
course is how to help overcome the deadly Public health crisis,
which we know has an outsized impact on seniors and communities
of color.
The FTC must continue to protect access to care by
challenging problematic hospital and healthcare provider
mergers that increase prices and limit patient choice. We must
vigorously apply scrutiny to pharmaceutical mergers as well as
address anti-competitive conduct involving healthcare service.
We also must seek creative ways to challenge price gouging.
Creativity is no substitute, however, for clear authority and I
would ask Congress to give the FTC a direct mandate to stamp
out abusive pricing practices. In conclusion, I want to
acknowledge the dedicated public servants at the agency who
have been working through this crisis in incredibly challenging
circumstances.
Working from home, especially for parents of young kids, is
harder than I could have imagined. Chairman Simons deserves
great credit for providing unmatched flexibility for staff
across the agency to ensure they and their families remain
safe. And the staff deserve equal credit for their tenacity,
resilience, and unwavering commitment to the important work of
the Commission. I look forward to answering your questions.
[The prepared statement of Commissioner Slaughter follows:]
Prepared Statement of Hon. Rebecca Kelly Slaughter, Commissioner,
Federal Trade Commission
Chairman Wicker, Ranking Member Cantwell, and Members of the
Committee, thank you for inviting us here today.
Like most Americans and yourselves, for me fallout from the
coronavirus is front of mind these days, so I am going to confine my
oral remarks to that topic. I worry most about the burden borne by
three groups in particular: kids, workers, and patients.
Supporting Solutions for Educational Equity
As a parent who has been struggling to manage distance learning for
her kids, even with the best circumstances and resources, I am
especially sensitive to education issues. The pandemic has exacerbated
the existing deep disparity in educational equity in this country. From
day one, we saw well-resourced schools transition relatively seamlessly
to online models with continued learning. Families with access to
broadband and devices, and the flexibility for a parent to be available
at home, muddled through. But for millions of America's kids from
vulnerable communities, school simply stopped.\1\ As many as one in six
kids lack the equipment necessary to participate in distance
learning,\2\ and nearly one quarter of kids lack reliable Internet
access--conditions that particularly affect rural, urban, and low-
income families.\3\
---------------------------------------------------------------------------
\1\ Emma Dorn, Bryan Hancock, Jimmy Sarakatsannis, and Ellen
Viruleg, ``COVID-19 and Student learning in the United States: The Hurt
Could Last a Lifetime,'' McKinsey (June 1, 2020) (collecting data
showing that ``only 60 percent of low-income students are regularly
logging into online instruction; 90 percent of high-income students do.
Engagement rates are also lagging behind in schools serving
predominantly black and Hispanic students; just 60 to 70 percent are
logging in regularly.''), https://www.mckinsey.com/industries/public-
and-social-sector/our-insights/covid-19-and-student-learning-in-the-
unit ed-states-the-hurt-could-last-a-lifetime.
\2\ Catherine E. Shoichet, ``These Kids are Getting Left Behind
When Schools Go Online,'' CNN (July 31, 2020, 8:36 AM), https://
www.cnn.com/2020/07/31/us/distance-learning-inequality/index.html.
\3\ Emily A. Vogels, Andrew Perrin, Lee Rainie, and Monica
Anderson, ``53 percent of Americans Say the Internet Has Been Essential
During the COVID-19 Outbreak,'' Pew Research Center (Apr. 30, 2020);
see also John Kahan, ``It's time for a new approach for mapping
broadband data to better serve Americans,'' Microsoft (Apr. 8, 2019),
(estimating that about half of Americans, 163 million people, do not
have high-speed Internet at home), https://blogs.microsoft.com/on-the-
issues/2019/04/08/its-time-for-a-new-approach-for-mapping-broadband-
data-to-better-serve-americans/.
---------------------------------------------------------------------------
The solutions parents and school districts are considering pose
increased risks of privacy harms to kids, particularly kids in
communities already battling the equity gap; we need to acknowledge
that privacy and data issues are also equity and civil rights
issues.\4\ Hybrid and in-person learning models will require
unprecedented collection of personal data to facilitate contact
tracing, quarantines, and family choices. Online learning demands rapid
adoption of a suite of technologies that may often be unvetted and used
without supervision. Where wealthy children's families can pay for
privacy-protective services, poor kids may pay by sacrificing their
privacy. The FTC should help mitigate these potential harms.
---------------------------------------------------------------------------
\4\ Hannah Quay-de la Vallee and Cody Venzke, ``Privacy and Equity
in the New School Year: Steps for In-Person, Remote, or Hybrid
Learning,'' Center for Democracy & Technology
(July 2020), https://cdt.org/wp-content/uploads/2020/07/2020-07-16-
Privacy-Equity-in-the-New-School-Year-Guidance-FINAL-2.pdf.
---------------------------------------------------------------------------
I was glad that the agency worked quickly to put out guidance on
how to protect student privacy.\5\ The FTC must aggressively use COPPA
and general Section 5 authority to hold companies accountable if the
solutions offered to fill the education gap violate current law. But I
want to be realistic about the best-case scenario many families face
for the current academic year: shared devices, hastily filled with
emerging apps and platforms, being used by kids for hours with little
oversight by adults. Current law provides very little protection in
these circumstances, particularly for applications targeting teenagers
or general audiences.
---------------------------------------------------------------------------
\5\ See, e.g., Lisa Weintraub Schifferle, COPPA Guidance for Ed
Tech Companies and Schools during the Coronavirus, Fed. Trade Comm'n:
Business Information Blog (Apr. 9, 2020), https://www.ftc.gov/news-
events/blogs/business-blog/2020/04/coppa-guidance-ed-tech-companies-
schools-during-co ronavirus; Lisa Weintraub Schifferle, Remote learning
and children's privacy, Fed. Trade Comm'n: Business Information Blog
(Apr. 9, 2020), https://www.consumer.ftc.gov/blog/2020/04/remote-
learning-and-childrens-privacy.
---------------------------------------------------------------------------
The need for comprehensive data-privacy legislation with meaningful
limitations on the collection and use of data and prohibitions on
discriminatory practices, dark patterns, and data abuses has never been
greater. The FTC stands ready to enforce a Federal privacy law, and my
hope is that the pandemic's catastrophic consequences for children will
serve as the final push for such legislation. Until then, I believe the
mounting data harms emerging from the crisis demand that the Commission
consider initiating a rulemaking under Magnuson-Moss to identify and
address serious data abuses.
Supporting Workers
In addition to supporting kids, we must support workers. As a
parent with four young kids at home, I am fortunate to navigate the
challenges of child-care and online learning from the privileged
position of employment. At least 11 percent of my fellow Americans do
not share that good fortune.\6\ I echo Commissioner Chopra's calls for
the FTC to focus on supporting small businesses, which are a
significant source of employment and may be particularly squeezed right
now.\7\
---------------------------------------------------------------------------
\6\ Employment Situation Summary, U.S. Bureau of Labor Statistics
(July 2, 2020), https://www.bls.gov/news.release/empsit.nr0.htm.
\7\ More than 40 percent of American workers are employed by small
businesses and small businesses can be significant drivers of new jobs.
See 2018 Small Business Profile, U.S. Small
Bus. Admin., https://www.sba.gov/sites/default/files/advocacy/2018-
Small-Business-Profiles-US.pdf.
---------------------------------------------------------------------------
I believe the FTC must also use its competition authority to better
protect our workforce by sharpening our attention on anticompetitive
conduct and mergers that harm workers. Employers ought to compete to
attract workers by providing the highest wages, most attractive
benefits, and, especially today, the most robust health and safety
measures. We should focus on these issues in our enforcement actions
and also consider whether and how our rulemaking authority might be
applied to address them.
Supporting Access to Affordable Care
The most fundamental challenge we all face, of course, is how to
help overcome the deadly public-health crisis, which we know has an
outsized impact on seniors and communities of color. The FTC must
continue to protect access to care by challenging problematic hospital
and healthcare-provider mergers that increase prices and limit patient
choice.\8\ We must vigorously apply scrutiny to pharmaceutical mergers
as well as address anticompetitive conduct involving healthcare
services. We also must seek creative ways to challenge price-
gouging.\9\ Creativity is no substitute, however, for clear authority,
and I would ask Congress to give the FTC a direct mandate to stamp out
abusive pricing practices.
---------------------------------------------------------------------------
\8\ See Remarks of Commissioner Rebecca Kelly Slaughter As Prepared
for Delivery, Antitrust and Health Care Providers Policies to Promote
Competition and Protect Patients, Center for American Progress (May 14,
2019), https://www.ftc.gov/system/files/documents/public_statements/
1520570/slaughter_-_hospital_speech_5-14-19.pdf.
\9\ See Concurring Statement of Commissioner Rebecca Kelly
Slaughter Regarding the Matter of Federal Trade Commission and State of
New York v. Vyera Pharmaceuticals, LLC; Phoenixus AG; Martin Shkreli;
and Kevin Mulleady, Fed. Trade Comm'n (Jan. 27, 2020), https://
www.ftc.gov/system/files/documents/public_statements/1564517/
2020_01_27_final_rks_daraprim_concurring_statement.pdf.
---------------------------------------------------------------------------
In closing, I want to acknowledge the dedicated public servants at
the agency who have been working through this crisis in incredibly
challenging circumstances. Working from home, especially for parents of
young kids, is harder than I could have imagined. Chairman Simons
deserves great credit for providing unmatched flexibility for staff
across the agency to ensure they and their families remain safe, and
the staff deserve equal credit for their tenacity, resilience, and
unwavering commitment to the important work of the Commission.
I look forward to answering your questions.
The Chairman. Thank you, Commissioner. It is indeed ironic
that just as you were speaking about online distance learning,
we lost your video although we could hear you and on the screen
was a text saying that we had lost the picture because of low
bandwidth. So----
Commissioner Slaughter. I apologize.
The Chairman. Well, no. I think that points out the
problems that we have. If a member of the Federal Trade
Commission has problems with distance testimony, you can
imagine what those students that are trying to do distance
learning are experiencing. Also I want to tell you that Hattie
has a beautiful head of hair there and she is well behaved. So
thank you for that testimony. And now we turn to Commissioner
Wilson. You are recognized.
STATEMENT OF HON. CHRISTINE S. WILSON, COMMISSIONER, FEDERAL
TRADE COMMISSION
Commissioner Wilson. Thank you. Chairman Wicker, Ranking
Member Cantwell, and members of the Committee, I am pleased to
appear before you today. I would like to highlight two areas
where I respectfully believe Congress could help the FTC
fulfill its mission. First, by enacting privacy legislation,
and second, by maintaining the focus on consumer welfare and
economics driven enforcement in antitrust. As my colleagues
have shared, Federal privacy legislation is necessary for
several reasons. First, businesses need predictability in the
face of a growing patchwork of State and international
frameworks.
Second, consumers need transparency regarding how their
data is collected and shared but they currently face
significant information asymmetries. Third, gaps have emerged
in sectoral privacy laws. For example, HIPAA covers the privacy
of health data collected by a doctor, but not by apps. The need
is more urgent now giving COVID-19. For millions of Americans,
work and school have moved online. Consumer data is being
deployed to monitor compliance with quarantines and for contact
tracing. While many view technology as key to safely easing
quarantines and resuming normal life, these tools depend on
sensitive health and location data. Though we now face many new
and complex privacy issues, interestingly effective contact
tracing requires widespread adoption, but digital trust is
lacking.
A Washington Post poll found that half of smartphone users
who could use contact tracing apps won't because they don't
trust tech companies. Privacy legislation would help build
digital trust which is necessary to foster continued innovation
and investment. Privacy legislation is also necessary to
protect our Fourth Amendment rights. Courts employ a reasonable
expectation of privacy tests in Fourth Amendment cases.
Consumers surrender extensive data through their use of phones
and other connected devices. If citizens know and accept that
nothing is private, then they have no reasonable expectation of
privacy and Fourth Amendment protections evaporate. While
privacy is important, so is competition.
Privacy legislation must be crafted so as to maintain
competition and foster innovation. Research indicates the
passage of GDPR in the EU led to decreased venture capital
investment and entrenchment of dominant players in digital
advertising. And compliance is costly for small businesses and
new entrants. U.S. legislation should seek to avoid these
pitfalls. With our dual mission in competition and consumer
protection, the FTC is well situated to provide technical
assistance to Congress on this issue. Four other considerations
for privacy legislation. First, the FTC should be the enforcing
agency given its decades of relevant experience.
Second, like COPPA, legislation should include civil
monetary penalties. Third, the FTC should have jurisdiction
over nonprofits and common carriers which collect sensitive
information. Finally, targeted APA rulemaking would permit the
FTC to address technological development. I will turn now to
the FTC's competition mission. The consumer welfare standard in
antitrust which measures the impact of competitive conduct on
consumers is under attack. Critics assert the standard suffers
because it focuses only on price but the consumer welfare
standard also addresses other important factors like quality
and innovation. If people wanted only the cheapest product, we
would still use flip phones instead of smartphones. But price
does matter.
Antitrust scholar Herbert Hovenkamp has written, attacking
low prices as a central antitrust goal is going to hurt
consumers, but it is going to hurt vulnerable consumers the
most. Some conduct like price-fixing drives up prices without
increasing quality or innovation, but most of the business
practices and mergers that we review require closer scrutiny.
Enforcers determine whether an action or a deal is legal based
not on its label but on its competitive effects. Economic
analysis helps us determine whether any harm to competition is
outweighed by benefits to consumers.
Without economic analysis, antitrust at best would be a
series of per se rules resulting in business decisions that
prioritize form over function, creating market distortions. At
worst, antitrust untethered from economic analysis would be
subjective and vulnerable to political manipulation. Companies
would seek the favor of legislators and regulators instead of
courting consumers. In closing, the FTC welcomes the
opportunity to assist Congress on these issues. I am happy to
answer any questions you may have.
[The prepared statement of Commissioner Wilson follows:]
Prepared Statement of Hon. Christine S. Wilson, Commissioner,
Federal Trade Commission
Introduction
Chairman Wicker, Ranking Member Cantwell, and Members of the
Committee, I am pleased to appear before you today (albeit remotely).
I would like to highlight two areas where I respectfully believe
that Congress could assist the Federal Trade Commission in fulfilling
its mission to protect consumers and competition: first, by enacting
Federal privacy legislation; and second, by maintaining the focus on
consumer welfare and economics-driven enforcement in antitrust.
Privacy Legislation
With respect to privacy legislation, I agree with Chairman Simons'
opening statement on this topic. Federal privacy legislation is
necessary for several reasons. First, businesses need predictability in
the face of a growing patchwork of state and international privacy
regimes. Federal privacy legislation would provide needed certainty to
businesses in the form of guardrails governing information collection,
use, and dissemination. Second, consumers need clarity regarding how
their data is collected, used, and shared so they can make informed
decisions about which goods and services to use. Currently, there are
significant information asymmetries with regard to consumers' knowledge
of the privacy characteristics of various products, leaving consumers
ill-equipped to evaluate the quality and value of those products.
Third, there are growing gaps in the sectoral coverage of our existing
privacy laws. For example, the Health Insurance Portability and
Accountability Act (HIPAA) \1\ covers the privacy of sensitive health
data collected by a doctor or pharmacist, but not by apps or wearables.
---------------------------------------------------------------------------
\1\ The Health Insurance Portability and Accountability Act of
1996, Pub.L. 104-191, 110 Stat. 1936 (1996).
---------------------------------------------------------------------------
The need for Federal privacy legislation is even more urgent now,
given the spread of Covid-19, which is driving data usage in ways not
previously contemplated by consumers. For tens of millions of
Americans, work, school, entertainment, and social interactions have
moved online. Businesses, researchers, and government entities have
deployed consumer data to monitor compliance with quarantines and to
implement contact tracing. And many view technology, including both
contact tracing and widespread health monitoring, as key to safely
easing quarantines and resuming normal life. But these tools are fueled
by sensitive data regarding people's movements and their health. These
initiatives have raised new and complex issues regarding consumer
privacy, and have laid bare both the lack of clear guidance for
businesses and the absence of comprehensive privacy protections for
consumers.
Proposed contact tracing initiatives have also exposed the dearth
of digital trust in this country. For disease containment initiatives
to be effective, consumers must trust that government entities and
businesses will be careful stewards of their data. But among those who
use smartphones and can download contract tracing apps, a Washington
Post poll found that more than half do not trust tech companies to
ensure that people who report a coronavirus diagnosis using an app
would remain anonymous.\2\ Privacy legislation would help build digital
trust around data collection and use, which is necessary to foster
continued innovation and investment in the tech arena.
---------------------------------------------------------------------------
\2\ Craig Timberg, Drew Harwell and Alauna Safarpour, Most
Americans are not willing or are able to use an app tracking
coronavirus infections. That's a problem for Big Tech's plan to slow
the pandemic, Washington Post (Apr. 29, 2020), https://
www.washingtonpost.com/technology/2020/04/29/most-americans-are-not-
willing-or-able-use-an-app-tracking-coronavirus-infections-thats-
problem-big-techs-plan-slow-pandemic/
---------------------------------------------------------------------------
An additional imperative for Federal privacy legislation is
protection of our rights under the Fourth Amendment. In applying the
Fourth Amendment, courts employ a ``reasonable expectation of privacy''
analysis.\3\ Consumers have grown accustomed to surrendering extensive
data through their daily use of phones, computers, digital assistants,
and other connected devices. If citizens know and accept that nothing
is private, then they have no reasonable expectation of privacy, and
protections under the Fourth Amendment are eviscerated.
---------------------------------------------------------------------------
\3\ Katz v. U.S., 389 U.S. 347 (1967).
---------------------------------------------------------------------------
While privacy is important, so is competition. Federal privacy
legislation must be crafted carefully to maintain competition and
foster innovation. The General Data Protection Regulation in the EU
(``GDPR'') may have lessons to teach us in this regard. Preliminary
research indicates that GDPR may have created unintended consequences,
including a decrease in venture capital investment and entrenchment of
dominant players in the digital advertising market.\4\ Reports also
indicate that compliance with GDPR is costly and difficult for small
businesses and new entrants. U.S. legislation should seek to avoid
these negative consequences. The FTC, with its dual mission in
competition and consumer protection, is uniquely situated to provide
technical assistance to Congress as it seeks to protect privacy while
maintaining competition.
---------------------------------------------------------------------------
\4\ See Jian Jia, Ginger Zhe Jin & Liad Wagman, The Short-Run
Effects of GDPR on Technology Venture Investment (Nat'l Bureau of Econ.
Research, Working Paper 25248, 2018), https://www.nber.org/papers/
w25248.pdf.; GDPR--What happened?, Whotracksme Blog (2018), https://
whotracksme/blog/gdpr-what-happened.html.
---------------------------------------------------------------------------
There are four other elements that I believe should be included in
Federal privacy legislation:
First, the FTC should be the enforcing agency. We have
decades of experience in bringing privacy cases, and we have
the requisite expertise to tackle any new law effectively.
Second, any legislation should include civil monetary
penalties, which Congress has included in other statutes
enforced by the FTC, including the Children's Online Privacy
Protection Act.\5\
---------------------------------------------------------------------------
\5\ Children's Online Privacy Protection Act of 1998, 15 U.S.C.
6501-05; see also Children's Online Privacy Protection Act Rule, 16
C.F.R. Part 312, available at: https://www.ftc.gov/enforcement/rules/
rulemaking-regulatory-reform-proceedings/childrens-online-privacy-
protection-rule.
Third, the FTC should be given jurisdiction over non-profits
and common carriers, which collect significant volumes of
---------------------------------------------------------------------------
sensitive information.
Fourth, any law should include narrow and targeted APA
rulemaking authority, which will enable the FTC to promulgate
guidance and address technological developments.
Finally, on a related note, I encourage Congress to enact data
security and data breach notification legislation.
Consumer Welfare and Economics in Antitrust
Let me turn now to the FTC's second mission, preserving
competition. The consumer welfare standard in antitrust--in which
competition in the markets for goods and services is measured by how
well it serves consumers--has attracted criticism in recent years.
Critics often over-simplify the standard by asserting that it is solely
concerned with low prices. In fact, the consumer welfare standard
encompasses other factors that consumers value, including quality and
innovation; if people wanted only the cheapest product, we would still
be using flip-phones instead of smartphones. But price does matter. As
antitrust scholar Herbert Hovenkamp recently wrote, attacking ``low
prices as a central antitrust goal is going to hurt consumers, but it
is going to hurt vulnerable consumers the most.'' \6\ Many of us are
fortunate enough today to be able to buy a higher quality, name-brand
product--but most of us also can remember those early days when we were
thankful for the availability of a no-frills, value-priced version.
---------------------------------------------------------------------------
\6\ Herbert Hovenkamp, Is Antitrust's Consumer Welfare Principle
Imperiled? 45 J. CORP. L. 101, 130 (2019) (``The neo-Brandeisian attack
on low prices as a central antitrust goal is going to hurt consumers,
but it is going to hurt vulnerable consumers the most. . . . As a
result, to the extent that it is communicated in advance, it could
spell political suicide. Setting aside economic markets, a neo-Brandeis
approach whose goals were honestly communicated could never win in an
electoral market, just as it has never won in traditional markets.'').
---------------------------------------------------------------------------
Some conduct, like price fixing and market allocation, clearly
drives up prices without any redeeming increase in quality or
innovation. But most of the business practices and mergers that come
before the antitrust agencies are more ambiguous in their effects.
Enforcers determine whether a business practice is legal based not on
its label, but rather by examining its empirical effects. For that
reason, we need economic analysis to help us determine whether any harm
to competition is outweighed by benefits to consumers. Fortunately, the
FTC has a Bureau of Economics that provides the expertise and
experience needed for such analysis, as well as for studies including
merger retrospectives that help to inform our enforcement. We also can
hire outside economists to testify at trial.
In the absence of economic analysis, antitrust at best would be a
series of per se rules. This system would result in business decisions
that prioritize form over function, creating market distortions and
inefficiencies. The U.S. experienced this phenomenon during the decades
when many vertical restraints that had similar welfare effects could be
either per se illegal or per se legal, and when merger decisions were,
as Justice Potter Stewart put it, a ``counting-of-heads game'' that
ignored the actual competitive dynamics in the relevant market. At
worst, antitrust untethered from economic analysis would be subjective
and vulnerable to political manipulation. Companies would devote
themselves to seeking the favor of legislators and regulators, instead
of courting consumers.
Conclusion
In closing, the FTC would welcome the opportunity to provide
technical assistance to Congress on these issues. Thank you for your
assistance in strengthening the FTC's ability to fulfill its mission.
I am happy to answer any questions you may have.
The Chairman. Well, thank you very much. And before I begin
my questions, another thing I wanted to mention after the
testimony of Rebecca Kelly Slaughter was to thank her for
pointing out what a wonderful job the staff of the FTC does.
And I am sure each member of the Commission subscribes to that.
We certainly, Senator Cantwell, can say the same for our hard-
working and talented and knowledgeable staff here in the
Committee on both sides of the dais and that gives me a chance
to say that. Let's start off, and I guess we will begin with
the Chair.
So Chairman Simons, let's talk about the FTC's role in
overseeing the enforcement of Section 230 of the Communications
Decency Act and in particular President Trump's Executive Order
in May on preventing online censorship. Specifically, Section 4
of this Order calls on the FTC to take action against online
platforms that restrict speech in a manner inconsistent with
their terms of service.
What is your view, Mr. Chairman, on the FTC's
responsibilities under the Executive Order? And have you seen
any examples of the behavior described in the order and taken
any action under your authority so far?
Chairman Simons. Thank you, Mr. Chairman. We haven't taken
any action according to the Executive Order. We get complaints
from a wide variety of sources, from the public, from Congress,
from competitors, from people in industry, from consumer
watchdogs, and it is very important that we get those
complaints and we pay attention to them. Lots of complaints
have come from members of this committee and we are very
thankful that you provide us with such thoughtful complaints.
We are an independent agency so we review all of them
independently.
We have jurisdiction over commercial speech, particularly
non deceptive and unfair and then some other statutes. So we
look to see whether the complaints are subject to unfairness
or--I am sorry, whether they are within our authority as I
described, and our authority focuses on commercial speech not
political content curation. If we see complaints that are not
within our jurisdiction, then we don't do anything. If we see
complaints that are, we take a closer look and figure out
whether there is a violation, and then we determine whether it
is appropriate for us to act.
The Chairman. So, Mr. Chairman, you don't view political
speech as within your jurisdiction?
Chairman Simons. Correct.
The Chairman. OK, and so if the public and members of the
Senate are concerned about online platforms like Twitter and
Facebook being inconsistent in the way they restrict political
speech, you do not view that as within the purview of your
statutory responsibilities and therefore the Executive Order
does not instruct you in that specific area. Is that correct?
Commissioner Simons. Yes, for political content curation.
Yes.
The Chairman. OK. Now who else would like to comment on
this? I am going to take my whole 5 minutes on this so----
Commissioner Chopra. Chairman Wicker, I am happy to weigh
in. I think putting aside the Executive Order, the issue of
Section 230 is one where of great concern, I think, and there
is a growing bipartisan consensus that it has been abused. We
see whether it comes to counterfeit and defective goods, an
unlevel playing field between online platforms and brick-and-
mortar stores, and in general, I think the scrutiny is
warranted when it comes to technology platforms abusing any
liabilities and public privileges, and using that as regulatory
arbitrage.
I think many of these platforms do have too much power to
dictate certain policies and regulations, and I don't want to
see them continue, in my view, to overuse and abuse the legal
immunities that Congress has provided and I think we need to
take a hard look at that, particularly when it comes to the use
of surveillance based behavioral advertising. I think that
business model is inconsistent with the origins of Section 230.
Section 230 is supposed to safeguard and promote speech, it
is not supposed to, you know, prioritize certain types of
things over the others based on what makes those companies more
money.
The Chairman. You know, Commissioner, I think you make some
very good points there and I would observe that the hearing in
the House of Representatives last week on a bipartisan basis
indicated a real concern that these platforms are awfully big
and too powerful, and that it is a matter of concern for the
consuming public. So I appreciate your testimony there and----
Commissioner Wilson. I also have a comment, Senator Wicker.
The Chairman. Yes, please ma'am.
Commissioner Wilson. You noted that this was a bipartisan
issue in last week's hearing and I actually have Chairman
Nadler's quotes in front of me. He asked whether the ability to
make money in any way affect Google's algorithm in terms of
what news appears in a typical users search results. He also
noted that Facebook and Google have gravely threatened
journalism in the United States. He noted, now we hear Google
and Facebook are making money over what news they let the
American people see. He said it is a very dangerous situation.
And so I agree social media companies now provide a
significant portion of America with its news and so there is
concern about content curation. My colleague, Commissioner
Chopra and I have previously asked the FTC in a public
statement to prioritize 6(b) studies that explore how content
curation and targeted advertising practices impact data
collection use and sharing, and how the monetization of data
impacts the creation and the refinement of algorithms that
drive content curation and targeted advertising practices. And
so I think this issue, as my colleague Commissioner Chopra
noted, is a really important one for us to consider and to
learn more about.
The Chairman. And have those studies been authorized and
commenced at this point?
Commissioner Wilson. Nothing has been publicly announced,
Senator.
The Chairman. Thank you. Thank you very much. And
undoubtedly, there will be more discussion.
Commissioner. Senator?
The Chairman. Yes? I hear a voice. Perhaps you are being
censored at this point. Let me say, this will be a further
topic of questions and I will not further intrude on my time at
this point, but recognize the distinguished Ranking Member. We
will get back to you for an answer once we get these kinks
ironed out. Senator Cantwell.
Senator Cantwell. Thank you, Mr. Chairman. And again,
thanks for holding this important hearing and for all the
feedback from the Commissioners. It has been quite interesting
obviously on a breadth and depth, but I would like to go back
to price gouging. In April, in the State of Washington, the
Attorney General launched a ``see it, snap it, send it''
campaign to fight price gouging. The initiative followed 400
price gouging related complaints, a round of cease and desist
letters to Washington-based online sellers accused of price
gouging, and upwards of 150 site visits to businesses that were
subjects of these complaints.
So this is a very important and timely issue as it relates
to the crisis and we want to make sure that Americans are
getting all the help that they deserve. Currently, the Federal
agencies have very limited authority to prevent price gouging.
The FTC, as the Chairman was just mentioning, go after unfair
and deceptive practices, which really hasn't been used in cases
of price gouging. So that is why I believe that we need a new
definition, particularly during the time of an emergency.
During the time of an emergency, we should not allow for
these unconscionably excessive prices. And I think that we
should do something about that. So I wanted to ask you,
Chairman Simons, do you support Congress doing something
specifically on price-gouging authority?
ChairmanSimons. Senator, we agree that price gouging is a
very serious problem, especially for PPE and the like. We
currently work with this with the DOJ and the states to refer
cases to them because as you said Section 5 really is not a
good fit for price-gouging authority, but we would vigorously
support and enforce legislation if Congress passed the law on
price gouging. We think that legislation should include a
triggering event and a time limit, should be National in scope,
it should define the products that are covered, describe what
constitutes an excessive price increase, and provide carve-outs
for offsetting costs increase. Thank you.
Senator Cantwell. Well, thank you for that list. I agree
and I think particularly when you define a crisis, we have
certainly been involved in what we think of being manipulations
of oil markets and certainly people who took advantage of oil
prices during a hurricane and certainly been involved in
electricity rates and what we thought were manipulated
electricity markets.
So anyway, look forward to working with you on that.
Commissioner Slaughter and Chopra--well first let me just thank
you Commissioner Slaughter for mentioning, well, first of all
enlightening our day with Hattie, thank you. That is very nice
of you. But also for mentioning 4 broadband.
And I know the Chairman agrees that we have an important
opportunity in front of us with the next COVID package as we
are seeing schools make decisions about what they are going to
do on the education system for the fall. We really have to
address this gap and we need to make sure that the dollars are
there and the specific programs are there for broadband. So we
look forward to working with everybody to make sure that gets
in a package. But on this issue of price gouging, Commissioner
Slaughter, you also mentioned, and Commissioner Chopra, what is
your perspective about the core provisions of a price gouging
law? We heard from the Chairman, but what do you believe needs
to be in the legislation?
Commissioner Slaughter. Thank you, Senator, for the
question and you are right about broadband. As you can see with
all of us struggling with our feeds occasionally in the best
circumstances, we can see how important it is. In terms of
price gouging, I agree with a lot of what the Chairman said in
terms of what the parameters of price gouging legislation
should look like.
I would want to make sure that it wasn't too limited and
didn't--excuse me, didn't put too high a burden on the agencies
to establish that the circumstances have been met because when
that's the case, then we can't really bring the cases
effectively that we want to protect the public. And the last
point I would make is, I agree also that Section 5 is very much
an imperfect tool for addressing these kinds of problems, but I
want to see us in all cases, including in the case of price
gouging or maybe especially thinking about whether particular
circumstances might give rise to a creative use of Section 5
authority on this topic, and this is something Commissioner
Chopra and I both talked about in terms of drug price spikes
recently.
So I think that we would really benefit from clear
legislation from Congress, but very much share your view that
this is a high priority and something that we can see the real
life effects of for American people every day.
Senator Cantwell. Thank you. Commissioner Chopra, did you
want to say anything? I mean----
Commissioner Chopra. Yes, that thank you. I agree. Just two
quick points. I do not want to see any Federal law delete the
State laws, the preemption of State laws. I don't think is
appropriate when it comes to this issue. And I also hope, given
some of the framework in the Defense Production Act as well,
that you also consider criminal penalties in certain
circumstances.
Senator Cantwell. Yes, I certainly believe so. We have done
effective work on this as it relates as I said to energy
markets, and having criminal penalties has been giving the FTC
really--I mean the Federal Energy Regulatory Commission the
tool that they needed to police energy markets.
So we certainly don't need any higher energy costs than
what we should be paying. And just Mr. Chairman, I know my time
has expired, but I just wanted to mention on Commissioner
Wilson's point about content curation, this is really a very
severe problem that is undermining the newspaper industry. The
fact that these content creators are basically becoming the
entry and point of delivery is limiting the options for our
broadcast and content delivers and the newspaper business.
And I so I look forward to seeing what the Commission comes
out with on this but I think this is also a very important
issue that needs to be addressed. Thank you.
The Chairman. Thank you very, very much, Senator Cantwell.
Senator Fischer is next.
STATEMENT OF HON. DEB FISCHER,
U.S. SENATOR FROM NEBRASKA
Senator Fischer. Thank you, Mr. Chairman. Chairman Simons,
as I am sure you know, this committee has been evaluating paths
forward on the name image likeness rules that have begun to
take shape at the State level along with the proposal recently
developed by the NCAA.
I am interested to hear your perspective on this matter,
particularly on the FTC's role in enforcing any new Federal NIL
rules. As talks continue on a potential Federal framework, what
new authorities and resources do you believe the Commission may
or may not need to enforce added protections for student-
athletes? I think you have to unmute, sir. There you go.
Chairman Simons. Alright. Can you hear me?
Senator Fischer. Yes.
Chairman Simons. Alright. Thanks for the question. I think
I was unmuted and by mistake muted. So I am sorry for that. So
I am a big believer that competition should function in almost
every situation including college athletics. I have been very
concerned for a long period of time that students are not
getting what they should get in terms of compensation for what
they do. This is particularly serious because it has a large
effect on minority, disadvantaged communities particularly with
the football and the basketball programs.
And so I am very, very excited about what you are doing and
I encourage you to go as far as you can. In terms of expertise,
we don't really have very much expertise at all in this area as
an institution. The DOJ has really been the one that has been
interacting with colleges including college athletics. And so
we don't really--we don't have that base that the DOJ has. But
having said that, if you want to give us authority, we will of
course enforce it.
But depending on exactly what you pass, it might require a
lot of increased manpower on our part in order to do that. And
also depending on what you pass, if it looks something like a
professional regulation like where you are regulating agents or
things like that and any kind of certification or other type of
way, I think that would be not particularly suited for our
agency.
Senator Fischer. Thank you. Over the past few months, we
have seen the pandemic add new volatility to our food supply
chain and that requires a massive shift in logistics. And amid
the financial strain, consumers are trying to stock up on food
while producers and retailers are doing their best to ensure
that the grocery store shelves are stocked.
The FTC has important responsibilities in helping safeguard
America's food supply. Mr. Chairman, in terms of the FTC's
rule, what policies do you feel would be most effective to
focus on for maintaining a stable food supply chain during
these unprecedented times?
Chairman Simons. So our big focus on, with respect to food,
is the retail aspect of it. And so we are very focused on that.
We are making--we are doing our best to make sure that there
are as competitive as possible and that the competition
flourishes at the retail level. The DOJ is the one that focuses
on the production of meat and things like that, and we are
dealing with the agricultural side of it.
So we would defer to them on that part. But on terms of the
retail part, we are very focused on making sure that there is
good competition for consumer benefit.
Senator Fischer. You know, as you know, the Packers and
Stockyards Act was drafted following an FTC report that
highlighted abuses by major meatpacking companies at that time
and leveraged their concentrated market power. Mr. Commissioner
Chopra, I would be interested in your take on this as well,
particularly on more recent concerns about vertical integration
trends that we are seeing in the food industry.
Commissioner Chopra. Thank you, Senator Fischer. I totally
share those concerns. What we are seeing in the food industry
from farm to table, including what Chairman Simon said on the
retail side but also on the production side, there are serious
issues with how certain large, powerful players are able to
dictate terms in the lives of so many, whether they are poultry
growers or livestock producers and ranchers. I am concerned
that the USDA's rulemaking on the Packers and Stockyards Act is
going to make matters worse. It is going to make it even harder
to make sure that our food markets are competitive and fair.
The FTC does have some limited authority under the Packers
and Stockyards Act but as we have seen during this pandemic,
just recently the JBS, Mountain States Rosen transaction, there
is going to be a lot of issues when it comes to the stability
of our food supply and I think we all as Federal agencies need
to think about it, including our national security regulators
as well.
Senator Fischer. Right. You do have say over retail sales
of meat and livestock products. And when you look at, as I know
you have been focused on that vertical integration, obviously
that has an impact on those retail sales, the vertical
integration that takes place. So I thank you for your comments
and hope that you--Thank you, Mr. Chairman.
The Chairman. Thank you. Thank you, Senator Fischer. Let me
just exercise a little discretion here and intrude on the next
round of questioning. Mr. Chairman, you don't want this issue
of athletic name image and likeness. You would rather the
Justice Department have that, right?
Chairman Simons. Yes, they have the expertise.
The Chairman. OK. Does any member of the Commission
disagree with the Chairman on that? Who wants this issue?
Commission Chopra. Well, I would personally favor a private
right of action for some of this. It is very hard to police
some of these markets and in some cases the 1 players
themselves may be well situated to vindicate their own rights.
The Chairman. Would you like for the FTC to have
jurisdiction over it?
Commissioner Chopra. You know, that is really your choice.
I don't think that we seem best situated, but we will do
ultimately what Congress passes laws instructing us to do.
The Chairman. OK. Well if anybody wants to comment----
Chairman Simons. Mr. Chairman, can I just make a comment
there? I agree with Commissioner Chopra that a private right of
action would be appropriate.
The Chairman. OK, and please submit, feel free to submit
written responses expanding your position there. And Senator
Klobuchar, I appreciate you letting me delay your questioning
for a moment or two there. You are recognized.
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator Klobuchar. Well, thank you. Mr. Chairman. And
again, thank you for conducting, along with Senator Cantwell,
this really important hearing right now. You know, I have told
many of you this before but I think that this pandemic has shed
a big magnifying glass on some issues that we know are already
out there with consolidation, with consumer scams, and the
like, and I appreciate all the Commissioners being here.
Start with following up with some of Senator Cantwell's
questions. I am on her bill along with Senators Markey and
Schatz on privacy and then Senator Kennedy and I have a
separate bill. But I wanted to ask, I think it was in your
opening statement, Chair Simons, that you mentioned you believe
you need additional rulemaking authority. I think Commissioner
Chopra is also taking this position. Could you just really
briefly, because I have a lot of questions, answer that
question in order to really do things on privacy outside of
legislation, Chairman?
Chairman Simons. Yes, thank you, Senator. So in terms of
the rulemaking, what we are looking for is a targeted
rulemaking authority. So not kind of pass a general statute
that says we want Federal privacy legislation, let the FTC
figure it out.
No, we think that that is your job and you have done great
efforts, as you have described, to the move that long and we
really encourage you to go further and get across the finish
line on that. In terms of us though, just like the Congress did
with COPPA, they allowed us to have APA targeted rulemaking to
do things such as change definitions to account for changes in
technology or changes in business methods.
One example from COPPA was there the original language did
not include photos. So this was like in 1998 or 2000 and photos
weren't a big thing in terms of being uploaded to the internet.
Now, of course they are and they are really important and
sensitive. That is just an example of targeted rulemaking.
Senator Klobuchar. OK. Before I go to Commissioner Chopra,
one other question of you because I don't think we have delved
into this yet. On the front of the hearing in the House last
week with the CEOs of Amazon, Facebook, Google, and Apple, do
you, based on what you heard at the hearing, I assume you
watched it or read the transcript, do you believe that the FTC
should look back at consummated mergers not just to learn from
them, but potentially to take more enforcement action given
what we have seen with Instagram and WhatsApp with Facebook and
some of these others and what the market is looking like right
now?
Chairman Simons. Yes, thank you, Senator. I don't think it
would be appropriate for me to comment on any particular
investigation or company. As I have said before that, yes, we
have the ability to look back at consummated mergers and to
undo them. And certainly we have done that many times in the
past.
We have a litigation going on now where we are doing that
so that is something that is definitely on the table for us. In
addition, what we have done is we have issued 6(b) orders to
all the major tech platform companies to get information from
them about acquisitions that were not reportable under the HSR
Act and so we are looking at those too.
Senator Klobuchar. And one thing you and I discussed in
Judiciary before the antitrust--I cut you off.
The Chairman. No, I think you are good.
Senator Klobuchar. OK. OK, one thing you and I discussed at
the antitrust subcommittee, and I guess you and the other
Commissioners could briefly pitch in here, I look back
historically at the staffing for the FTC. This is not about
your decisions as Chairman. And when you look, you are like a
shadow of yourselves from the 80s, from the Reagan
Administration on down, and yet you are dealing with trillion
dollar companies and are expected to be the counterweight to
those companies and expected by the public and by all of us
Democrats and Republicans to be looking at these things.
So Grassley and I have a bill to, as you know, add more
resources with some filing fee changes for the mega-mergers and
the like. I think we should be doing more going into next year
in a big way, but could you just briefly say whether more
resources would be helpful.
The public needs to understand and my colleagues need to
understand this shift over time and how it is just literally
going to be impossible for us to take on legions of lawyers and
trillion dollar companies to do all the stuff everyone is
talking about from Senator Hawley on, if we don't have the
resources.
Chairman Simons. Yes, we dearly need the resources. You
make a very good point that in the 80s we were about twice the
size we are now, and some of that has to do with
computerization and more efficiency among the staff. But still
we are, I think, we are behind and we do need more resources.
We are busting at the seams. We are having trouble staffing the
existing mergers as it is. Like I mentioned earlier, we are on
a pace to have more merger enforcement actions than any time
since Fiscal Year 2000.
Senator Klobuchar. Exactly and here is the point that for
my colleagues that want to be fiscally responsible, which we
all do, is that you bring in money, the FTC and the antitrust
division of the Justice Department brings in money with these
fines and we got to look at all of this in that context. And
what is happening to consumer prices in this new gilded age
that we are entering and if we don't do something with this
pandemic profiteering and other things that is going on.
Chairman Simons. Yes, let me respond to one thing in
particular about that, Senator. That is the way that the law,
the HSR Act is currently determined, increasing the fees
actually would not go into our budget but you could change that
legislatively and we would ask that you do that.
Senator Klobuchar. Got it. OK. I am just going to turn to,
is that Commissioner Chopra's name, but I am running out of
time quickly. Commissioner Slaughter, are you there?
The Chairman. She was going to have to come and go, so
maybe perhaps we can get back to her.
Senator Klobuchar. OK, I was going to complement the baby.
But I will ask this on the record, but it is just simply about
the exclusionary practices bill that we have and they need to
update our standards for these mergers in light of what is
going on around the country with monopolies and the like. And I
can do that on the record. Thank you, Mr. Chairman.
The Chairman. Thank you so much, Senator Klobuchar. Senator
Moran.
STATEMENT OF HON. JERRY MORAN,
U.S. SENATOR FROM KANSAS
Senator Moran. Chairman, thank you. Thank you for having
this hearing. Your subcommittee had a hearing two weeks ago on
the issue of consumer protection in the times of COVID-19 as
well. So I will skip those questions today. Senator Blumenthal
is in the room. It seems like I should be asking you about data
privacy, but I am going to deal with at least for this round of
questions with the U.S.-EU Privacy Shield.
Chairman Simons, the court of justice at the--of the
European Union in Schrems II recently invalidated the Privacy
Shield arrangement as a basis for lawful transfers of data.
With more than 70 percent of the nearly 5,300 Privacy Shield
certified companies being small to medium sized businesses
including many in my home state, I would understand this to be
an extremely urgent matter for digital commerce in the United
States. Just simply to begin with, do you agree with the
significance of this?
Chairman Simons. I am sorry. Yes, particularly for small
businesses. I was muted, sorry.
Senator Moran. Yes, thank you, Chairman. Your website, the
FTC's website includes an update on the recent developments
related to the Privacy Shield. It states in there and I quote,
``continues to expect companies to comply with the ongoing
obligations with respect to transfers made under the Privacy
Shield framework.''
This statement aligns with the FTC's previous discretions
and refraining from bringing any enforcement action in 2015
when the Privacy Shield's predecessor says Safe Harbor was
invalidated in Schrems I. Can businesses expect a similar
reasonable approach by the FTC in terms of enforcement in the
aftermath of this invalidation of the Privacy Shield?
Chairman Simons. Yes, basically we you know, they are
making promises that they are following the Privacy Shield
principles and if they don't, that is a problem under our Act,
under Section 5. In addition, so companies could say, they
could put on their website we are no longer certified under
Privacy Shield. It has been overturned by the EU courts, but
they would still be obligated to protect the data in a way that
they promised going forward. So one thing they might have to
delete it or otherwise just, you know, protect it in the way
that they promised pursuant to the Privacy Shield principles.
Senator Moran. And in that circumstance, how does the FTC
respond to that business?
Chairman Simons. You mean if they don't?
Senator Moran. Yes, if they do--let me let me first start
with if they do, then the FTC would take no action. Is that
right?
Chairman Simons. That is right.
Senator Moran. OK. Commissioner Wilson, let me direct this
to you. I would warn that the European's Court surveillance
concerns in relation to Privacy Shield should not be conflated
with the concerns about consumer data privacy. However, is it
fair to say that the enactment of a pre-emptive Federal privacy
framework might make achieving a future adequacy determination
by the EU easier?
Commissioner Wilson. Yes, thank you for the question. And I
would agree with that statement.
Senator Moran. And then let me ask all, in the case of--if
that is the case, would you support enactment of the Consumer
Data Privacy Security Act which provides a uniform National
standard? And I have seen some of the Commissioners have
answered that question in other Senators' dialogue, but that
uniform National standard, I would ask for a yes or no from
each of you.
The Chairman. We will begin with Chairman Simons.
Chairman Simons. Yes, sorry.
Senator Moran. Commissioner Wilson?
Commissioner Wilson. Yes, I think that one Federal privacy
standard is incredibly important. The Internet does not stop at
state or even international borders and businesses need the
predictability and certainty of one Federal standard.
Senator Moran. Are there any other Commissioners that have
not spoken to this issue this morning in response to my
colleagues' questions?
Commissioner Slaughter. I don't believe I have. I don't
know--can you hear me?
Senator Moran. Yes.
Commissioner Slaughter. Can you hear me? OK, great. Sorry,
I would say I support the idea of a national floor. That makes
a lot of sense to me, but I would be concerned about a law
where that floor is too low or a law that invalidated stronger
State privacy statutes or prohibited states from having the
ability to innovate to fill gaps that aren't filled by the
Federal law.
Senator Moran. Thank you. Mr. Chairman, my time is almost
expired.
The Chairman. Let's go ahead those--since we have not
specifically heard from Commissioner Phillips and Commissioner
Chopra on that question.
Senator Moran. OK. Thank you. I thought we had from
Commissioner Chopra.
Commissioner Chopra. Mr. Chairman, I agree that a national
law would be helpful. I do have concerns about deleting all the
State laws. The FTC has dealt with this in the past in terms of
working with State laws, determining if there is conflicts, and
then what is more protective, and I think we could go down that
path again to make sure we don't delete states that decide they
want higher levels of protection.
Commissioner Phillips. Senator, this is Commissioner
Phillips. Can you hear me?
The Chairman. Yes.
Commissioner Phillips. Thank you. I just want to echo what
my colleagues, Chairman Simons and Commissioner Wilson said
about the need for a coherent and singular Federal standard.
Not only will this help businesses save costs and keep barriers
down for smaller firms relative to large incumbents, it will
also help with another critical privacy issue we face and that
is consumer understanding. It is easier for consumers to
understand one standard.
Senator Moran. Let me thank the Commissioner for that
answer. It is a point that has not been made often previously.
Thank you.
The Chairman. And thank you, Senator Moran. Senator
Blumenthal.
STATEMENT OF HON. RICHARD BLUMENTHAL,
U.S. SENATOR FROM CONNECTICUT
Senator Blumenthal. Thank you, Mr. Chairman. And thank you
to Senator Moran for raising the privacy issue. We are
continuing to strive for bipartisan solutions, which I think
should be within reach at some point because clearly these
questions and the answers we received, and most important, the
feelings of the American people, are that we need stronger
privacy protection and we should continue to work to that end.
But as important as new legislation is the commitment to
enforce the tools that the FTC has right now.
On Monday, Twitter disclosed that it faces an FTC fine up
to $250 million for its misuse of account security information
for ad targeting. According to Twitter this breach of trust
lasted between 2013 and 2019, 6 years. And this announcement
follows Twitter's catastrophic and dangerous breach of dozens
of high-profile accounts last month. Twitter has been under a
consent order since 2011 for exactly these kinds of problems,
an order that requires biannual audits and a comprehensive
information security program.
So I think that the public is rightly skeptical about the
FTC's use of its existing tools and its inconsistent and
inadequate enforcement of the laws already on the books, and I
would like to hear what the FTC has to say about this issue at
length, but I want to turn first to the issue of antitrust.
The House hearings, I think, should give the FTC a greater
sense of urgency about bringing an action based on antitrust
against both Facebook and Amazon which are within its purview.
I want to ask Chairman Simons, can we expect some kind of
antitrust action against tech firms that have monopolistic
power and may have abused that monopolistic power by the end of
the year, and what is preventing action now?
Chairman Simons. Thank you, Senator. I don't want to
prejudge the outcome of an investigation, but let me say this,
we are focused on and this is the most important thing that we
are doing on the competition side at the FTC which is these
investigations of the tech platforms. We formed a new group in
the Bureau of Consumer--Bureau of Competition, the Technology
Enforcement Division specifically dedicated to investigating
these types of companies.
And they are incredibly busy. They are very active and I
have told them that what they are working on is the most
important thing in the Bureau of Competition and that they
should do it as quickly and as efficiently as possible, and I
am very confident that they are doing that.
Senator Blumenthal. Have you given them a mandate that is
action oriented because I think the American people want to see
action?
Chairman Simons. Oh, yes. I have absolutely and I talk to
them regularly.
Senator Blumenthal. Let me ask you about some of the scams
that have appeared in the wake of the pandemic. As you know,
the FTC has issued 255 warning letters about these snake oil
scams that have appeared promising cures. It is really the wild
west out there. Warning letters simply lack the deterrent and
enforcement value of actions. Do you plan more action to stop
these kinds of consumer scams that exploit people's fears about
the pandemic and their search for treatments and cures?
Chairman Simons. Yes, thank you Senator. We try to do what
is most effective and most efficiently--and efficient to get to
the problematic advertising or claims off the internet. And so
we are able to get out these warning letters very quickly and
so far they have been extremely effective, extremely effective.
Overwhelmingly, the companies take down the problematic
language within 48 hours, and where they don't, then we
initiate enforcement actions and we brought a number of those
already. I think today in fact we announced three or four new
ones. And so we have had seven of those already.
Senator Blumenthal. Well, let me just interrupt because--I
apologize my time is running out but we know from experience, I
know as a former U.S. Attorney and a State Attorney General
that a warning letter means that the company can just come back
and you can do an enforcement action, but the better course is
to have a judgment on the books that can be enforced rather
than have to begin the case all over again.
Let me just ask you finally on the issue of privacy, in his
Dissent in the Facebook privacy settlement, Commissioner Chopra
criticized the FTC for not deposing Facebook executives. Don't
you believe that the FTC should depose Mark Zuckerberg in your
ongoing antitrust investigation?
Commissioner Simons. I can't comment on the specifics of
any individual matter, but we--it depends on the circumstances.
What we do is fact-specific. Sometimes it is important to
depose the CEO and sometimes it is not necessary. But where it
is important and helpful, we try to do it. And the other thing
I would say is particularly with respect to Facebook, we got as
much--we had e-mails from lots and lots of people, we did not
need to get Mr. Zuckerberg in a deposition for that case.
Senator Blumenthal. Don't you think in this antitrust
investigation it will be necessary to depose both Zuckerberg
and Jeff Bezos?
Chairman Simons. Well, Mr. Bezos works for Amazon, but I
can't comment on----
Senator Blumenthal. I understand that is a separate
antitrust investigation but shouldn't this investigation----
Chairman Simons. I can't comment on what--sorry, I can't
even comment on whether there is an investigation of Amazon.
The only investigation that is publicly known that our TED
group is doing is Facebook and that is only because they have
disclosed it themselves and so we are able to confirm that. But
other than that, we don't--we don't discuss individual cases.
Senator Blumenthal. Fair enough. Let me just suggest
because my time has expired that the credibility of this
investigation is going to depend on its completeness and
aggressiveness, and seems to me that the public will be
satisfied only if you do depose the very top executives of
whatever company you are investigating. Thank you, Mr.
Chairman.
The Chairman. Thank you very much, Senator Blumenthal.
Senator Blackburn.
STATEMENT OF HON. MARSHA BLACKBURN,
U.S. SENATOR FROM TENNESSEE
Senator Blackburn. Thank you to each of you for the time to
be here today. Mr. Chairman, I think that--Chairman Simons, I
think you know that Facebook compliance is very important to us
and dealing with social media is very important to us. You are
hearing a lot about it from letters and notes that are coming
to you. We are hearing a good bit about it.
So I have been jumping back and forth from the Judiciary
hearing to this one and so let me ask you this. Just very
briefly, when do you think you are going to bring this to a
conclusion? And are you satisfied that we are going to be able
to get to a conclusion with the issues with Facebook and all of
this going back to the 2012 Order?
Chairman Simons. OK, there we go, unmuted. So are you
talking about the Facebook privacy order or you talking about a
Facebook antitrust investigation?
Senator Blackburn. Yes. Let's take privacy first and then
we can go to antitrust.
Chairman Simons. OK. Sure. So the order, the negotiated
order settling the our order violation of Section 5 case
against Facebook was finally entered I think on April 27 or 28
of this past year. It was in litigation in front of a judge in
the D.C. District Court----
Senator Blackburn. We know all of that. Where are you?
Where do you feel you are in compliance? Are they in
compliance? And then are you satisfied with the progress? And
then I will add something on it because the clock is ticking,
what kind of legislative balance do you think we need to strike
to make certain that you all can properly deal with this?
Chairman Simons. Yes, I think, I don't--so, I can't comment
any particular investigation of any particular company, but we
are very focused on that Order in particular and compliance
with it. If there is any problem with it, we will be on it. We
will be active, but I can't talk about anything in particular
about an existing, non-public----
Senator Blackburn. Correct, but you are pleased with where
you are in the process. Is that what you are saying?
Chairman Simons. What I am saying is we are very happy with
the Order. We think it really restructures aboard. It provides
all kinds of----
Senator Blackburn. OK. Speak to whatever kind of
legislative balance we need to strike to empower you to conduct
enforcement to hold big tech accountable, because when we hear
from Tennesseans, they will say well there is a lot of
conversation around this but what are you going to do about it?
So what kind of legislative action needs to happen?
Chairman Simmons. So I think what your colleagues, what you
and your colleagues are doing in terms of a new Federal privacy
legislation is absolutely critical because our hundred-year-old
statute is not really up to the task and doesn't give us the
authority that we need. We don't really have anything looking
even remotely close to what the Europeans have with GDPR so it
is really important that you, you know, through your work on
the privacy, Federal privacy legislation to continue.
Senator Blackburn. OK, I have got another question and I am
not going to have time to get through this but looking at the
invalidation of the Privacy Shield of the court of justice of
the EU and some of the European data protection authorities,
they have signaled that they do not foresee a grace period to
allow data flows to continue during the negotiation of a
successor agreement like that which occurred in 15-16.
So I would be interested to know if any of you have had
conversations with any of your DPA colleagues in Europe about
the importance to both economies of allowing these data flows
to continue? And, also if you have a sense of whether or when
there might be a final or collective decision on allowing data
transfers to continue while a successor framework is
negotiated? And Chairman Simons, I will come to you first and
anyone else that wants to weigh in on this just raise your
hand.
Chairman Simons. Thank you, Senator. So we are working with
the Commerce Department and other parts of the Administration.
We stand by ready to help them in whatever way we can be useful
to them. They are carrying the water on this, and you know, we
will have to see what direction they head in and will support
them as much as we can.
Commissioner Phillips. Senator, this is Commissioner
Phillips. If I can just add----
Senator Blackburn. Absolutely.
Commissioner Phillips. Thank you so much. I really
appreciate it. A little bit of context, back in, after the
Schrems I decision when the Safe Harbor agreement was
invalidated, the U.S. Government and the European Commission
were already negotiating what became the Privacy Shield
agreements.
It was because of that ongoing negotiation that the
European privacy authorities agreed to do what you are
describing which is to standdown on enforcement and allows
firms to continue to transact in data. I shared the
disappointment of Secretary Pompeo and Secretary Ross at this
decision.
I do not think it is fair to hold the U.S. to a standard
that other countries cannot meet. I think the transaction in
this data is very important, in particular for small businesses
and we are going to do whatever we can to support the Commerce
Department in its efforts and to continue to hold companies
accountable to the privacy promises that they make.
Senator Blackburn. Thank you. Anyone else want to weigh in
on this? I am over time, Mr. Chairman. I thank you and I yield
back my time.
The Chairman. Thank you, Senator Blackburn. Senator Schatz.
STATEMENT OF HON. BRIAN SCHATZ,
U.S. SENATOR FROM HAWAII
Senator Schatz. Thank you, Mr. Chairman, Ranking Member,
members of the Commission. First thing I want to say is I just
want to thank the Commissioners for making it very difficult to
determine who was a Republican appointee and who was a
Democratic appointee. This is the way that these Commissions
should operate. It is the way that the Commerce Committee likes
to do it and it is a real pleasure to sort of dig into the
issues without necessarily digging 1 into each other.
My first question is for Chairman Simons on credit
reporting. What actions is the FTC taking to verify that the
credit reporting agencies are following the CARES Act
provisions and what is the FTC doing to ensure that data
furnishers are accurately reporting the data?
Chairman Simons. So, thank you, Senator. So yes, so we have
investigations open. We had a--and we brought some actions as
well. We had a workshop that was specifically focused on
accuracy with the CFPB and we are working with them as well.
They have supervisory authority under the big three credit
bureaus and so we work with them and talk to them about
accuracy issues in that regard.
Senator Schatz. Can you talk a little more about that
because I had Ms. Kraninger in front of the Banking Committee
and I was, you know, I don't mind a consultative educational
process, but I am a little concerned as to where the
enforcement stick is and to the degree and extent that the
CARES Act specifically instructs the big three, you know, not
to report say a forbearance as a negative credit event. I want
to be satisfied that people have access to that information to
know that the CARES Act is being complied with and that the big
three are actually doing so.
Chairman Simons. Yes. So, we are monitoring for that, and
yes, I didn't understand your question. We are monitoring for
that and if we see something that is problematic, that is a
priority for us.
Senator Schatz. Thank you. Commissioner Chopra, do you want
to add anything just generally speaking about credit reporting
and about the sort of public policy question of whether or not
consumers should have access to their own credit reports?
Commissioner Chopra. Yes, I really think we are long
overdue for broader reforms of what I see as a broken oligopoly
where consumers are the product, they are not the customer. The
CFPB really is the lead on this because of their broader
authorities, but I really want to see the FTC continue its
focus on some of the tenant screening and employer background
check abuses, because if we see some of this being misreported,
you are going to see people who are trying to get to back to
work, trying to get a new place if they can't afford their
current one, and they might be blocked from doing it.
So we have got a lot to do but we have got to really figure
out what we are going to do long-term about Equifax,
TransUnion, and Experian because it is just simply not working,
the current system.
Senator Schatz. I think that is right. And I think that,
you know, some of the folks who are exasperated by the big
three and their conduct to their incompetence and their
unwillingness to give in any way are sometimes characterized as
wanting to undermine the ability to do, you know, proper
underwriting for mortgages and car loans and everything else.
That is not what we are doing. We are trying to make sure that
the error rate goes down and that consumers have access to
their own information.
I remember being in a Commerce Committee hearing and one of
the representatives from the big three said well, our error
rate is only three to five percent, which means many, many
millions of people are being prevented from having a job or a
mortgage or a car as a result of the errors of these companies
and they just plug along profitably. Commissioner Chopra, what
do you think you can do under the FTC's authority here?
Commissioner Chopra. Well just to be candid with you, I
think the Congress rightfully stripped the FTC of much of its
authorities here and gave it to the CFPB. I have obviously been
disappointed at the CFPB's actions in this regard because I
think there is much more that they can be doing given the much
broader panoply of authorities that they have.
I do want us to enforce the FCRA, including with respect to
whether certain large data brokers and tech platforms may be
subject to its requirements but have been flouting it. But I
agree, we need to reform the big three credit reporting
agencies, and it is going to take time, but we need to
introduce some real competition because it is just not working
right now.
Senator Schatz. Thank you very much, Commissioners. Thank
you, Mr. Chairman.
The Chairman. Thank you, Senator Schatz. Senator Capito.
STATEMENT OF HON. SHELLEY MOORE CAPITO,
U.S. SENATOR FROM WEST VIRGINIA
Senator Capito. Thank you, Mr. Chairman, and I thank all of
you both for your testimony, but also for your service. I
greatly appreciate the complexity of a lot of the issues that
you are dealing with. In 2015, I launched my West Virginia
Girls Rise Up program to encourage young women to take on
leadership roles and to build and encourage the future leaders
of America. There was a recent Wall Street Journal article that
referenced a study that found that 78 percent of fifth through
eighth graders, girls in particular, were lonely and isolated
during this pandemic time and certainly understandably so.
And so it was also quoted that girls between 10 and 14 are
spending about three to four hours a day on TikTok, Snapchat,
and Instagram to stay connected. So as children and teens turn
to more social media platforms to stay connected, what is the
Commission doing to ensure that companies who collect user data
are not violating the Children's Online Privacy Protection Act
and I will ask the Chairman that question?
Chairman Simons. Thank you, Senator. So we are monitoring
the market very carefully. We have given advice to ed tech
providers. We have given advice to schools. We have given
advice to parents, consumers. And so, let's see what--you know,
I mean that is what we are doing so far. And one of the things
I think that this points to is that we really need Federal
privacy legislation. This is an area where it is not just a
matter of are you doing what you say? It is a matter of what
you are doing may not be proper even if you don't say anything
about it.
Senator Capito. Well, I think obviously and particularly
nobody could have anticipated this and the availabilities
obviously of online platforms to younger children, probably
maybe were some parents might have prevented the use of it or
limited the use of it, now it has become more difficult to do
that because that is the only way that a lot of teens and pre-
adolescents and everything are keeping in touch.
So I am concerned about that. I am going to shift to
another issue and Commissioner Phillips on the Made in America
provisions. I know that there has been some lack of clarity in
terms of what does made in America mean? What does it mean to
you? What does it mean to consumers for perception? I know you
do studies on that.
Where are we on that made in America? Obviously here again
during this pandemic when we saw our PPE is was being made in
China, the lack of availability very frustrating. We are going
to try to do something about that here, hopefully in our next
CARES package. So do you have a comment on that Commissioner
Phillips?
Commissioner Phillips. Sure, and Senator, let me just begin
by following up briefly on your last question to the Chairman.
It is important also to note that the COPPA enforcement under
this FTC, the five Commissioners sitting here before you today,
is as aggressive as it ever has been. That began with what was
then a record settlement against a company that few Americans
have heard up at the time, TikTok.
We are very glad they are under order. It continued with
our settlement with the New York Attorney General for $170
million in the YouTube case. On ``made in the USA,'' we are
continuing to do our enforcement. We had a big case recently
against William Sonoma. We are also in the process of doing a
rulemaking. I have to tell you I dissented from that.
But the reason that I dissented is something very much
within your power and that was I didn't think that we had the
authority to make the rule that we were trying to make. That is
a pretty easy legislative fix even though legislation as we all
know is hard. That is certainly something that Congress can
address and that I could work with you on going forward. Thank
you.
Senator Capito. Thank you. I am going to go to Commissioner
Slaughter. She just gave me a little chat and said she had some
comments. So that is the beauty of technology. Yes,
Commissioner.
Commissioner Slaughter. Thank you so much, Senator. I just
wanted to echo your comments about the importance of thinking
about how our children are being affected by all of the online
activity that they are engaging in and particularly thank you
for your leadership in addressing the mental health issues for
young women. I have three daughters and this is something I
think about all the time.
And I just point out to you that COPPA does give us some
specific authority for children's privacy, but only for kids 13
and under, and only basically to give parents' permission and
to require reasonable data security. It doesn't give us the
same sort of general authority to engage in protection against
abuse of privacy and data practices that you are referring to,
especially for teenagers, so I really hope that this is
something that Congress will think about as you continue to
discuss data privacy legislation.
Senator Capito. Well it certainly looks like the data
coming forward over in the last several months would support
something like that. Thank you very much. I think I probably
used my 5 minutes. I appreciate it. Thank you all, and a cute
little baby.
The Chairman. Thank you, Senator Capito. Senator Udall.
STATEMENT OF HON. TOM UDALL,
U.S. SENATOR FROM NEW MEXICO
Senator Udall. Thank you, Mr. Chairman and Ranking Member.
Mr. Chairman, you can hear me, I assume?
The Chairman. You bet.
Senator Udall. OK. Throughout the COVID-19 pandemic, we
have seen Americans come together to support frontline workers.
We have seen New Mexicans rally as communities to help their
families and neighbors, but just as times of crisis can bring
out the best in people, they can also bring out the worst who
target vulnerable people. And that is why we have been seeing
this I think a lot in numerous reports of harmful scams that
put consumers at risk.
As a former Attorney General in New Mexico, I know you
recognize the need to work with partners outside of the agency.
State Attorneys General have their ear to the ground. They hear
directly from consumers. And many are strong protectors of
State consumer laws. A working relationship with them is
essential and that is why I introduced the ``Stopping COVID
Scams Act'' in the Senate to empower Federal and State
authorities to do more to deter scammers and hold them
accountable.
So my question is, my legislation would allow State
Attorneys General to bring a civil action in District Court or
State court to respond to COVID related fraud under the FTC
Act. So a question for every Commissioner, do any of you oppose
authorizing State Attorneys General to take action and respond
to fraud under the FTC Act?
Chairman Simons. Hi, this is Chairman Simons. No, I don't
have any reservations about that at all. And I agree completely
and want to echo what you said about the importance of our
relationship with the State AGs. They are boots on the ground.
They are terrific partners and we couldn't do what we do
without cooperating with them.
Senator Udall. Great. Thank you.
Commissioner Slaughter. No concerns. I think it is a good
idea.
Senator Udall. Terrific. Thank you.
Commissioner Chopra. Same.
The Chairman. I think we want answers from Phillips, Chopra
and Wilson also.
Commissioner Phillips. Senator Udall, I would like to take
a closer look at the legislation. A lot of our statutes do pair
our State AG enforcement with ours and that tends to be a
really good thing. A lot of states also have what we call baby
FTC Acts so I am not sure how the statute, I mean the proposed
bill will match up to that.
Commissioner Wilson. Senator, I agree with your proposal.
Senator Udall. Great. Thank you very much. We would like
to--Commissioner Phillips, we would like to continue the
discussion with you and hopefully get to a place where you feel
comfortable with Attorneys General doing that. Now my----
Commissioner Phillips. I appreciate it.
Senator Udall. You bet. Now, my second question goes to
civil penalty authority. My bill also enhances the FTC's civil
penalty authority. This is the same bill we talked about with
regard to the Attorneys General. Currently FTC enforcement
begins with an administrative complaint against a potential
scammer. Then there is a cease and desist order or a
settlement. Under current law, the Commission can only then
seek civil penalties in court if there is a further violation.
This is months or potentially years of court action, but as
we have seen the current health crisis moves quickly. New
Mexicans have died due to contaminated hand sanitizers with
false labeling, families fear for their health and are willing
to spend their money on questionable products making false
claims. Chairman Simons, would enhancing the FTC's authority to
use civil penalty authority protect consumers in the current
health crisis?
Chairman Simons. Yes. We support that. The other thing I
would say is we really need 13(b) because with 13(b), we can go
into Federal court and get a TRO, preliminary injunction, and
we can get an asset freeze for these fraudsters. Whereas civil
penalties might take a while to get through the court system
and we have to get the Justice Department involved too. So that
would be important in the absence of 13(b) but 13(b) is really
important.
Senator Udall. Yes. Thank you for that answer. Commissioner
Slaughter, is the FTC's current toolkit of enforcement actions
up to the present challenge?
Commissioner Slaughter. Well, I think as you point out,
Senator, civil penalty authority would be enormously helpful.
It is really hard for us to have to go in most cases through
that iterative process to get to civil penalties and civil
penalties are valuable because they put a big stick on the
table in terms of potential money that companies will have to
pay which has an important deterrent effect. So seeing that
would be important.
The Chairman pointed to an issue that I think is little-
noticed but is also very important, which is that when we have
civil penalties, we usually have to go through DOJ. I would
rather see those be coupled with independent litigating
authority for us on the civil penalty front. And I also agree
with the Chairman's point about 13(b) which is not only gives
us those important tools to go into court, but it also allows
us to return money directly to consumers and what we want to do
at the end of the day is make harmed consumers whole.
So I think civil penalties coupled with 13(b) authority
that is clarified are really, really important to both give a
big stick, help deter bad actions, punish companies that have
wronged consumers, and also return money to consumers that have
been wronged.
Senator Udall. Thank you so much, Commissioner, and I have
a couple of questions for the record that I hope you will
answer with regards to refunds for flights and other travel
arrangements and then some of these bots that are taking real
advantage of consumers and the marketplace. So with that, I
yield back, Mr. Chairman.
The Chairman. Thank you, Senator Udall. Senator Thune.
STATEMENT OF HON. JOHN THUNE,
U.S. SENATOR FROM SOUTH DAKOTA
Senator Thune. Thank you, Mr. Chairman. Chairman Simons, as
you know, reforming Section 230 of the Communications Decency
Act has been hotly debated here in Congress. Section 230 is the
law that prevents social media platforms like Facebook and
Twitter from being sued for content that users post on their
platforms. I have introduced a bipartisan bill with Senator
Schatz on this issue known as the Platform Accountability and
Consumer Transparency Act or the PACT Act which among other
things would stipulate that the immunity provided by Section
230 does not apply to civil enforcement actions brought by the
Federal Government.
The DOJ recommended this particular provision and it has
recently published a list of recommendations for reforming
Section 230. My question is how would consumers benefit from
reforming Section 230 to ensure that the immunity provided by
Section 230 does not apply to civil enforcement actions brought
by the Federal Government such as the FTC?
Chairman Simons. Thank you, Senator. So we have a number of
instances, it is actually fairly common, for us to go into
court and have a defense put on us relating to Section 230. So
it would be very helpful to us to avoid having to deal with
that and allow us the ability to go not only after the platform
participants but in the right circumstances the platform
itself.
Senator Thune. OK. This I would direct all Commissioners
and it has to do with the bill that Congress passed last year
that the President signed into law. It is called the TRACE Act,
and among other things, the TRACE Act required that the FTC
register a single entity that conducts private lead efforts to
trace back the origin of illegal robocalls, and I was pleased
to see that the FTC did fulfill that requirement this last
month. Can you speak to the FTC's efforts on engaging with
industry initiatives like the U.S. Telecom Industry Traceback
Group and whether this public-private partnership has been
successful in identifying illegal robocallers? Let's start with
the Chairman.
Chairman Simons. Yes, Senator. Yes, so absolutely. This has
been extremely helpful for us. The traceback organization is
very effective and we use--you know, we are just overjoyed with
what the with their progress. The other thing I will say is
what we are doing is we are going after VoIP service providers
who often serve as the entry point for scammers into the U.S.
telephone network.
And we sued a company in December of last year, Globex, and
then we sent a whole bunch of warning letters to other VoIP
service providers and said hey, look at this. You may be
liable. These people are already being sued. You may be next.
And we think that that may have had some impact on a decrease,
on a substantial decrease in robocalls since that time.
Senator Thune. Great. Thanks. Is there anybody else quickly
or--yes, go ahead.
Commissioner Phillips. Senator, just to add briefly, in the
TRACE Act, as you know, it also calls for the FTC to convene
the Hospital Robocall Protection Group to come up with best
practices for State and local governments, for telecom, and for
hospitals to help deal with the particular storage, in
particular the public health, that robocalls present. We had
our first meeting last week and meetings are continuing, and we
hope to have a report out according to the timeline indicated
by Congress.
Senator Thune. Good. Excellent. Thank you. Last question
very quickly. I think I have got a little bit of time left. And
Mr. Chairman, do you expect to exercise discretion and refrain
from bringing any enforcement actions with regard to Privacy
Shield until after a new structure is negotiated and put in
place to transfer data from Europe?
Chairman Simons. I think what we are expecting to do, what
we intend to do is make companies fulfill the promises they
made under Privacy Shield. If they had made promises private--
excuse me, if they made promises, which if you sign up for
Privacy Shield you have and you are going to protect the data
in a certain way and when you are done with it, you are going
to delete it. Those types of things. We are going to enforce
with respect to that.
Senator Thune. OK. And my understanding is that the issue
of preemption and the California law has been covered
extensively already. But so I will--my time has running out. I
will defer that one and perhaps may have a question for the
record about that.
The Chairman. Thank you, Senator Thune. Senator Baldwin.
STATEMENT OF HON. TAMMY BALDWIN,
U.S. SENATOR FROM WISCONSIN
Senator Baldwin. Thank you, Mr. Chairman. A recent FTC
press release noted that online shopping complaints that the
FTC has received during the pandemic have surged. The FTC has
pointed out--or has put out a shopping online guide that
recommends online shoppers get the sellers' physical address
and inspect product descriptions closely. These common-sense
suggestions seem aimed at ensuring that the buyer has the same
information shopping online during the pandemic as they would
if they were shopping in person. Before I go further, I would
like to just ask each Commissioner if they agree that generally
American consumers should seek the same information shopping
online as they do in person? And if you could just briefly
answer yes or no starting with Mr. Chairman.
Chairman Simons. Yes.
Senator Baldwin. Mr. Phillips?
Commissioner Phillips. Yes, they generally seek the same
information.
Senator Baldwin. Mr. Chopra?
Commissioner Chopra. Yes.
Senator Baldwin. Ms. Slaughter?
[No response.]
Senator Baldwin. Ms. Wilson?
Commissioner Wilson. Yes, I agree.
Senator Baldwin. OK. I think I missed Ms. Slaughter, but
let me carry on. I know that many consumers want to buy
American-made products, but they can't verify the country of
origin of items when they are shopping online. In order to
ensure that online consumers get the same access to country of
origin and seller location information that in-person shoppers
have, I introduced the COOL Online Act with Senator Rick Scott
back in May.
The bill requires online sellers to provide buyers the
country of origin label for products that they are selling.
With more and more consumers buying their goods online during
the pandemic, this transparency is more important than ever.
Commissioner Chopra, can you please share that if you are
supportive of the goals of my COOL Online Act and explain the
role you see the FTC playing in this important issue for
American consumers?
Commissioner Chopra. Yes, there is no question that there
are so many products where consumers want to know where they
were made, particularly during the pandemic. I have had
discussions with many major e-commerce platforms that been very
concerned that they are not listing the country of origin
except for textile wool and other things where they are
required to and I think this needs to change. They should
disclose country of origin for those goods, and in as much that
they are lying about it, that can create some enforcement
liability and I think this is a good way to create more
information for consumers.
Senator Baldwin. Thank you. In April, I joined my colleague
Senator Hawley, in sending a letter to the Commission urging an
investigation into the consolidation of the meat packing and
processing industry, and its impact on consumers, farmers,
workers, and our Nation's food supply. During the COVID-19
pandemic, we have seen severe outbreaks of the virus among
workers at meat packing facilities in Wisconsin and elsewhere
in the country.
Though the pandemic has brought many of the issues into
starker relief, the concerns around consolidation have been
simmering for years. Commissioner Chopra, I know there has been
a previous question in this hearing about consolidation in the
meat packing industry, but I want to hear if you agree that
concentration has contributed specifically to workplace safety
issues and pricing issues? And what do you believe the FTC as
well as other Federal agencies can do to address these
problems?
Commissioner Chopra. Yes. I agree. It was 100 years ago
that the FTC's reports exposed a lot of the abuses by the food
and the meat packing industry in particular. In 1921, Congress
stripped some of those authorities to enforce those laws for
the FTC but we still retain our industry-wide investigation
authority under Section 6(b).
I really think the USDA needs to increase its enforcement
and its rulemaking to change the undue preferences standards. I
think they are going in the wrong direction and I think the
DOJ, all of us need to really be cracking down on this. It has
some real impact for those of us eating at the table as well as
those working and everyone in our food industry.
Senator Baldwin. I did note that Ms. Wilson said she had a
comment on this issue. With the Chairman's indulgence can we--
--
The Chairman. Ms. Wilson?
Commissioner Wilson. Thank you, Senator Baldwin. I
appreciate the opportunity to address this issue. I think
actually while consolidation may be a concern, one of the
significant issues that we may not perhaps be paying sufficient
attention to is the fact that laws and regulations that are
designed to apply to some of the larger food producers and meat
producers impose significant costs and compliance issues when
they are applied in the same way to smaller farmers.
And so smaller farmers do need to grapple with these
massive compliance costs not even designed for them and end up
having to exit the business. There is a fantastic book on this
topic called ``Everything I Want To Do is Illegal.'' So I think
revisiting the way in which we regulate small farmers could
perhaps help to reintroduce more competition into the food
sector in the United States.
The Chairman. Thank you. And thank you very much. Our next
questioner will be Senator Scott. But we heard there was a
question about the connection. Senator Scott, can you hear us?
STATEMENT OF HON. RICK SCOTT,
U.S. SENATOR FROM FLORIDA
Senator Scott. I can hear you perfectly.
The Chairman. You are recognized.
Senator Scott. Alright, thank you, Chairman Wicker. Just to
follow up on what Senator Baldwin was talking about. I
introduced the PRIME Act which is going to require online
retailers to list the country of origin for each product they
sell. Then I joined with Senator Baldwin to introduce the
Country Of Origin Labeling Online Act which would give the FTC
authority over such laws. The PRIME Act would also require app
stores just to display the country of origin for apps sold in
their marketplace.
So consumers know where the apps they download to their
phones are developed and you know, they can make good
decisions. I think we have seen this just recently with TikTok.
So I am concerned, as I think all of us are, about companies
influenced and controlled by the Chinese government like TikTok
because under Chinese law they have to adhere to the communist
government's demands of spy, steal user data, or any content
the government wishes and we have seen that with TikTok.
I think we all would agree that no American should be
subject to things like this and this sort of risk. And we will
see if TikTok becomes owned by a U.S.-based company, but even
if we do we have to be careful about back doors. So my question
is, what enforcement measures and oversight does the FTC have
to ensure a company operating in the United States with access
to personal identifying information discloses to users where
the company is housing the data and how they are using that
data?
Commissioner Simons. So this is one of the--thank you,
Senator. This is one of the reasons we need Federal privacy
legislation because there isn't a lot--there is a hundred year
old statute is based on deception standard where somebody says
here is what we are doing with your data and then they don't do
it. But if they don't say anything and it is not untruthful and
we are deceptive, then it is very challenging for us to deal
with that.
Senator Scott. Have you proposed legislation?
Chairman Simons. I am m sorry. Say again.
Senator Scott. Have you proposed legislation or do you--
have you seen legislation that you like?
Chairman Simons. No, we have been relying on the Congress
to do that, your new colleagues on the Committee and elsewhere.
Senator Scott. OK. Have you seen any legislation that has
been proposed that you like with regard to giving you the
authority you need?
Chairman Simons. I could get you something on that. We have
given technical assistance on a bunch of statutes and we would
be happy to provide that to you.
Senator Scott. So, I mean first off what Senator Baldwin
and I are doing with regard to looking at apps and products
sold online, do you think it is the right approach or do you
have suggestions that we should change to make sure that our
goal is accomplished, assuming we can get that passed?
Chairman Simons. I have to consult with the staff. I
haven't had the opportunity to look at your legislation in
detail, I am sorry, sir.
Commissioner Chopra. Senator Scott, if I could add one
challenge that--I support the goals. One challenge that is an
emerging issue among the technology community is verifying the
country of origin for software code.
This is obviously something that the DOD and the Commerce
Department have been thinking about. It is extremely difficult
in certain circumstances to verify. It is not physical and it
is going to be a more emerging problem as our whole industrial
base as well as consumers are thinking more about supply chains
and whether there might be back doors or theft from adversarial
State and non-State actors.
Senator Scott. That makes sense.
Commissioner Phillips. Senator Scott, this is Commissioner
Phillips and if I could just add briefly, whenever we are
talking about enforcement, again, privacy and other
enforcement, against companies that are abroad that have
effects here in the United States, we would be remiss not to
mention the SAFE WEB Act and the passage of that authority
which is set to expire is very, very important for us, not only
on our own but in particular working with our partners abroad
on cases that--as cyber cases often do cross National
boundaries.
Senator Scott. OK, and when is that expiring?
Commissioner Phillips. I believe later this month.
Senator Scott. OK. Alright. Do anybody else want to
respond? OK. Do you have--does the FTC have the ability to
require online retailers to disclose the country of origin for
either products or apps, understanding what you just said about
the difficulty on the app side because of where codes are
produced, do you have the ability to do this without
legislation?
Commissioner Chopra. Yes, Senator. My understanding is that
we have certain rulemaking authorities that could be used for
that. It may be potentially cumbersome. There are certain
statutes that directly require country of origin labeling for
textiles, wool, and other products, but there is not a general
requirement. So legislation would obviously make it much more
expedited.
Senator Scott. OK.
Commissioner Wilson. Senator, this is Commissioner Wilson.
I do believe that more information available to consumers is
always better. It will allow them to more accurately evaluate
the quality and value that various product and services may
offer to them. And so I think this is definitely a good idea.
The Chairman. Thank you.
Senator Scott. Go ahead.
The Chairman. Thank you, Senator Scott.
Senator Scott. Thank you. Thank you, Chairman Wicker.
The Chairman. Thank you, sir. Senator Peters.
STATEMENT OF HON. GARY PETERS,
U.S. SENATOR FROM MICHIGAN
Senator Peters. Thank you, Mr. Chairman, and thank you for
putting this hearing together and each of the Commissioners.
Appreciate your testimony here today as well. My first question
is for Commissioner Phillips. On June 5, one of Michigan's
largest healthcare providers finished investigating a data
breach that occurred in January.
They found that around 6,000 patients had information
possibly exposed as a result of this breach. The system that
assessed accounts contain personal and protected health
information according to the system. This included patient
names, dates of birth, diagnosis, the codes, procedures,
treatment locations, treatment types, prescription information,
patient account numbers, pretty extensive information.
So my question to you because I know in your opening
statement you discussed the need for data security in
particular, knowing that this technology is constantly evolving
in a rapid fashion, what can the FTC and Congress particular do
to ensure that companies are doing all that they can to protect
this data, especially when it comes to patient data?
Commissioner Phillips. There are things we can do here. I
think a regime that includes a very specific legal authority
that captures some of the work we do already ensuring that
companies undertake adequate processes to make sure that they
are protecting the kind of data that they have. I do think
rulemaking authority is appropriate here and I think civil
penalty authority is appropriate here. My view is that
unfortunately, we don't always have the people who could most
efficiently protect data, adequately protecting it, that the
cost is borne by others. There are externalities, and a civil
penalty regime that helps sort of right that incentive
structure.
Senator Peters. Well----
Commissioner Chopra. Senator, may I add something to that?
Senator Peters. Absolutely.
Commissioner Chopra. Yes, one of the things that I think we
are going to need to confront is there has been a change in my
view over the last 10 years that much of the impetus for
stealing personal data was really identity theft to open up a
credit card at a department store in someone else's name. But
really what we are seeing is something very different. Equifax,
Anthem, Marriott, the Justice Department and others have all
said that these were not necessarily identity thieves.
They were affiliated with State and non-State actors
related to China. And I think we are now going to need to be
thinking about really safeguarding our entire data security
even in the commercial context to make sure that adversarial
parties cannot collect detailed dossiers on each of us for the
purposes of weaponizing it, interfering in our country, and
manipulating us. So I think the stakes are much higher and the
harms are on a different dimension than they were even just a
few years ago.
Commissioner Wilson. Senator, this is Commissioner Wilson.
If I may, just one thought.
Senator Peters. Yes, please.
Commissioner Wilson. I think your question highlights one
of the issues we need to confront. Privacy legislation and data
security legislation essentially are two sides of the same coin
and it is important to remember that many healthcare providers
in the United States are classified as nonprofits and so in
data security and privacy legislation, the FTC should gain
jurisdiction to have authority over these nonprofits, because
as you point out, they do have significant sensitive health
data and so it is just another reason that we need to get
privacy legislation coupled with data security legislation in
place to protect consumers.
Senator Peters. Yes, clearly. And really go online and
follow those lines about more of this information. It is
becoming available. Directed to Commissioner Slaughter
initially, but others, please weigh in, you know, according to
media reports, data brokers are buying and selling data
collected from Americans phones and have even been tracking
Americans at protest or at places of worship.
And while smartphones allow customers to choose whether or
not to allow an app to have access to their location data,
Americans have no ability to control whether either the app
developer or its partners sell that information to third
parties. So my question is, do you believe that Americans have
sufficient control over secondary uses and the sharing of very
sensitive data? And if not, what is the FTC doing to address
this problem?
Commissioner Slaughter. Thank you so much for the question,
Senator. I think this is a really, really good point. No, I
don't believe Americans have enough control for a number of
reasons. Our current framework is as you suggested basically a
notice and consent framework that says companies are supposed
to tell you what they are doing and you are supposed to be able
to say yes or no. But as you know, often that notice is buried
in really lengthy and unreadable privacy policies that
consumers often have no choice but to click through to get
access to the service.
They can't go back and say yes, I agree to some provisions
or not other provisions and almost none of that controls
secondary uses or tertiary uses down the line. So one of my big
concerns is that the current FTC authority, which as we have
discussed is basically premised on deception in the privacy
context with some unfairness authority, really doesn't reach
that kind of behavior that is deeply concerning and deeply
problematic.
So I think you are highlighting a really important issue
that should continue to be a focus for the Committee. And I do
think in the meantime the Commission should think about where
we can apply existing authorities that we have, whether it is
standard UDAP enforcement or whether we dust off our Magma's
rulemaking authority which we basically rarely use because it
is as Commissioner Chopra pointed out, it is somewhat
cumbersome. I think undertaking that process is really an
important thing for us to start and not just wait for Congress
to act because these things are happening now in real time and
they are creating real peril for Americans.
The Chairman. Senator Peters, could we let other members
answer on the record since----
Senator Peters. That would be great. Thank you.
The Chairman. Thank you, Senator Peters. Senator Lee.
STATEMENT OF HON. MIKE LEE,
U.S. SENATOR FROM UTAH
Senator Lee. Thank you, Mr. Chairman. Thank you,
Commissioners for being here today. The FTC first implemented
the Contact Lens rule in 2004 after Congress passed the
Fairness to Contact Lens Consumers Act. The Contact Lens rule
at its heart is very simple. It simply requires prescribers to
give consumers a copy of their contact lens prescriptions. The
reason for this is also simple.
That contact lens consumers, as Congress determined and as
the FTC has reiterated, need to have the opportunity to shop
around to find the best deal. Now, Senator Klobuchar and I
wrote to the Commission raising concerns that Federal law was
not being properly implemented and enforced and the consumers
don't always have access to their prescription and I was
grateful for your response. I want to thank each of you for
your unanimous agreement to finalize the new Contact Lens rule
to help protect consumers against this kind of protectionism.
Unfortunately, I am hearing that there are some efforts
underway to delay this important rule and so I want to ask a
couple of questions about that.
Chairman Simons, we will start with you. If this rule is
delayed, particularly now when consumers are facing significant
economic hardships in connection with the global pandemic and
trying to socially distance, couldn't consumers end up being
harmed and specifically couldn't it end up making it more
difficult for consumers to shop around and to purchase contact
lenses from their retailer of choice and at a lower cost?
Chairman Simons. Thank you, Senator, for that question.
Yes, absolutely. The whole purpose of this of this rule----
Senator Lee. Chairman Simons, you still there? Sounds like
we may have lost you.
The Chairman. Chairman Simons, you were saying the whole
purpose of the rule and then we lost the connection. Can you
hear us, sir?
Senator Lee. OK. Mr. Chairman----
The Chairman. I think, Senator Lee, you were making such a
poor point there that the technology went out----
[Laughter.]
Senator Lee. I know. I think it has much more to do with
the fact that Chairman Phillips was emotionally overcome at the
importance of this to Contact Lens consumers.
The Chairman. OK, can the witness hear us because we do
need to get an answer there.
Senator Lee. OK. Maybe we can move along to some follow-up
questions of other members of the panel and then we will move
back to Chairman Simons if and when we hear back from him.
Let's move to you then, Commissioner Phillips, optometrists
argue in some cases not all cases, but some optometrists are
arguing that the compliance costs associated with the rule are
great.
Some have even argued that they can't do patient signatures
because that would require pens to be disinfected between uses.
Putting aside for a moment the fact that during COVID-19
optometrist should be practicing basic sterilization, did the
Commission examine the compliance costs and if so, what were
the findings?
Commissioner Phillips. Absolutely, Senator. As you know,
the Contact Lens rule that we recently promulgated was a very
long process involving two proposed rules and taking into
account some of the concerns about compliance costs about
health. All of those things are reflected in the final version
of the rule that we published. But as you noted earlier, the
concerns that animated Congress and that animated us also
include having a sufficient degree of competition in the
market, allowing and making sure that consumers have available
to them their prescriptions for contact lenses, and that sales
for those lenses not only be done by the prescriber but also by
other sellers.
Senator Lee. Thank you. Commissioner Slaughter, in your
statement regarding the Contact Lens rule, you actually noted
that Congress could go further to empower consumers. What
additional reforms do you think Congress should perhaps
consider in order to stop this kind of market protectionism?
Perhaps we have lost Commissioner Slaughter as well.
I can move on to a subsequent question. We will pick up
there if we pick them back up. I would next like to talk
briefly about another issue. Our country is in a nationwide
debate regarding online political bias and censorship among
certain big tech firms. It is sad to think that Internet
platforms, platforms that boast the ability to connect hundreds
of millions of people and allow for the rapid dissemination of
ideas and opinions believe that they know what is best for the
American people, to read, to watch, and to listen, and to know
what opinions are dangerous, even when they have no technical
expertise in a particular field.
In an effort to protect all viewpoints, a number of members
including myself are asking whether Congress must amend current
law as part of the solution and whether the FTC might play a
new role in that. Chairman Simons, if you are back, I would
like to ask you evaluating whether a tech company is following
the terms of service is something that the FTC currently does,
but having the FTC evaluate political viewpoints is much
broader. Would FTC evaluation of online content for political
bias or neutrality implicate the First Amendment and how would
the FTC go about evaluating for such bias?
The Chairman. We are informed, Senator Lee, that Chairman
Simons had to log off and try to log back on. Are you back on,
Mr. Chairman? That may not have been accomplished. Let's----
Senator Lee. Can I ask the same question of Commissioner
Phillips?
Commissioner Phillips. Yes, Senator. Look, I think the
process of content moderation is something that big firms face.
It is something that a lot of small firms face. I am not sure
if my answer was clear earlier in the hearing but we all recall
with horror when press reports about the awful shooting at the
Tree of Life synagogue in Pittsburgh included reports about
communication on a platform called ``Gab'' so this isn't all
just about large tech companies. It is a difficult question.
At the end of the day though, when it comes to moderating
speech, the First Amendment is implicated and that is something
that we have always taken into account when we have done any of
our work related to the content of speech with respect to a kid
video games, going back decades. And of course, the First
Amendment is something we have to keep in mind as we move
forward.
Senator Lee. Thank you. Thank you, Mr. Chairman.
The Chairman. Thank you. Senator Tester.
STATEMENT OF HON. JON TESTER,
U.S. SENATOR FROM MONTANA
Senator Tester. Thank you, Mr. Chairman. I got to tell you
I love this committee. This has been a great hearing and I
appreciate the Commissioners. I just want to make a few
statements, never going to get to my question. Number one, I
cannot believe how concerned people are about textiles and
electronics when it comes to country of origin labeling yet we
don't give a damn about where the food that we put in our body
comes from.
So maybe I need to use you guys to be able to enforce a
country of origin labeling for food at least online food. And
the second thing is I want to go back to Commissioner Wilson's
point on smaller companies. You are absolutely correct. And I
will tell you that when the 2012 Food Modernization Act came by
and I put an amendment in to exempt smaller companies and we
got it passed, guess who came to Capitol Hill and acted like
the world was going to end, the big food companies. And that is
where I come to my question is for you, Mr. Chopra, and it
deals with consolidation in the packer industry, but it is
going to deal with it from a Packers and Stockyards Act
perspective. Look, I am going to tell you a fact, this is an
overstatement.
We got kalkhoff operators and we got medium and small-sized
feeders that are going broke and it is going to change the food
chain for food for this country from a consumer standpoint and
a for food production standpoint. We authorized the USDA to put
forth some new rules on the Packers and Stockyards Act and they
came back with a document that wasn't worth the paper it was
written on.
So my question to you, Mr. Chopra, what is your
recommendations for improving the Packers and Stockyards Act so
it actually works for folks in production agriculture and folks
and consumers?
Commissioner Chopra. Well, I just have to say that in the
submission I made to the USDA, I think the rulemaking they are
doing is going to legalize lots of the worst practices that
allow them to do everything from rigging the weights and
measures to giving poor product and then penalizing farmers for
doing it. So there is--we need to do a real rework of how that
whole thing is working.
And we need to also more answers from the USDA about what
is going to go on. There has almost been no enforcement on some
of these things. So I also just add on country of origin
labeling, even under the USDA guidelines, meat can come from
overseas. And if it comes into a factory by a U.S. meat packer,
it can be labeled as product of USA. It is totally inconsistent
with every other country of origin standard and it just feels
like a giveaway to me.
Senator Tester. You are absolutely 100 percent correct. It
is a giveaway and guess who suffers? The people in production
ag suffer because you are bringing in crappy meat from Brazil
or Argentina to put it with good U.S. product and the consumer
doesn't know the difference. So we agree. The question I have
for you, Mr. Chopra before I go to Commissioner Wilson is, is
there anything the FTC can do about it or is it just the
Congress has to get off their butt and do it?
Commissioner Chopra. Well, I would push Congress but
legally and I am happy to share more with you and your staff
later. Our authorities are much different when it comes to
poultry products and margarine versus other types of meat. The
Justice Department does a lot of the antitrust work. Our
efforts are really on retail, but we got to start looking at
the whole food system, whether it is food delivery apps,
whether it is supermarkets, or whether it is the exploitation
of farmers.
And I just want to share, you know, one of the reasons that
we are seeing more poverty, more opioid issues in many of these
communities is being unable to sell and make a livelihood. You
know, last week we are seeing that a lot of those who raise
lamb are not going to be able to get it to market and that is
going to be devastating.
Senator Tester. Well, let me tell you, I couldn't agree
with you more. And the fact is that we are screwing things up
by not enforcing the rules that have been put out 100 years
ago. They still apply. They need some modification. We need to
make them work or all we are going to turn into serfs working
for the big man. OK, so thank you, Mr. Chopra, for your work.
Ms. Wilson, I want to talk about something else is near and
dear to my heart and that is right to repair, OK. When I went
back to Montana this weekend, we harvested a little bit of
peas, we harvested a little bit of winter wheats, and I had a
rear beater bearing go out of my combine. I was able to replace
it because my combine is about 15 years old, OK. Today, it is a
different story when you buy this equipment because of the
technology and by the way, this isn't about cell phones. You
can throw this damn cellphone away. I don't care. I can go buy
a new one for $300 bucks. It cost me $300,000 bucks to buy a
combine if I can't repair the damn thing.
So could you give me a little input on what we need to be
doing on the ``right to repair'' stuff because it is going to
put, once again for people in production agriculture, out of
business. It will be consolidated at the ground. It will be
consolidated at the packer level. It will be consolidated from
top to bottom and it is going to ruin it for this country. You
are muted.
Commissioner Wilson. Sir, thank you for the question, and I
completely agree with you. Obviously ``right to repair'' is an
issue that the FTC has explored in a recent workshop. There are
competition issues and a bedrock principle of competition is
that you are not tied to a manufacturer to do repairs on your
equipment. We have a Massey Ferguson tractor on our farm out
here in West Virginia and my husband broke a couple of bands
using the chipper and replaced the band himself, because
frankly, the dealer here isn't great.
And so the ``right to repair'' is important. I see you
laughing. Yes, we have an issue with the Massey Ferguson dealer
here. But at the same time, there are legitimate consumer
protection concerns with respect to certain products. For
example, if you put the wrong battery in a certain product, it
might explode, so the FTC, as it has done with the contact lens
rule, is looking to balance the benefit of competition with the
protection of consumers from exploding products or products
that are harmful to health.
But I do believe, sir, that you are correct. There are
manufacturers who invoke safety concerns, in fact, not to
protect consumers but to prevent competition for repairs in the
aftermarket and that is just another cost that our small
farmers are facing and that we need to eradicate.
Senator Tester. And unnecessary. And I want to echoed
Senator Schatz saying I appreciate the bipartisan work that
this Commission does. Thank you.
STATEMENT OF HON. KYRSTEN SINEMA,
U.S. SENATOR FROM ARIZONA
Senator Sinema. Hi, it is Senator Sinema. I want to thank
the Chairman for holding this hearing today and I want to thank
our witnesses for being here. As the pandemic create
significant challenges for American families and small
businesses, scammers are using the pandemic as an opportunity
to defraud Americans including our seniors. This week one of
Arizona's major private lab companies Sonora Quest alerted
patients that scammers are posing as Sonora Quest
representatives to steal personal information from patients.
This is just one troubling example of the thousands of
COVID-related scams Arizonans reported to the Federal Trade
Commission. These scams have cost millions of dollars in losses
for Arizona families, but they are not just a financial
concern. COVID scams also endanger the health of the public who
can be defrauded into believing that certain products can
prevent or cure COVID, which of course as we know is not true.
I am looking forward to working with the FTC to make sure you
have the tools you need to protect Arizona families and small
businesses from deceit and abuse.
I think Chairman Simons is not back on yet so I will direct
my first question only to Commissioner Slaughter. I introduced
the bipartisan Seas Act with Senators Gardner and Capito that
expands FTC authority to stop false advertising and other
deceptive ads during the Coronavirus pandemic by increasing
civil and criminal penalties on scammers. This bill ensures
that scammers face serious 1 Federal penalties for lying to the
public about COVID. Do you support the goals of this
legislation?
Chairman Simons. Senator Sinema, this is Joe Simons. I
actually showed up. I had a power outage at my house and I am
on battery power.
Senator Sinema. Oh, wonderful. I am so glad.
Chairman Simons. I can--I am a little bit in the dark here
as you can see because I have no light, but I do support the
goals of that legislation absolutely, but I would have to say
this, in terms of legislative priorities at least from our
parochial standpoint, from my parochial standpoint at the FTC,
your time is very valuable and----
Commissioner Chopra. Senator Sinema, I never like to speak
for the Chairman, but I will just--I believe what he is
probably going to say is that he would welcome Congressional
action on Section 13(b) to make sure that we can get the ill-
gotten gains and return money to consumers. And he can correct
me later if I am wrong, but that is what I believe he was going
to argue.
Senator Sinema. Well, I appreciate it and thank you for
stepping on that. We will follow up with him after the hearing
to get those details. And is Commissioner Slaughter on?
Commissioner Slaughter. I just tried to change my audio.
Can you hear me now?
Senator Sinema. Yes, I can.
Commissioner Slaughter. OK, great. I don't know what the
problem was. So I wanted to say, yes. I think the goals that
you are talking about are extremely important. Stopping scams
is part of the bread and butter of the FTC and it is never more
important than in a moment like this where bad actors are
really praying on vulnerable consumers and imperiling not only
their wallets but their health and safety. So I really applaud
you for working on that and look forward to continuing to work
with your office and your colleagues on these issues.
Senator Sinema. Thank you so much. Commissioner Chopra, due
to the coronavirus pandemic, many Arizona small businesses are
struggling to get by and entrepreneurs are doing everything
they can to stay afloat. Some bad actors are using these
difficult times to take advantage of small business owners with
unfair and deceptive practices related to financial assistance.
Can you tell me what the FTC has done to protect small
businesses from abuse and what should small business owners
know when looking for financial assistance right now?
Commissioner Chopra. Thanks for that question. We have
actually sued two actors in this space including one very
recently that I think we believe were violating the law in
order to profit off of small business owners' pain. One of the
things that's really concerning to me is that the contract
terms, some of them are completely unfair in how they are
executed and essentially require that a small business owner
automatically plead guilty when they are sued. This is called a
``confession of judgment.''
So I really hope that small business owners--I know they
are struggling to work with many of the largest banks. A lot of
the community banks have been much better in delivering PPP
assistance, but really going after these high rates, sometimes
4,000 percent loans, it is just setting small businesses up to
fail, and we just can't have that.
Senator Sinema. Thank you. I know my time is close to
expiring. I am not sure if the Chairman is back so I am going
to go forward and ask one more question to Commissioner
Slaughter. As I referenced earlier, Arizonans are being
targeted by COVID scams such as the Sonora Quest imposter scam
and we need to make sure that our enforcement agencies have
adequate resources to protect Arizona families and return
stolen money to Arizonans. Given the increase in scams during
the pandemic, how could the FTC best use additional resources
to protect Arizonans? And what authorities do you need to
insure that victims of fraud do get their money back?
Commissioner Slaughter. Thank you, Senator. This is a
really important question and I appreciate your attention to
this issue. In terms of resources, as determined, and some of
my colleagues have noted, the FTC has been doing its work in a
very substantially underresourced way for several decades and
that has never been felt more acutely than it is right now as
we are trying to cope with all the pandemic related issues as
well as the general underlying ongoing work of the Commission.
So I think whatever appropriations the Congress felt fit to
give us would be able to put to very good use on behalf of the
American people. In terms of authority and returning money to
harmed consumers in particular, there are two things that we
are talking the most about, clarifying our authority under
Section 5 of the FTC Act, the provision that allows us to
discord ill-gotten gains and return money to consumers.
I think that is one of the most important things that you
do and right now that authority is under attack in the courts--
verification from Congress on that point is enormously
important. And then civil penalty authorities also helpful for
us to create leverage with companies--bad actions and help us
in our negotiations, keep the fraud from happening in the first
place. So we can't return civil penalties to consumers. That
money goes into the Treasury, but I think it is still useful
for us to have a bigger--in order to prevent the fraud from
happening to begin with.
Senator Sinema. Thank you so much. Thank you, Mr. Chairman,
for holding this hearing today and I do yield back.
STATEMENT OF HON. JACKY ROSEN,
U.S. SENATOR FROM NEVADA
Senator Rosen. Thank you, Senator Sinema. This is Senator
Jackie Rosen from Nevada. I am not sure that Chairman Wicker is
on so I believe that I am the last Senator and I will ask a few
questions and we will close this hearing out. I want to thank
you for being here today. And Commissioner Slaughter, I want to
tell you that you really exemplify during this pandemic what so
many families are going through trying to balance work and
childcare and all of that and I appreciate you sharing your
beautiful sleeping baby with us today. It reminds us of all the
important work that we have to do to protect things for the
next generations. But I want to talk just a little bit about
notario scams.
You know, Nevada, is home to thousands of immigrant
families who make up a really diverse fabric of our state and
of our Nation. Almost 30 percent of Nevadans identify
themselves as Hispanic or Latino and scammers have targeted
members of these communities as they go through the immigration
process. Of course, we know one common form of deception are
the so-called ``notario.'' While public notaries may perform
the duties of attorneys in some Latin American countries, they
cannot practice law, give legal advice, or accept legal
consultation fees here in the United States.
Nonetheless, bad actors will suggest that they can guide an
individual through the U.S. immigration process, even though
they are not qualified or authorized by Federal law to do so.
We know that only a lawyer or federally accredited
representative can provide someone with legal advice and so
therefore so many in my state are falling prey to these scams.
In response in 2015, the Federal Trade Commission, you released
a fotonovela educational graphic novel to raise awareness about
notario schemes in Latino community and since then Nevada's
Chief Deputy Attorney General Mark Ruger indicated that notario
scams are expanding even broader into our AAPI communities, our
Ethiopian communities, and our Nigerian communities.
So to Ms. Slaughter and Mr. Chopra, although the 2015
campaign increased awareness about notario scams in our Latino
community, like I said, we know fraud is rising in many of our
minority communities. What other types of outreach or resources
are you doing with the FTC to protect individuals from the
notarios or other kinds of fraud? How are you working with
their State agencies and communities to prevent this? Ms.
Slaughter, you can go first.
Commissioner Slaughter. Thank you, Senator, and I want to
thank you for your kind words about the baby and I just want
you to know on behalf of all of the working parents out there,
appreciate everybody saying nice things about how easy this
looks. It is really hard. So just a moment for all of the
families who are trying to juggle childcare and their
professional responsibilities and acknowledge that these are
really, really challenging times--so I appreciate the support
from everybody on the Committee and the understanding. In terms
of your question, I think this is a hugely important issue.
Paying attention to scams that target our most vulnerable
communities should be among the highest priorities we have, and
in addition to the outreach that we do, we can work with our
State partners and we often host local events with community
organizers and groups and work with State AGs to raise
awareness in order to help prevent people from falling for
these scams before they even come up. We need to do enforcement
to stop them when they happen where it is possible but we would
rather they not happen to begin with.
Senator Rosen. Mr. Chopra, anything to add?
Commissioner Chopra. Yes. Thank you, Senator Rosen. You
know, when it comes to notario fraud, this has been actually an
ongoing problem now. It is actually pretty difficult to enforce
on a one-by-one basis, and one of the things I think we have to
start thinking about is more criminal sanctions and also what
are we going to do to go after the plumbing of some of these
rings of mob-like fraudsters? We need to look at how they are
moving money. I think we have to look at this more with
cracking down on a mob mentality, an organized crime rather
than one by one. So, you know, it is definitely a huge problem
and it has been really worrisome to see how it is just invading
so many states across the country. So we have to look at this
systemically and not just one by one.
Senator Rosen. Yes by the time sometimes we find out about
it, the people that have been affected have just gone really
through such a terrible experience. And I look forward to
working with you and figuring out what we can do about that.
But for the last question, I want to talk just what is on
everybody else's mind too probably a little bit is unemployment
and PII. You know, the Coronavirus, of course, hit Nevada's
economy harder than any state in the Nation. I don't know if
you know that.
We had unemployment over 30 percent in April. It was a
highest in the country. It is still I think the highest in the
country. Our average is about 15 percent now. That was in June
but we will wait to see what the numbers are coming back up.
Over half a million Nevadans filed for unemployment insurance
since March 14, of course. Again, we are seeing scammers. We
are seeing criminals. They are trying to defraud people. They
are trying to hack into the system. They are taking that
personal identifiable information. They are doing phishing and
impersonation scams and the impact of this cannot be
underestimated in Nevada.
Really thousands of families are waiting on their
unemployment benefits because we are having to weed through
some of these hackers and scammers, whatever you want to call
them. And so as the agency charged with protecting consumers
personal information, you at the FTC really have a significant
role to play and we want to just quote a little bit from the
FTC that using law enforcement policy initiatives, consumer,
and business education to protect consumers personal
information.
That is what you are charged to do. So let me ask, I don't
think Chairman Simons is on so I see you there, Mr. Chopra. I
will ask you. First, how much time and resources is being
devoted? Do you know or anybody that is still on? I can't see
everything on my screen either.
Commissioner Chopra. Sure. And I believe the Chairman has
joined.
Senator Rosen. OK, so whoever if that thinks they can
answer. I see some blank screens, some initials. It is the joy
of working this way. How much time are you devoting to this?
Because it is not just a problem in Nevada. It is a problem
everywhere and hardworking people are not able to pay their
bills because we have to take so much time to stop the scammers
from stealing the hard-earned tax dollars that we are using on
unemployment benefits right now. Chairman Simons, are you on? I
don't hear him----
Chairman Simons. Can you hear me?
Senator Rosen. Yes. Yes, we can now. Thank you.
Chairman Simons. I can hear you. Like I said, the power
went out and then my jetpack went out so but I got another
battery supply so hopefully that will be OK. So we are doing at
least two different types of things. One is we are actually
suing people over this kind of stuff. And the other thing is
that we have an incredible amount of outreach.
On all levels, we are dealing with our--well, first of all
we have an FTC website that deals with all these types of scams
relating to coronavirus, including the financial ones. We have
got--our folks are out all over the place doing media and they
are doing meetings and town halls and that type of thing. They
did one effort with the AARP that was participated--where
800,000 people participated.
So you know, it is all our regional offices. We have boots
on the ground there. They are out there all the time doing this
kind of thing. And then we are doing it online and then we are
bringing enforcement actions.
Senator Rosen. And do you think there is a role for you to
partner--this is my final question for you Chairman. Is there a
role for us to partner, for you to partner with our State
unemployment agencies? Of course during this pandemic
everything is turned on its head where you might not partner
with them, but in this extreme case with every state, everybody
applying, what is a role that you can do to help states like
mine who are really suffering with a lot of--could be a lot of
potential fraud?
Chairman Simons. So one thing I would say is that we have
all kinds of partners and they are very important in terms of
making our work productive and effective and in using our
scarce resources. And I don't see me, you know, why we wouldn't
at least talk to the employment offices and see if there is
something that we can do together to stop this type of horrible
thing from happening.
Senator Rosen. Well good. Well, I am going to have my team
reach out to, maybe there are some ways we can get some help
out there because it I know it is not just in my state but
others. Well, I appreciate--you know, I am telling you the baby
was good. The baby slept. You had your power up and down.
We are all in and out, all the technical difficulties
today, but I want to thank everyone for taking the time to be
here today and for the hard work that you do. And I know you're
probably all happy to hear this as considering with all the
challenges we have had that that concludes our hearing. And the
hearing record will remain open for two weeks. During this
time, Senators are asked to submit any questions for the
record, and upon receipt, the witnesses are requested to submit
their written answers to the Committee as soon as possible.
I thank you again. Please stay safe and healthy. And this
hearing is adjourned.
[Whereupon, at 12:43 p.m., the hearing was adjourned.]
A P P E N D I X
International Franchise Association
Washington, DC, August 11, 2020
Hon. Roger Wicker,
Chair,
Committee on Commerce, Science, and Transportation,
U.S. Senate,
Washington, DC.
Hon. Maria Cantwell,
Ranking Member,
Committee on Commerce, Science, and Transportation,
U.S. Senate,
Washington, DC.
Dear Chairman Wicker and Ranking Member Cantwell:
On behalf of the Franchisee Forum of the International Franchise
Association (IFA), we appreciate the opportunity to comment for the
record on how the franchise business model is a vehicle for achieving
the American Dream, especially in the wake of COVID-19. Leveraging our
experience as successful franchise business owners and mentors to
prospective franchisees, we would like to offer a more comprehensive
picture of franchising than the one painted at the Committee hearing by
Commissioner Chopra and express our firm belief that participation in
the franchise business industry helps unlock economic prosperity for
all Americans.
As the representative body for franchisees within the IFA, we are
proud to be a clarifying voice for franchisees as legislative and
regulatory issues impacting the franchise business model arise at the
federal, state, and local levels. The view on franchisee
dissatisfaction offered in Commissioner Chopra's testimony suffers from
flawed reasoning. Without providing any factual analysis of concern, it
is irresponsible to conclude that franchisors must be prevented from
alleged abusive practices. While there may be instances when a
franchisor behaves or takes action that is perceived to be unjust to a
franchisee or prospective franchisee, they are rare.
We know first-hand that small business franchise ownership is a
viable pathway to achieving and maintaining economic success. With
careful planning and execution, sound management of a franchise
business can help grow the business and the franchisor's brand--
contributing to a successful relationship between the franchisee and
the franchisor. Allowing someone who profits off the unfortunate
circumstances of others to paint a one-sided picture of franchising
does a disservice to the thousands of small franchise business owners
in this country who work hard every day to grow their business and our
economy.
The story about franchising we wish had been aired at the hearing
is one based in data rather than cherry-picked generalizations. A
broader perspective is provided by Franchise Business Review, which
surveyed over 6,500 franchisees over the last four months during the
pandemic. Key findings from the comprehensive research include:
55 percent of franchise owners surveyed said they are
(still) optimistic that they will meet their 90-day business
goals;
80 percent said they feel very positive/mostly positive
about their association with their franchise brand; and
83 percent said they have received valuable support from HQ
during COVID-19.
Franchisee satisfaction with their franchisor has remained steady
during the pandemic, and in some cases, has even risen. This data
reflects the spirit of franchising: franchisors are vehicles for
community, growth, and support for their franchisees, especially during
a crisis. To ease franchisees' burdens and take steps to help the
systems survive, there are numerous reports of franchisors taking
proactive steps to provide flexibility to their franchisees during
COVID-19. These actions include, but are not limited to:
(1) Royalty/ad fund deferrals, fee waivers, abatements, and other
cash-flow assistance to franchisees;\1\
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\1\ See ``Subway to Slash Royalty Payments by 50 Percent'' at
https://www.qsrmagazine.com/franchising/subway-slash-franchise-royalty-
payments-50-percent; see also ``7-Eleven Ups Fran
chisee Support Amidst Coronavirus Pandemic'' at https://csnews.com/7-
eleven-ups-franchisee-support-amidst-coronavirus-pandemic; see also
``Wyndham Continues Waivers on Franchise Fees'' at https://
www.asianhospitality.com/wyndham-continues-waivers-on-franchise-fees/;
and see also ``Church's Chicken Franchisees Get Relief Plan'' at
https://www.franchising.com/articles/
churchs_chicken_franchisees_get_relief_plan.html.
(2) Extensions of development schedules under development
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agreements;
(3) Transitions to more ``e-learning'' and virtual learning as part
of initial training programs to minimize travel for franchisee
employees and related costs;
(4) Extensions of unit opening deadlines under existing franchise
agreements;\2\
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\2\ Scott Deviney, President & CEO, Chicken Salad Chick.
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(5) Reductions of initial fees to incentivize new franchise sales;
(6) Changing the unit's footprint to lower development costs;
(7) Providing franchisees with frequent, if not daily, updates on
legislative assistance from the Federal government under CARES
Act;\3\
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\3\ See ``Stories from the Covid-19 Front Lines: CEO Q&A with Meg
Roberts of The Lash Lounge'' at https://www.franchising.com/articles/
stories_from_the_covid19_front_lines_ceo_qa
_with_meg_roberts_of_the_lash_lo.html.
(8) Providing grants to employees suffering from pandemic-related
layoffs or furloughs;\4\
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\4\ See ``Self Esteem Brands Founders, Employees & Roark Capital
Unveil $1 Million SEB Relief Fund to Financially Aid Employees of
Clubs, Studios Impacted by COVID-19'' at https://cutt.ly/Od1o04A.
(9) Providing PPE to franchisees, local communities, front-line
workers;\5\
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\5\ See ``With PPE Shortages, BrightStar Care Creates Fulfillment
Center for Franchisees'' at https://www.franchisetimes.com/news/May-
2020/With-PPE-Shortages-BrightStar-Care-Creates-Fulfillment-Center-for-
Franchisees/; see also ``KFC Implements Additional Health and Safety
Measures in U.S. Restaurants'' at https://www.yum.com/wps/portal/
yumbrands/Yumbrands/kfc-newsroom/detail/Vertical+Content_3-SF/
additional-safety-measures-4-16-20; and see also ``Two Men and a Truck
volunteers to deliver face shields to Detroit hospital'' at https://
www.mlive.com/coronavirus/2020/04/two-men-and-a-truck-volunteers-to-
deliver-face-shields-to-detroit-hospital.html.
(10) Providing franchisees with signage related to social
distancing, mask wearing and other Covid-19 prevention
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operations procedures; and
(11) Providing guidance on safe re-opening, social-distancing, and
related practices to protect employees, consumers, and the
brand.\6\
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\6\ See ``McDonald's Engages Mayo Clinic to Advise on Continued
Approach to Cleanliness and Safety'' at https://news.mcdonalds.com/
news-releases/news-release-details/mcdonalds-engages-mayo-clinic-
advise-continued-approach.
The value of the franchise business model can be harnessed by
Congress and provide a vehicle for sustained economic growth out of the
pandemic. As a result of the significant economic impact of COVID-19,
the number of unemployed individuals reached nearly 30 million workers.
Given the dislocation in the economy, many of those jobs may not return
forcing many individuals to find new employment or try entrepreneurial
ventures, including starting a new franchise business. This has been
the case following previous economic downturns, such as after the 2008
financial crisis where interest in franchise ownership significantly
increased, as out of work Americans explored new career opportunities.
For example, the growth in employment in the franchise sector was 7.4
percent from 2009 to 2012, while the total U.S. employment growth rate
was only 1.8 percent.
IFA also maintains its commitment and strong support of the FTC
Franchise Rule, which will continue to ensure that prospective
franchisees receive relevant and material information about their
proposed franchise purchases sufficiently in advance of such purchases
to enable them to make informed and unpressured purchase decisions.
This rule has been essential to the continued growth and success of the
franchise business model.'' \7\
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\7\ See IFA's April 24, 2019, Comments to the Federal Trade
Commission regarding Disclosure Requirements and Prohibitions
Concerning Franchising, available at https://bit.ly/2XpUIm7.
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We thank the Subcommittee for its attention to our views and the
opportunity to comment.
Sincerely,
Tamra Kennedy
President, Twin City's T.J.'s, Inc.,
Chair, International Franchise Association Franchisee Forum.
cc: Members, Senate Committee on Commerce
[all]