[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
TRANSFORMING THE FTC: LEGISLATION TO MODERNIZE CONSUMER PROTECTION
=======================================================================
HYBRID HEARING
BEFORE THE
SUBCOMMITTEE ON CONSUMER PROTECTION AND COMMERCE
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
JULY 28, 2021
__________
Serial No. 117-46
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Published for the use of the Committee on Energy and Commerce
govinfo.gov/committee/house-energy
energycommerce.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
52-433 WASHINGTON : 2023
COMMITTEE ON ENERGY AND COMMERCE
FRANK PALLONE, Jr., New Jersey
Chairman
BOBBY L. RUSH, Illinois CATHY McMORRIS RODGERS, Washington
ANNA G. ESHOO, California Ranking Member
DIANA DeGETTE, Colorado FRED UPTON, Michigan
MIKE DOYLE, Pennsylvania MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois STEVE SCALISE, Louisiana
G. K. BUTTERFIELD, North Carolina ROBERT E. LATTA, Ohio
DORIS O. MATSUI, California BRETT GUTHRIE, Kentucky
KATHY CASTOR, Florida DAVID B. McKINLEY, West Virginia
JOHN P. SARBANES, Maryland ADAM KINZINGER, Illinois
JERRY McNERNEY, California H. MORGAN GRIFFITH, Virginia
PETER WELCH, Vermont GUS M. BILIRAKIS, Florida
PAUL TONKO, New York BILL JOHNSON, Ohio
YVETTE D. CLARKE, New York BILLY LONG, Missouri
KURT SCHRADER, Oregon LARRY BUCSHON, Indiana
TONY CARDENAS, California MARKWAYNE MULLIN, Oklahoma
RAUL RUIZ, California RICHARD HUDSON, North Carolina
SCOTT H. PETERS, California TIM WALBERG, Michigan
DEBBIE DINGELL, Michigan EARL L. ``BUDDY'' CARTER, Georgia
MARC A. VEASEY, Texas JEFF DUNCAN, South Carolina
ANN M. KUSTER, New Hampshire GARY J. PALMER, Alabama
ROBIN L. KELLY, Illinois, Vice NEAL P. DUNN, Florida
Chair JOHN R. CURTIS, Utah
NANETTE DIAZ BARRAGAN, California DEBBBIE LESKO, Arizona
A. DONALD McEACHIN, Virginia GREG PENCE, Indiana
LISA BLUNT ROCHESTER, Delaware DAN CRENSHAW, Texas
DARREN SOTO, Florida JOHN JOYCE, Pennsylvania
TOM O'HALLERAN, Arizona KELLY ARMSTRONG, North Dakota
KATHLEEN M. RICE, New York
ANGIE CRAIG, Minnesota
KIM SCHRIER, Washington
LORI TRAHAN, Massachusetts
LIZZIE FLETCHER, Texas
------
Professional Staff
JEFFREY C. CARROLL, Staff Director
TIFFANY GUARASCIO, Deputy Staff Director
NATE HODSON, Minority Staff Director
Subcommittee on Consumer Protection and Commerce
JAN SCHAKOWSKY, Illinois
Chair
BOBBY L. RUSH, Illinois GUS M. BILIRAKIS, Florida
KATHY CASTOR, Florida Ranking Member
LORI TRAHAN, Massachusetts FRED UPTON, Michigan
JERRY McNERNEY, California ROBERT E. LATTA, Ohio
YVETTE D. CLARKE, New York BRETT GUTHRIE, Kentucky
TONY CARDENAS, California, Vice LARRY BUCSHON, Indiana
Chair NEAL P. DUNN, Florida
DEBBIE DINGELL, Michigan GREG PENCE, Indiana
ROBIN L. KELLY, Illinois DEBBIE LESKO, Arizona
DARREN SOTO, Florida KELLY ARMSTRONG, North Dakota
KATHLEEN M. RICE, New York CATHY McMORRIS RODGERS, Washington
ANGIE CRAIG, Minnesota (ex officio)
LIZZIE FLETCHER, Texas
FRANK PALLONE, Jr., New Jersey (ex
officio)
C O N T E N T S
----------
Page
Hon. Jan Schakowsky, a Representative in Congress from the State
of Illinois, opening statement................................. 2
Prepared statement........................................... 3
Hon. Gus M. Bilirakis, a Representative in Congress from the
State of Florida, opening statement............................ 4
Prepared statement........................................... 5
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 7
Prepared statement........................................... 8
Hon. Cathy McMorris Rodgers, a Representative in Congress from
the State of Washington, opening statement..................... 9
Prepared statement........................................... 11
Witnesses
Lina Khan, Chair, Federal Trade Commission....................... 12
Joint prepared statement of Federal Trade Commission
witnesses.................................................. 15
Answers to submitted questions............................... 165
Noah Joshua Phillips, Commissioner, Federal Trade Commission..... 19
Prepared statement\1\
Answers to submitted questions............................... 186
Rohit Chopra, Commissioner, Federal Trade Commission............. 20
Prepared statement\1\
Answers to submitted questions............................... 188
Rebecca Kelly Slaughter, Commissioner, Federal Trade Commission.. 22
Prepared statement\1\
Answers to submitted questions............................... 192
Christine S. Wilson, Commissioner, Federal Trade Commission...... 24
Prepared statement\1\
Answers to submitted questions............................... 195
David C. Vladeck, Professor of Law, Georgetown University Law
Center......................................................... 61
Prepared statement........................................... 63
Answers to submitted questions............................... 198
Graham Dufault, Senior Director for Public Policy, ACT, The App
Association.................................................... 93
Prepared statement........................................... 95
Answers to submitted questions............................... 206
Sally Greenberg, Executive Director, National Consumers League... 106
Prepared statement........................................... 108
Answers to submitted questions............................... 214
Submitted Material
H.R. 2671, the Solidifying Habitual and Institutional
Explanations of Liability and Defenses Act\2\
H.R. 2672, the FTC Robust Elderly Protections and Organizational
Requirements to Track Scams Act\2\
H.R. 2676, the Revealing Economic Conclusions for Suggestions
Act\2\
H.R. 2677, the Technological Innovation through Modernizing
Enforcement Act\2\
----------
\1\ The Federal Trade Commission witnesses submitted one joint prepared
statement.
\2\ The legislation has been retained in committee files and is
available at https://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=113972.
H.R. 2690, the Clarifying Legality and Enforcement Action
Reasoning Act\2\
H.R. 2702, the Statement on Unfairness Reinforcement and Emphasis
Act\2\
H.R. 3067, the Online Consumer Protection Act\2\
H.R. 3918, a Bill to amend the Federal Trade Commission Act to
permit the Federal Trade Commission to enforce such Act against
certain tax-exempt organizations\2\
H.R. 4447, the 21st Century FTC Act\2\
H.R. 4460, the Consumer Equity Protection Act of 2021\2\
H.R. 4475, the Protecting Consumers in Commerce Act of 2021\2\
H.R. 4483, the Veterans and Servicemember Consumer Protection Act
of 2021\2\
H.R. 4488, the FTC Autonomy Act\2\
H.R. 4530, the Federal Trade Commission Technologists Act of
2021\2\
H.R. 4551, the Reporting Attacks from Nations Selected for
Oversight and Monitoring Web Attacks and Ransomware from
Enemies Act\2\
H.R. 4564, the Federal Trade Commission Transparency Act\2\
Letter of July 28, 2021, from Don Erickson, Chief Executive
Officer, Security Industry Association, to Ms. Schakowsky and
Mr. Bilirakis, submitted by Ms. Schakowsky..................... 132
Letter of July 28, 2021, from Ashley Baker, Director of Public
Policy, Committee for Justice, to Mr. Pallone, et al.,
submitted by Ms. Schakowsky.................................... 134
Letter of July 28, 2021, from Neil L. Bradley, Executive Vice
President and Chief Policy Officer, Chamber of Commerce of the
United States of America, to Ms. Schakowsky and Mr. Bilirakis,
submitted by Ms. Schakowsky.................................... 142
Letter of June 17, 2021, from Senator Pat Toomey, Ranking Member,
Senate Committee on Banking, Housing, and Urban Affairs, to
Commissioner Chopra, submitted by Mr. Bucshon.................. 144
Letter of July 13, 2021, from Senator Pat Toomey, Ranking Member,
Senate Committee on Banking, Housing, and Urban Affairs, et
al., to Commissioner Chopra, submitted by Mr. Bucshon.......... 147
Dissenting Statement of Commissioners Phillips and Wilson,
Federal Trade Commission, on the ``Statement of the Commission
on the Withdrawal of the Statement of Enforcement Principles
Regarding `Unfair Methods of Competition' Under Section 5 of
the FTC Act,'' July 9, 2021, submitted by Mr. Latta............ 150
Dissenting Statement of Commissioners Phillips and Wilson,
Federal Trade Commission, on the Adoption of Revised Section 18
Rulemaking Procedures, July 9, 2021, submitted by Mr. Guthrie.. 159
----------
\2\ The legislation has been retained in committee files and is
available at https://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=113972.
TRANSFORMING THE FTC: LEGISLATION TO MODERNIZE CONSUMER PROTECTION
----------
WEDNESDAY, JULY 28, 2021
House of Representatives,
Subcommittee on Consumer Protection and Commerce,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:33 a.m., in
Room 2123, Rayburn House Office Building, Hon. Jan Schakowsky
(chair of the subcommittee) presiding.
Members present: Representatives Schakowsky, Rush, Castor,
Trahan, McNerney, Clarke, Cardenas, Dingell, Kelly, Soto, Rice,
Craig, Fletcher, Pallone (ex officio), Bilirakis (subcommittee
ranking member), Upton, Latta, Guthrie, Bucshon, Dunn, Pence,
Lesko, Armstrong, and Rodgers (ex officio).
Also present: Representative Burgess.
Staff present: Jeffrey C. Carroll, Staff Director;
Katherine Durkin, Policy Coordinator; Lisa Goldman, Senior
Counsel; Waverly Gordon, General Counsel; Tiffany Guarascio,
Deputy Staff Director; Ed Kaczmarski, Policy Analyst; Zach
Kahan, Deputy Director, Outreach and Member Service; Mackenzie
Kuhl, Digital Assistant; David Miller, Counsel; Kaitlyn Peel,
Digital Director; Chloe Rodriguez, Clerk; Andrew Souvall,
Director of Communications, Outreach, and Member Services;
Caroline Wood, Staff Assistant; Anna Yu, Professional Staff
Member; Sarah Burke, Minority Deputy Staff Director; Michael
Cameron, Minority Policy Analyst, Consumer Protection and
Commerce, Energy, Environment; Nate Hodson, Minority Staff
Director; Peter Kielty, Minority General Counsel; Emily King,
Minority Member Services Director; Tim Kurth, Minority Chief
Counsel, Consumer Protection and Commerce; Brannon Rains,
Minority Professional Staff Member, Consumer Protection and
Commerce; Michael Taggart, Minority Policy Director.
Ms. Schakowsky. Welcome, everyone. The Subcommittee on
Consumer Protection and Commerce will now come to order.
Today we will be holding a hearing entitled ``Transforming
the FTC''--the Federal Trade Commission--``Legislation to
Modernize Consumer Protection.''
Due to the COVID-19 public health emergency, Members can
participate in today's hearing, either in person or remotely.
The online--via video conference. Members are--and
witnesses who are participating in person--these are the new
guidelines--must wear a mask, and Members and witnesses who are
not vaccinated must also be socially distant. Such Members and
witnesses may remove their masks when they are under
recognition and speakers from--and speaking from a microphone.
Staff and press who are present in the committee room must wear
a mask at all times, and staff and press who are not vaccinated
must be socially distant.
Too bad that we had to move to different guidelines, I
might say, but here we are.
To be clear, mask wearing is now required, regardless of
vaccination status.
For Members participating remotely, your microphones will
be set on mute for the purpose of eliminating inadvertent
background noise. Members participating remotely will need to
unmute yourselves, and your microphones, when you are--each
time that you wish to speak.
Please note that, once you unmask, that once you unmute
your microphone, anything that is said in Webex will be heard
over the loudspeaker in the committee room, and subject to be
heard by the live stream and C-SPAN. So, you know, watch what
you are saying into the microphone if you are not muted.
Since Members are participating from different locations at
today's hearing, all recognition of Members, such as for
questions, will be in the order of the subcommittee seniority.
Documents for the record can be sent to Ed Kaczmarski at
the email address that we have provided to staff. All documents
will be entered into the record at the conclusion of the
hearing.
So the Chair now recognizes herself for 5 minutes.
OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
We--today we are considering 16 pieces of legislation
intended to modernize the Federal Trade Commission's ability to
pursue the--its consumer protection mission.
For over 100 years the FTC has been the premier Federal
consumer protection agency. But despite its broad mandate to
protect consumers and to promote competition, the Commission
has been sorely underresourced for decades now. Today it has a
smaller staff and fewer resources than other consumer
protection regulators. And--however, it is a new era for the
Federal Trade Commission now.
In a breath of fresh air, the Commission held two open
meetings this month. These public, accessible meetings
increased transparency and public input on important topics,
like the Made in USA Rule and Right to Repair. It is time to
recommit to restoring the cultural--the culture and the--of the
FTC to put consumers first.
Many of the 16 bills that we are considering today will
help them to accomplish this mission. These include the Online
Consumer Protection Act, which I have introduced, and--with
Representative Castor. This legislation will hold technology
platforms accountable for failure to live up to the promises
that they made with their--made to consumers in their terms of
service.
The 21st Century FTC Act, sponsored by Representative
Castor, and my own FTC Autonomy Act, will provide the
Commission with additional enforcement tools, including
rulemaking, civic--civil penalties, and independent litigation
authority.
Legislation from our colleagues, Representatives Rush and
McNerney, will give the Commission authority over consumer
protection violations by nonprofit organizations and
telecommunications--communications carriers.
A few of the bills that are being considered today will
also--will allow the FTC to more efficiently--scams that target
vulnerable groups. This includes bipartisan legislation from
Representatives Rice and Upton focusing on fraud affecting
military veterans and service members.
And legislation from Representative Kelly would establish a
task force to bolster the communications work--the Commission's
work on equity issues and would inform the public about scams
targeted specifically to other groups.
Representative McNerney has legislation that would create
the office of technologists to provide additional technical
assistance to the Commission, and update in--every technology
consideration.
Today these bills will force--will forge a new path forward
for the Federal Trade Commission.
I am going to ask my ranking member for permission to go
over time. As you can see, I do have some reading issues that
are hampering me in some ways. It is a physical thing that I
have got. OK, thank you very much.
So today these bills will forge a new path forward for the
Federal Trade Commission. They strengthen the Commission's
consumer protection capacity and provide the tools necessary to
guide today's increased innovation and dynamic marketplace. It
is essential that the Commission have the tools it needs to
hold technology platforms accountable.
The era of self-regulation is over. Self-regulation has
threatened our democracy and now threatens our health and our
very lives, as vaccine misinformation continues to spread
across social media. Consent decrees and fines have proven
ineffective in improving the behavior of technology companies.
Violation after violation underscores that stronger enforcement
today--enforcement tools are urgently needed.
The American people deserve a 21st-century consumer
protection agency that meets 21st-century threats, and I am
looking forward to hearing from the witnesses that are here
today on how more--how modernizing the Federal Trade Commission
and protecting consumers can happen.
I want to say a special thank you to our witnesses. I am so
grateful to the Commissioners who are all here today: three
virtually and two in person. Thank you so much.
And also from our experts that we will hear--for the second
panel.
[The prepared statement of Ms. Schakowsky follows:]
Prepared Statement of Hon. Jan Schakowsky
Today we will consider 16 pieces of legislation intended to
modernize the Federal Trade Commission's ability to pursue its
consumer protection mission.
For over 100 years the FTC has been the premier federal
consumer protection agency.
Despite its broad mandate to protect consumers and promote
competition, the Commission has been for decades sorely under-
resourced.
Today, it has a smaller staff and less funding than other
consumer protection regulators.
However, it is a new era at the Federal Trade Commission.
In a breath of fresh air, the Commission held two open
meetings this month.
These publicly accessible meetings increased transparency
and public input on important topics like the Made in USA rule
and right to repair.
It's time to recommit to restoring a culture at the FTC of
putting consumers first.
Many of the 16 bills we are considering today will help
them live up to that commitment.
These include the Online Consumer Protection Act which I
have introduced with Representative Castor.
This legislation will hold technology platforms accountable
for failing to live up to the promises they make to consumers
in their terms of service.
The 21st Century FTC Act, sponsored by my colleague
Representative Castor and my own bill, the FTC Autonomy Act,
will provide the Commission with additional enforcement tools,
including notice and comment rulemaking, civil penalty, and
independent litigating authorities.
Legislation from my colleagues Representatives Rush and
McNerney will give the Commission authority over consumer
protection violations by non-profit organizations and certain
common carriers.
A few of the bills we are considering today will allow the
FTC to more efficiently police scams targeting vulnerable
groups.
This includes bipartisan legislation from Representatives
Rice and Upton focusing on fraud affecting military veterans
and service members, and legislation from Representative Kelly
that would establish a task force to bolster the Commission's
work on equity issues and would inform the public about scams
targeting specific consumer groups.
Representative McNerney's legislation would create an
office of technologists to provide additional technological
expertise to keep the Commission up to date in an ever-changing
consumer landscape.
Together, these bills will forge a new path forward for the
Federal Trade Commission.
They strengthen the Commission's consumer protection
capabilities and provide the tools necessary to regulate
today's increasingly innovative and dynamic marketplace.
It is essential that the Commission have the tools it needs
to hold technology platforms accountable.
The era of self-regulation is over.
Self-regulation has threatened our democracy and now
threatens our health and our very lives as vaccine
misinformation continues to spread indiscriminately across
social media.
Consent tools have proven ineffective at improving the
behavior of technology companies.
Violation after violation underscore that stronger
enforcement tools are urgently needed.
The American people deserve a 21st century consumer
protection agency that meets 21st century threats.
I am looking forward to hearing from the witnesses here
today on how to modernize the Federal Trade Commission and
protect consumers.
Thank you to the witnesses for joining us today. I now
recognize Mr. Bilirakis for 5 minutes.
Ms. Schakowsky. The Chair--thanks for the indulgence. I am
practicing on how to use my new disability to speak more
properly. But here we are.
And the chairman now recognizes Mr. Bilirakis, the ranking
member of our subcommittee, for 5 minutes.
OPENING STATEMENT OF HON. GUS M. BILIRAKIS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA
Mr. Bilirakis. Thank you so much, Madam Chair. I appreciate
it. Thank you for holding this important hearing. And to both
panels appearing today, we really appreciate it very much. I
would like to welcome all five of our FTC Commissioners--I
guess, three virtually and two in person--in front of our
subcommittee, where we can not only examine the legislation
before us but also conduct overdue oversight of the Commission.
Chair Khan, congratulations on your recent confirmation as
Commissioner and Chair of the FTC. This is a very important
agency, as you know, and I am eager to learn how you will
continue leading on its important work, especially in the
protection of our constituents from fraud and scams, and how
you can enforce a national privacy standard we want to enact.
It is critical we get the ball rolling on that effort.
I am also interested in learning how the FTC can assist
with protecting Americans from ransomware and other cyber
attacks. I recently introduced H.R. 4551, the RANSOMWARE Act,
which would amend the Safe Web Act to focus on such attacks.
The FTC can play an important role in securing our Nation from
ransomware. So I hope today's conversation may assist in fine-
tuning my legislation to best accomplish this goal.
Given the majority scheduled this as an oversight hearing,
as well, I would be remiss if I did not inquire about recent
changes at the FTC.
Chair Khan, I understand that change comes when a new team
is in charge, and we will have our policy differences here in
DC, but that should not stop you from working with your fellow
Commissioners in a collegial manner. So you must understand why
I am concerned when we hear reports of individuals inside the
FTC being silenced and your other Commissioners being shut out
of the process. We must take these allegations extremely
seriously. It is concerning, the recent changes in FTC
processes took place without acknowledging the consideration of
all Commissioners and of FTC experts, some of whom have
lifetimes of experience within the subject matter.
To those staff, I hope you are watching today so you may
know this Commission cares--again, this committee definitely
cares about the FTC process remaining open and transparent, and
that your voice and expertise play an important role. We will
begin a process to review these allegations. And with that, I
would like to announce for the FTC staff listening that, if you
have any issues, we have created a whistleblower email. It is
[email protected]. Again:
[email protected].
As you are aware, with other bills on the docket,
Republican members of this committee introduced legislation to
ensure guardrails are included in any FTC decision-making
process. I am glad to see these bills are on the docket, and I
appreciate it, Madam Chair, that you placed them on the docket.
Thanks for following through. They will bring much-needed
transparency, in my opinion, require proper notice and input
from key experts at the FTC, like from the Bureau of Economics,
something I wish was included in H.R. 2668, the legislation
that expands section 13(b).
As I have said before, Republicans support providing the
FTC with the tools they need to pursue bad actors and to
sufficiently enforce privacy standards. So I ask that the
Democrat--Democratic proposals in front of us be considered in
that context. I hope my Democratic colleagues' engagement on
these issues will also mean seriously engaging on putting in
place a national privacy standard.
Madam Chair, thank you again for holding this hearing. We
have a lot to get through today, so I wanted to be as brief as
I could. I am eager to learn how we, as the committee of
jurisdiction, can bring much-needed transparency to the FTC and
how the legislation before us may do just that. And I thank you
very much, and I yield back.
[The prepared statement of Mr. Bilirakis follows:]
Prepared Statement of Hon. Gus M. Bilirakis
Good morning Chair Schakowsky, thank you for holding this
important hearing, and to both panels appearing today. I'd like
to welcome all five of our FTC Commissioners in front of our
Subcommittee where we can not only examine the legislation
before us, but also conduct overdue oversight of the
Commission.
Chair Khan, congratulations on your recent confirmation as
Commissioner, and Chair of the FTC. This is a very important
agency, and I am eager to learn how you will continue leading
on its important work--especially in the protection of our
constituents from fraud and scams, and how you can enforce a
national privacy standard we want to enact. It is critical we
get the ball rolling on that effort.
I am also interested in learning how the FTC can assist
with protecting Americans from ransomware and other cyber-
attacks. I recently introduced H.R. 4551, the RANSOMWARE Act
which would amend the SAFE Web Act to focus on such attacks.
The FTC can play an important role in securing our nation from
ransomware, so I hope today's conversation may assist in fine
tuning my legislation to best accomplish this goal.
Given the majority scheduled this as an oversight hearing
as well, I would be remiss if I did not inquire about recent
changes at the FTC. Chair Khan, I understand that change comes
when a new team is in charge, and we all have our policy
differences here in DC, but that should not stop you from
working with your fellow Commissioners in a collegial manner.
So you must understand why I am concerned when we hear reports
of individuals inside the FTC being silenced and your other
Commissioners being shut out of the process. We must take these
allegations very seriously.
It's concerning the recent changes in FTC processes took
place without acknowledging the consideration of all
Commissioners and of FTC experts, some of whom have lifetimes
of experience within the subject matter. To those staff, I hope
you are watching today so you may know this Committee cares
about the FTC process remaining open and transparent, and that
your voice and expertise play an important role. We will begin
a process to review these allegations, and with that I would
like to announce for the FTC staff listening that if you have
issues, we have created a whistleblower email
[email protected].
As you aware with the other bills on the hearing,
Republican members of this Committee introduced legislation to
ensure guardrails are included in any FTC decision making
process. I am glad to see these bills on the docket today. They
will bring much needed transparency, require proper notice, and
input from key experts at the FTC, like from the Bureau of
Economics--something I wish was included in H.R. 2668, the
legislation that expands Section 13(b).
As I have said before, Republicans support providing the
FTC with the tools they need to pursue bad actors and to
sufficiently enforce privacy standards, so I ask that the
Democratic proposals in front of us be considered in that
context. I hope my Democratic colleagues' engagement on these
issues will also mean seriously engaging on putting in place a
national privacy standard.
Madam Chair, thank you again for holding this hearing, we
have a lot to get through today. I am eager to learn how we as
the Committee of jurisdiction can bring much needed
transparency to the FTC and how the legislation before us may
do just that.
Thank you, and I yield back.
Ms. Schakowsky. The gentleman yields back, and the chairman
now recognizes Mr. Pallone, chairman of the full committee, for
5 minutes.
OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Chairwoman Schakowsky. Today we are
continuing this committee's important work on putting consumers
first.
For the past few months, this subcommittee, and then the
full committee, pushed forward the Consumer Protection and
Recovery Act to restore the FTC's basic authority to get stolen
money back to consumers. That urgently needed legislation
passed the House last week, and I urge the Senate to take up
the bill without delay.
With House passage of the Consumer Protection and Recovery
Act, we must take the next step, not just fixing what was
broken but improving the Nation's foremost consumer protection
agency and putting consumers first. The FTC initially addressed
only unfair competition, which led to unjust results for
consumers. But then, in 1938, Congress met the moment, enacting
the FTC's now core section 5 authority to enforce against
unfair or deceptive acts or practices. By granting the power to
stop consumer harms, the FTC's consumer protection mission was
born at that time.
And over time, the FTC needed more authority to execute its
mission. In 1973 Congress met that moment by granting the FTC
the authority to go into Federal court and seek relief for
consumers, including under Section 13(b) of the FTC Act. And
these changes led to billions in relief for consumers and a
more efficient way to deter illegal conduct. And the
legislation that passed the House last week would restore this
critical authority after it had been seriously undermined
earlier this year by the Supreme Court.
We are now facing another seminal moment for consumer
protection. The digital age has fundamentally changed the
consumer experience, but the FTC's mission to protect consumers
and honest businesses remains the same. Congress must meet the
moment again. It is time to bring the FTC into the modern era,
to give it the tools and resources to keep up with changes in
the market. And much of the legislation before us today would
do just that.
The legislation that would improve general rulemaking
authority under the Administrative Procedures Act would remove
uniquely onerous burdens so the FTC can more efficiently
provide clear rules of the road to businesses and consumers.
Legislative proposals would also give the FTC civil penalty
authority, which is critical to impose meaningful consequences
on wrongdoers and deter other bad actors. Those reforms help
industry and individuals, and are essential to maximize the
FTC's limited resources.
There is also legislation that ends exemptions on
nonprofits and telecommunications common carriers from FTC
jurisdiction that also helps consumers and businesses.
Consumer protection enforcement should be based on the
activity, not the entity.
Unfortunately, on the other hand, some proposals before us
today would hinder the FTC and ultimately harm consumers. I am
concerned by the proposals that would burden staff and drain
resources with needless processing reports that effectively
obstruct information exchanges between the FTC and other
regulators and lawmakers. The bills that I am talking about
would undermine the FTC's ability to prevent potential harms or
react to unusual, unfair, and deceptive practices.
Some of these bills would hurt companies by potentially
forcing the FTC to reveal confidential investigations before
the FTC has determined whether illegal acts have taken place or
whether it will take action against the subjects of the
investigations. And I believe these proposals would put the FTC
on the wrong track.
Now, my Republican committee colleagues have routinely
emphasized the need for comprehensive consumer privacy
legislation, and I agree, and that is why the committee remains
hard at work on privacy. But at the same time, the legislation
would effectively gut the FTC's ability to protect consumer
privacy. And I believe that, across the board, deregulation and
a strong Federal privacy regime cannot coexist.
[The prepared statement of Mr. Pallone follows:]
Prepared Statement of Hon. Frank Pallone, Jr.
Today, we are continuing this Committee's important work on
putting consumers first. For the past few months, this
Subcommittee and then the full Committee pushed forward the
Consumer Protection and Recovery Act to restore the Federal
Trade Commission's (FTC) basic authority to get stolen money
back to consumers. That urgently needed legislation passed the
House last week, and I urge the Senate to take up the bill
without delay.
With House passage of the Consumer Protection and Recovery
Act, we must take the next step--not just fixing what was
broken but improving the nation's foremost consumer protection
agency and putting consumers first.
Congress established the FTC in 1914 in response to rapid
industrial change. As Teddy Roosevelt said in support of the
new agency, a consensus had emerged that federal law was ``not
adequate to meet the situation'' created by ``modern business
conditions.''
The FTC initially addressed only unfair competition, which
led to unjust results for consumers. In 1938, Congress met the
moment, enacting the FTC's now-core section 5 authority to
enforce against ``unfair or deceptive acts or practices.'' By
granting the power to stop consumer harms, the FTC's consumer
protection mission was born.
Over time, the FTC needed more authority to execute its
mission. In 1973, Congress met that moment by granting the FTC
the authority to go into federal court and seek relief for
consumers, including under section 13(b) of the FTC Act. These
changes led to billions in relief for consumers and a more
efficient way to deter illegal conduct. And the legislation
passed in the House last week would restore this critical
authority after it had been seriously undermined earlier this
year by the Supreme Court.
We are now facing another seminal moment for consumer
protection. The digital age has fundamentally changed the
consumer experience, but the FTC's mission to protect consumers
and honest businesses remains the same.
Congress must meet the moment again. It's time to bring the
FTC into the modern era, to give it the tools and resources to
keep up with changes in the market. Much of the legislation
before us today would do just that.
Legislation that would provide general rulemaking authority
under the Administrative Procedure Act would remove uniquely
onerous burdens so the FTC can more efficiently provide clear
rules of the road to businesses and consumers. Legislative
proposals would also give the FTC civil penalty authority,
which is critical to impose meaningful consequences on
wrongdoers and deter other bad actors. These reforms help
industry and individuals and are essential to maximize the
FTC's limited resources.
Legislation that ends exemptions on nonprofits and
telecommunications common carriers from FTC jurisdiction also
helps consumers and businesses. Consumer protection enforcement
should be based on the activity, not the entity. As former FTC
Chairman William Kovacic told this Subcommittee in February,
these ``embarrassing anachronisms'' no longer make sense, and
only diminish the FTC's ability to do its job.
Unfortunately, on the other hand, some proposals before us
today would hinder the FTC and ultimately harm consumers. I am
concerned by the proposals that would burden staff and drain
resources with needless process and reports and effectively
obstruct information exchanges between the FTC and other
regulators and lawmakers. The bills would undermine the FTC's
ability to prevent potential harms or react to unusual, unfair,
and deceptive practices. Some of these bills would hurt
companies by potentially forcing the FTC to reveal confidential
investigations before the FTC has determined whether illegal
acts have taken place or whether it will take action against
the subjects of the investigations. I believe these proposals
would put the FTC on the wrong track.
My Republican Committee colleagues routinely emphasize the
need for comprehensive consumer privacy legislation. I agree,
and that is why the Committee remains hard at work on privacy.
At the same time, however, their legislation would effectively
gut the FTC's ability to protect consumers' privacy. Across the
board deregulation and a strong federal privacy regime cannot
coexist. I can only hope that despite their legislation put
forth today, my Republican colleagues share my commitment to a
federal privacy law that would actually protect Americans'
privacy.
I thank all five Commissioners for appearing before us to
help us determine the right path forward for the FTC and for
consumers. I also look forward to hearing from our expert
witnesses on how to modernize the FTC to best protect consumers
and honest businesses.
Mr. Pallone. So I thank all five Commissioners for
appearing before us. I also look forward to hearing from our
expert witnesses, and I yield the balance of my time to the
gentlewoman from Florida, Ms. Castor.
Ms. Castor. Well, thank you, Chair Pallone. This is a
critical hearing because the Federal Trade Commission is
absolutely vital to protecting our neighbors back home,
protecting consumers, and then fostering competition across the
economy. We have got to give the FTC all of the tools it needs
to help protect consumers from fraudsters and scam artists,
predatory companies.
My neighbors back home in Florida, which just is rife with,
unfortunately, with scam artists, they really need the FTC at
work, at full force. They have got--the FTC--a lot of folks
don't really understand. You all help recoup money. You help
hold these fly-by-night operations accountable. You, in
essence, restore the dignity to folks who have been scammed and
you penalize these bad actors.
So welcome, Chair Khan, welcome, Commissioners. We look
forward to working with you and look forward to hearing you
today, along with our expert panel.
And I really appreciate, Chair Schakowsky, you including my
21st Century FTC Act in this hearing today.
So thank you, I yield back my time.
Ms. Schakowsky. The gentleman has yielded back his time.
And now let me recognize Mrs. Rodgers, the ranking member of
the full committee, for her 5 minutes for an opening statement.
OPENING STATEMENT OF HON. CATHY McMORRIS RODGERS, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON
Mrs. Rodgers. Thank you, Madam Chair. Welcome, Chair Khan,
our distinguished members of the Federal Trade Commission, as
well as our second panel of experts.
This past year has been difficult. COVID-19 has not only
altered our daily lives, it has refocused the way we conduct
our business in Congress. Over the past year it has been
essential that we work together in a bipartisan way to protect
seniors and other vulnerable populations. Thanks to our work
with Chair Schakowsky, we have been able to expand the FTC's
authority to go after COVID-19 fraudsters and scammers.
Yet I am concerned today that we are now prioritizing
politics over protecting Americans. Just last week we saw a
very partisan 13(b) legislation narrowly pass the House floor.
What makes this worse is that, just a couple of weeks prior,
during a committee markup, Representative Bilirakis introduced
an amendment to this bill that received bipartisan support. But
it was shut out by the majority once the bill moved to the
floor. A colloquy on the House floor between committee
Democrats tried to clarify the intent of the underlying bill.
The concerns raised during the colloquy would have been clearly
addressed by Bilirakis's compromise.
This begs the question: If our compromise amendment was
considered on the floor, would it have passed? I believe that
the answer is yes.
Sadly, the partisan process for 13(b) was also a missed
opportunity to enact a national Federal privacy standard,
something we desperately need to ensure that people's personal
information is protected online. America's data and personal
information does not end with State lines. Neither should
privacy protections, considering proposals on the agenda today
were part of the bipartisan privacy negotiations last Congress.
I will be listening for ways that these bills being
considered can be adapted into a national privacy standard,
which would be a landmark achievement for this committee and
for the protection of America's data. I certainly hope they
don't move alone--stand alone.
In the past, even when we disagreed on certain approaches
to policymaking, we were able to come together and work in a
bipartisan manner. This was the case when Chairman Pallone led
on attacking robocalls and enacted the landmark TRACED Act.
That was Congress at its best, and I hope that we return to
that, because what we have now is a set of really bad examples
for agencies and departments under our oversight.
We have heard reports on shifts at the FTC to shorten
notice of actions, limit consultation, and reduced economic
analysis. This trend is crippling the thoughtful process at the
FTC and jeopardizing fraud protections for Americans who need
them. It is a disservice to Americans.
Your mission is to protect. By neglecting your duty to
follow a process that allows for proper deliberation and
import--input from experts is a disservice. I implore you to
resist the urge to take your focus off of consumer protections.
Engage with the public to find out what alarms them most.
Listen to people at regional workshops about their top
concerns. I would be surprised if you didn't hear stories about
unwanted calls for scam real estate leads, car warranties, even
fake IRS bills. These are the kinds of things that should guide
your efforts. The FTC is an independent agency that should not
have your agenda dictated by the White House.
The time to establish a strong and uniform data protection
for all Americans is now, and I look forward to hearing from
you.
[The prepared statement of Mrs. Rodgers follows:]
Prepared Statement of Hon. Cathy McMorris Rodgers
Thank you, Madam Chair. Welcome Chair Khan, our
distinguished members of the Federal Trade Commission (FTC), as
well as our second panel of experts.
The past year has been tumultuous. COVID-19 has not only
altered our daily lives, it has refocused the way we conduct
our business in Congress. Over the past year, it has been
essential that we worked together in a bipartisan way to
protect seniors and other vulnerable populations. Thanks to our
work with Chair Schakowsky, we have been able to expand the
FTC's authority to go after COVID-19 fraudsters and scammers.
Yet I'm concerned we're now prioritizing politics over
protecting Americans. Just last week we saw partisan 13(b)
legislation narrowly pass the House floor. What makes this
worse is that--just a couple of weeks prior during a committee
markup Rep. Bilirakis introduced an amendment to this bill that
received bipartisan support, but it was shut out by the
Democrats once the bill moved to the floor.
A colloquy on the House floor between Committee Democrats
tried to clarify the intent of the underlying bill. The
concerns raised during that colloquy would have been clearly
addressed by the Bilirakis compromise. This begs the question--
if our compromise amendment was considered on the floor, would
it have passed? I believe the answer is yes.
Sadly, the partisan process on 13(b) was also a missed
opportunity to enact a national privacy standard--something we
desperately need to ensure people's personal information is
protected online. Americans' data and personal information does
not end with state lines, why should their privacy protections?
Considering proposals on the agenda today were part of our
bipartisan privacy negotiations last Congress, I'll be
listening for ways the bills being considered can be adapted
into a national privacy standard which would be a landmark
accomplishment for this committee and for the protection of
Americans' data. They certainly shouldn't move as stand-alones.
In the past, even when we disagreed on certain approaches to
policymaking, we'd still be able to come together and work in a
bipartisan manner. This was the case when Chairman Pallone led
on attacking robocalls, and enacted the landmark TRACED Act.
That was Congress at its best and I hope we return to that
because what we have now sets a bad example for the agencies
and departments under our oversight. We have heard reports on
shifts at the FTC to shorten notice of actions, limit
consultation, and reduce economic analysis.
This trend is crippling the thoughtful process at the FTC
and jeopardizing fraud protections for Americans who need them.
It's a disservice to Americans your mission is to protect by
neglecting your duty to follow a process that allows for proper
deliberation and input from experts.
I implore you to resist the urge to take your focus off
consumer protections. You should instead engage with the public
to find out what most alarms them. Listen to people at your
regional workshops about their top concerns.
I'd be surprised if you didn't hear stories about unwanted
calls for scam real estate leads, car warranties, even fake IRS
bills. These are the kinds of things that should guide your
efforts. You are an independent agency that should not have
your agenda dictated by the White House. The time to establish
strong and uniform data protections for Americans is now. I
look forward to hearing from you. Thank you, I yield back.
Mrs. Rodgers. I yield back, Madam Chair.
Ms. Schakowsky. The gentlelady yields back.
The Chair would like to remind Members that, pursuant to
committee rules, all Members' written opening statements shall
be made part of the record.
I now would like to introduce our witnesses for our first--
from our first panel at today's hearing: the Honorable Lina
Khan, Chairwoman--Chairman of the Federal Trade Commission; the
Honorable Noah--we have them on--OK--the Honorable Noah Joseph
Phillips, Commissioner with the Federal Trade Commission; the
Honorable Rohit Chopra, Commissioner, the FTC; the Honorable
Rebecca K. Slaughter, Commissioner at the FTC; and the
Honorable Christina Wilson--I am sorry, it is Christine, excuse
me--Wilson, the Commissioner at the FTC.
At this time the Chair will recognize each witness for 5
minutes to provide their opening statement.
Before I do, I think most of you are already familiar with
the lights, but let me explain that system. In front of our
witnesses is a series of lights. The lights will initially be
green. The light will turn yellow when there is 1 minute left.
And please begin to wrap up at that point. The light will turn
red when the 5 minutes have expired.
So Chair Khan, it is a pleasure to welcome you and to
recognize you for 5 minutes.
STATEMENTS OF LINA KHAN, CHAIR, AND NOAH JOSHUA PHILLIPS, ROHIT
CHOPRA, REBECCA KELLY SLAUGHTER, AND CHRISTINE S. WILSON,
COMMISSIONERS, FEDERAL TRADE COMMISSION
STATEMENT OF LINA KHAN
Ms. Khan. Thanks so much, Chair Schakowsky, Ranking Member
Bilirakis, and members of the subcommittee. I am pleased to
appear before you today to discuss the 16 bills under
consideration by the subcommittee. Thank you for this important
work, and I look forward to working with you all.
My testimony today will identify several key issues
currently facing the Commission, and share initial views on
some of the bills currently being considered.
Congress created the Federal Trade Commission to serve as a
guardian for fair competition and to protect consumers,
workers, and honest businesses from unfair or deceptive trade
practices. This statutory charge has never been more important,
yet the Commission faces today notable challenges in carrying
out its mission. I will briefly describe three problems that
are currently shaping the agency's work.
First, as this subcommittee is well aware, the Supreme
Court's decision last year in AMG dealt a serious blow to the
FTC's ability to seek refunds for defrauded victims and to
discourage ill-gotten gains. Across the Commission's work, the
loss of section 13(b) is leading to windfalls for lawbreakers.
For example, after a major pharmaceutical company engaged
in a multiyear scheme to keep drug prices high by choking off
generics, a court ordered it to return $448 million to victims.
The Supreme Court's interpretation of section 13(b) has meant
that the pharmaceutical company was later, instead, allowed to
pocket these illegal profits. All together, AMG has jeopardized
over $2 billion in potential relief to victims in pending
cases.
Beyond monetary relief, the FTC now also faces challenges
in seeking an injunction to halt wrongdoing, curtailing the
Commission's ability to challenge past abuses.
I am committed to using the full range of the FTC's tools
to crack down on unlawful conduct. But restoring our full
section 13(b) authority is critical, and I am grateful that the
full House has already acted on Congressman Cardenas's bill to
re-arm the Commission against these growing threats.
Second, Americans have been subjected to a massive increase
in fraud over the last year, with the number of complaints up
more than 20 percent. While the FTC has focused on shutting
down COVID-related schemes, from bogus treatments to government
impostors, fraud has continued to surge. One reason is that
fraud today is supercharged by digital platforms, where this
conduct is tolerated and even promoted, by some of the world's
largest companies. Business models singularly focused on skill
and engagement, coupled with microtargeting, have allowed these
platforms to become finely tuned instruments for bad actors,
who often target the most vulnerable.
Although digital platforms profit off of the tools that are
being weaponized against Americans, these companies often claim
special immunity under the law. The Commission will continue to
aggressively pursue those that exploit this crisis to target
American families. But, ultimately, systematically rooting out
fraudulent schemes will require focusing on the warped
incentives and legal privileges that allow major firms to
profit from predation.
Third, even as the agency tackles the proliferation of
unfair or deceptive practices, the current merger boom
threatens to make them worse. Significant market consolidation
deprives consumers, workers, and independent businesses of
choice, further enabling dominant firms to engage in unfair
practices. As the wave of privacy abuses in recent years has
shown, market dominance often allows companies to renege on
commitments, evade the law, and repeatedly violate Commission
orders. We are seeing rapid consolidation across industries.
Through the first three-quarters of this fiscal year, antitrust
agencies have processed over 2,400 merger filings, a level of
activity that is already the highest in 2 decades.
Although the FTC is working to review many of these deals,
the sheer volume of transactions is significantly straining
Commission resources. I am deeply concerned that the current
merger boom will further exacerbate deep asymmetries of power
across our economy, further enabling abuses.
This subcommittee is considering several bills that would
boost the Commission's ability to confront these challenges.
Both the FTC Autonomy Act and the 21st Century FTC Act would
help the Commission seek civil penalties against lawbreakers.
This would mark an important change, guaranteeing the public
greater protections.
Those that would end special protections for select
industries would also strengthen our law enforcement. For
example, the online Consumer Protection Act would clarify that
platforms cannot claim special privileges when facing an FTC
enforcement action. Meanwhile, the Protecting Consumers and
Commerce Act and Removing Nonprofit Exemption Act would allow
the FTC to challenge abuses by common carriers and nonprofit
entities.
Finally, several bills focus efforts on communities that
are offering particular targets of predation, including older
Americans, service members, and consumers. These bills are a
critical reminder of the importance of the FTC's work in
ensuring that our government works for all Americans.
I look forward to working with the subcommittee to meet the
challenges that we face, and I welcome the opportunity to
answer any questions.
[The joint prepared statement of Ms. Khan and the FTC
Commissioners follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Schakowsky. Thank you very much.
And now, Commissioner Phillips, you are recognized for 5
minutes.
STATEMENT OF NOAH JOSHUA PHILLIPS
Mr. Phillips. Thank you, Madam Chair. Chair Schakowsky,
Ranking Member Bilirakis, members of the subcommittee, thank
you for the opportunity to appear before you. I am honored to
testify with my fellow Commissioners about the important work
we do at the FTC. I am glad the subcommittee has decided to
solicit a range of views on agency reform.
I would also like to take a moment to thank the staff at
the Edgartown Public Library for providing me with a private,
quiet place to testify. I will be masked, in adherence to
library policy.
The thoughtful proposals Members have made on agency reform
deserve attention--in particular, those designed to increase
transparency into the Commission, like the FTC Reports Act,
sponsored by Congressman Bilirakis, and Mr. Guthrie's FTC
Transparency Act.
In the last few weeks, the Commission has repeatedly
changed policy directions without giving the public any real
notice or right to be heard and, without serious consideration,
removed guidance from the public and business community alike.
And by removing Commission oversight from antitrust and other
investigations, as we recently did, we have reduced
transparency within the agency. We must do better.
As you consider agency reforms, I urge you to think about
the other ways in which the agency is changing course.
The first change is the Commission pivoting, without
Congress, to regulate a great deal of the economy. Over the
last few years, my colleagues have called for a bevy of new
rules, mostly under authorities that we have. The President's
recent Executive order contemplates our issuing major
regulations concerning, among other things, pharmaceuticals,
technology, labor, retail, and devices. Not all of the
proposals in the Executive order are bad, to be clear. But much
of it would replace consumer-driven market forces with
government-supervised regulation, the opposite of competition.
And much of that appears to be based on authority we simply do
not possess.
The Commission, however, is in a hurry to regulate. For
example, on July 1st, without input from the public, we adopted
rules to enable us to promulgate regulations with less
objectivity, less oversight, and less public input. The
Commission majority is reducing what it calls red tape on the
Commission, to impose more real red tape on American
businesses, large and small.
Well-crafted regulations can help consumers and businesses,
but poor regulatory design can raise prices, stifle innovation,
and reduce consumer choice. This was a lesson America learned
the hard way decades ago.
And when it comes to policy questions of great economic and
political importance, my basic philosophy is that Congress, not
the FTC, is the place to answer them. I believe the law
reflects that fact. Privacy is a good example, and I commend
Committee Ranking Member Rodgers and subcommittee member--
Ranking Member Bilirakis on their recent letter calling for
privacy legislation and for the administration to make it a
priority.
In adopting regulations, I hope we address clearly defined
problems, fashion rules designed to address them, and minimize
unintended consequences. I hope we base our decisions on
empirical evidence and input from all stakeholders, which is
why I also support the goals of the RECS Act, introduced by
Congressman Bucshon, to ensure that we approach Congress with
analytical rigor.
Another change, I fear, is moving away from the
Commission's historical commitment to combating fraud. Just a
few weeks ago, this subcommittee considered amendments to
section 13(b), following the Supreme Court's AMG decision. As
we detailed in testimony, a fraud program has, for decades,
done essential work to return money to victims of fraud.
Companies large and small that engage in fraud can cost
consumers their life savings. In the past 5 years we have
returned $11.2 billion in refunds to consumers who are victims
of fraud. I am heartened that Congress has appropriated funds
and passed laws to strengthen the fraud program, and count me
among those who believe that a well-crafted amendment to 13(b),
with guardrails, will help serve consumers.
Of late, some of my colleagues have made comments to
suggest that we should focus only on large companies. The fact
is that many of the frauds we see are not perpetrated by those
kinds of companies, and I hope these comments do not indicate a
desire to turn away from the fraud program. Where big
corporations violate the law, we absolutely should hold them to
account. But some of the wrongdoers that hurt Americans the
most happen not to be large corporations. We should focus on
harm to consumers, not the identities of defendants.
While enforcement against robocallers, COVID-19 scammers,
and others may not generate as many headlines, it generates
results for consumers. While section 19 is not a perfect tool,
it enables us to turn--return money to them. We should continue
to commit resources to combating practices like fraud that
cause the most harm, and I welcome legislation like updating
13(b) that will help with that.
Thank you, and I look forward to your questions.
[Mr. Phillips submitted a joint prepared statement with the
other FTC witnesses.]
Ms. Schakowsky. Thank you.
And now, Commissioner Chopra, you are recognized for 5
minutes.
STATEMENT OF ROHIT CHOPRA
Mr. Chopra. Chair Schakowsky, Ranking Member Bilirakis, and
members of the subcommittee, thank you for holding this hearing
today. My name is Rohit Chopra, and it is an honor to be here
with you and my fellow Commissioners.
The pandemic created the conditions for a wide range of
market abuses that harmed so many Americans, including millions
of small businesses. Many small businesses in America didn't
just find their financial futures in peril; they also found
themselves completely under siege against--by unfair,
deceptive, and anticompetitive practices by--firms.
Local restaurant owners were worried about food delivery
apps that coerced them into paying extraordinary fees. Local
franchisees faced new onerous requirements that franchisors
were imposing on them, even as they struggled to stay afloat.
Independent pharmacists, who played a critical role in the
response to the pandemic, found themselves at the mercy of
middlemen using tactics that are driving many of these
independent clinics out of business. And the same goes with
small retailers and small banks, and the list goes on and on
and on. It was crystal clear that small businesses across the
country needed the FTC's help, but many felt completely
ignored.
I appreciate your work to increase the effectiveness of the
Federal Trade Commission. And as you pursue these efforts, I
would also encourage you to consider other reforms to ensure
that the FTC is more responsive to small businesses and less
slanted in the favor of larger ones. We need to look at laws
related to ethics and financial conflicts of interest and more.
Small businesses have expressed concern that the FTC routinely
gives favorable treatment to large, powerful firms, such as Big
Tech and Big Pharma giants, while ignoring pleas for action to
address practices harming small players.
When Big Tech companies egregiously violate privacy and the
law, the FTC has shown across multiple administrations that it
is more than willing to be lax and forgiving. But when small
businesses violate these laws, the FTC brings down the hammer
on them, wiping out revenues and often shutting them down. This
two-tier approach does not make sense.
Congress should explore whether our laws need to be amended
to reduce favoritism toward these dominant players, crack down
on financial conflicts of interest, and increase responsiveness
to local businesses and upstarts.
First, Congress should examine whether to revisit laws
regarding postemployment restrictions for senior FTC officials.
While senior officials cannot immediately represent clients in
front of the agency, many are able to work quietly behind the
scenes, leveraging their intimate knowledge of nonpublic agency
deliberations on law and policy. This gives them an enormous
advantage on how to help large firms escape meaningful
accountability when they break the law and how to advise them
on how to get the FTC to take specific actions. Small
businesses don't have the resources or the ability to hire
former FTC Commissioners and bureau directors who regularly
appear before the agency on behalf of dominant firms. This
creates an unlevel playing field for small businesses engaging
with the FTC, seeking action or a fair resolution.
Congress should also assess whether existing postemployment
restrictions and other standards regarding financial conflicts
of interest in our laws are adequate. While some argue that
tougher restrictions will deter some from considering
government service, our experience at the FTC reveals a
different story, with many of our most talented officials
devoting the vast majority of their career to working in public
service.
In addition, Congress should also determine whether
existing law regarding so-called sponsored travel needs to be
updated. Under existing law, senior government officials can be
sponsored by non-Federal sources to travel to conferences and
retreats, largely attended by and indirectly paid for by those
representing dominant firms, especially Big Tech. These events
sometimes include closed-door panel discussions that are not
open to the media or the public, giving conference organizers
and their patrons a chance to gather intelligence about
emerging policies and priorities.
This nonpublic information can be exploited by investment
funds that trade on this information. Small businesses and the
general public can't easily access these private panel junkets
and don't have the resources to organize them on their own. To
ensure equal access and fairness, it will be important to
examine whether laws and regulations need to be amended to
guard against real or perceived conflicts of interest when it
comes to sponsored travel by non-Federal sources.
In closing, it is clear that honest businesses need the FTC
more than ever. I am confident that we can work together to
fairly administer the law and promote a marketplace free of
fraud and anticompetitive abuses.
Thank you, and I look forward to your questions.
[Mr. Chopra submitted a joint prepared statement with the
other FTC witnesses.]
Ms. Schakowsky. Thank you, Commissioner.
And now I recognize Commissioner Slaughter for 5 minutes
for an opening statement.
STATEMENT OF REBECCA KELLY SLAUGHTER
Ms. Slaughter. Thank you, Chair Schakowsky, Ranking Member
Bilirakis, and members of this subcommittee. I am pleased to
appear before you today, and I appreciate the opportunity to
appear remotely. With four children too young to be vaccinated
at home, I am being extra cautious about COVID exposure.
I want to start by thanking this committee for its
incredibly hard work to pass the Consumer Protection Recovery
Act, what we refer to as the 13(b) fix, through the House
earlier this month. I am grateful for your appreciation of the
challenges the recent Supreme Court decision posed for the
Commission, for your hard work to arm us with the tools we need
to protect your constituents. I am eager for us to continue to
partner with Congress and this committee.
While I am happy to discuss the bills before the committee
today, I also want to encourage you to continue work on a
meaningful, comprehensive, legislative approach to data abuses.
Yesterday the FTC held its sixth annual PrivacyCon conference,
with presenters covering topics including algorithmic bias,
issues around consent, misinformation during the pandemic, and
special concerns related to kids and teens. That broad agenda
reflected our understanding that data issues have moved past
the narrow framework of who has access to your personal data.
This understanding is why I prefer the term ``data abuses''
to the narrower language of ``privacy.'' Thinking in terms of
abuses reflects the fact that rampant data collection, sharing,
and exploitation harms consumers and competition in ways that
affect nearly every aspect of our lives.
I know this topic is front of mind for members of this
committee and that you are actively considering how best to
craft legislation to address--to directly address the harms
faced by consumers, workers, and small businesses in our data-
driven economy.
I also understand that doing this well takes time and
thought, and I encourage you to focus on approaches that not
only address the full panoply of harms that stem from
indiscriminate data collection, including civil rights
violations, abuse of market power, economic exclusion, and
exploitation of children, but also provide meaningful solutions
that root out damaging and dangerous business models and market
practices.
When it comes to questions about personal data, I
respectfully suggest we move past outdated notice and content
models that put untenable burdens on users. Instead, we should
turn our focus to changing the underlying incentives that fuel
data-driven business models, such as behavioral advertising.
One approach to consider is data minimization, a principle
that would ensure companies can collect only the information
necessary to provide consumers with the service on offer and
use the data they collect only to provide that service. That
minimization could be coupled with further use, purpose,
sharing, and security requirements to ensure that the
information companies collect isn't used to build tools or
services that imperil people's civil rights, economic
opportunities, and personal autonomy, or facilitate corporate
self-dealing. We have to recognize that, as long as key digital
markets are controlled by just a few large, data-hungry, online
platforms, both consumers and prospective entrants are at their
mercy.
As Congress continues to debate these issues, I believe it
is incumbent upon the Commission to act within the full scope
of our existing authority to target pernicious data practices
with both aggressive enforcement and rulemaking.
A quick note about rulemaking, which I know can generate
big reactions. Congress specifically delegated to the FTC the
authority, albeit with a burdensome process, to write rules
that prohibit or regulate any unfair or deceptive act or
practice that is prevalent in interstate commerce. In other
words, if we can already sue someone for committing an unfair
or deceptive practice in violation of section 5 of the FTC Act
and that practice is prevalent, then we can also write a rule
that clarifies for the markets that the conduct is prohibited.
That means rulemaking can only target conduct that is
already illegal. Rules are developed using a participatory
process with substantial stakeholder engagement and, when
finalized, provide notice and certainty to the market about
what conduct is outside the scope of our 100-year-old statute.
As I said before, I believe it is past time for the FTC to
begin a rulemaking process on data abuses. Among other
benefits, this process can have a clarifying effect for the
congressional debate, as well. Participating in the rulemaking
process means businesses, advocates, consumers, workers,
researchers, and other interested parties all have the
opportunity to make their opinions known, out in the open, and
with specificity in the public record. An open record can
provide substantiation of the types of consumer protection and
competition harms people are experiencing in digital markets
and illuminate how we can act decisively to stamp out these
abuses.
I look forward to working with my fellow Commissioners and
with Congress to advance these efforts, and I welcome your
questions.
[Ms. Slaughter submitted a joint prepared statement with
the other FTC witnesses.]
Ms. Schakowsky. Thank you.
And Commissioner Wilson, you are now recognized.
STATEMENT OF CHRISTINE S. WILSON
Ms. Wilson. Thank you. Chairman Pallone, Ranking Member
McMorris Rodgers, Chair Schakowsky, Ranking Member Bilirakis,
and distinguished members of the subcommittee, thank you for
the opportunity to testify. In my remarks I will address
section 13(b), Federal privacy legislation, and process issues
that have arisen recently at the Commission because those
process issues impact my view of the 16 bills we will discuss
today.
I am blessed to be serving my third stint at the Federal
Trade Commission. I have great respect for the agency's devoted
personnel, and I remain amazed at how much we accomplish in so
many different industry sectors despite our small budget. And I
am proud of our agency's history of collegiality and
bipartisanship.
I understand that elections have consequences. The Biden
administration may choose to pursue different policies than its
predecessors, but the process used to implement those changes
matters. Congressman Pallone stated in 2016 during a hearing on
FTC legislation, ``I am a big proponent of regular order. That
means engaging in real deliberation, not just checking the
boxes.'' I agree with that sentiment, and I believe it applies
equally to the Federal Trade Commission.
As a political appointee nominated by the White House and
confirmed by the Senate, I am obligated to exercise due
oversight of Commission business. FTC actions traditionally
have been the product of robust dialogue and analysis,
supported by briefings and staff memoranda. These procedures
facilitate a healthy flow of information among Commissioners
and staff and enable us to arrive at reasoned conclusions. When
we adhere to these traditions, I am able to fulfill my
oversight function.
But in recent weeks, longstanding norms and procedures have
been jettisoned. Practitioners, academics, and former enforcers
across the political spectrum have expressed concern about the
agency's abrupt departure from regular order. I share these
concerns, and they impact my view of the bills we will discuss
today.
Some bills establish additional procedural safeguards and
augmented oversight. Given the shift away from regular order,
those bills are more important now than ever. Other bills give
the FTC additional authority. Given the FTC's conduct in the
1970s, I have long been concerned about the possibility of
agency overreach, and recent actions by Commission leadership
have deepened those concerns. I am wary of more power without
appropriate guardrails.
Turning to section 13(b), I appreciate this committee's
attention to this issue. I support Commission authority to seek
equitable monetary relief in appropriate cases and to challenge
conduct that wrongdoers have halted. But I understand the
concerns that have been raised.
Some are concerned about disgorgement in antitrust cases.
Guiding principles on when the FTC will seek disgorgement, like
those in the FTC's 2003 disgorgement policy statement, would
provide appropriate guardrails.
Others are concerned about using 13(b) in consumer
protection cases that involve not fraud but legitimate
companies selling legitimate products, albeit with deceptive
claims. Congress can include a framework in 13(b) under which
courts must evaluate the value consumers have retained from the
product or service despite the deception.
The bottom line: With proper guardrails, legitimate
concerns can be addressed while also enabling the FTC to pursue
wrongdoers in appropriate cases.
And finally, I would like to address Federal privacy
legislation. Businesses need clarity regarding the rules of the
road in this important area. But, more importantly, consumers
need clarity regarding how their data is collected, shared, and
monetized. Without this information, consumers cannot make
informed choices about the costs and benefits of using various
websites, apps, and devices.
The events of the last 18 months have exacerbated privacy
concerns, but they have also underscored that our civil
liberties, including Fourth Amendment protections, are at stake
and the FTC's existing jurisdiction and tools are limited. I
thank the members of this committee, in particular Ranking
Member McMorris Rodgers and Ranking Member Bilirakis, for their
recognition of this important issue. And I encourage the
committee to continue working on privacy legislation. As the
elected representatives of the American people, you are best
situated to make the important value judgments inherent in
privacy legislation.
President Biden's recent EO asked the FTC to consider a
privacy rulemaking. I recently have become more receptive to a
privacy rulemaking as a stopgap measure until Congress could
act. But the Commission recently voted along party lines to
erase procedural safeguards and limit opportunities for public
input during our rulemakings. Consequently, I am now much less
receptive to an FTC rulemaking. Federal privacy legislation
remains the optimal solution, so I encourage you to act.
In closing, I thank this committee for your time and
support of the FTC's mission. I am happy to answer any
questions you may have.
[Ms. Wilson submitted a joint prepared statement with the
other FTC witnesses.]
Ms. Schakowsky. Thank you. We have concluded witnesses'
opening statements, and at this time we will move to--I am
sorry? Oh, I am sorry, there is a vote on the floor, so we are
going to recess.
How many votes are there? Just one. Can we have people just
vote? Do we have to recess? We have to recess?
OK, yes, since the time of voting actually has gotten
pretty strict, we are going to recess. But come back as soon as
you can so that we can get to our question period. And I--not
exactly apologize to the witnesses, this is our life here, but
we will be back as soon as we can to get to questions. Thank
you.
[Recess.]
Ms. Schakowsky. OK, we are going to come back to order.
Thank you. And once again, these are situations beyond our
control, and I appreciate your patience.
So we are going to begin with the questions from our
Members, and I want to begin with 5 minutes of questioning.
I want to talk about holding Big Tech accountability
online, consumer protection, et cetera, and there is no doubt
that, especially during this pandemic, that more and more
Americans are increasingly online, and the importance of
holding the technology companies accountable is more and more
important, I believe.
And there is absolutely no reason for internet platforms to
not hold to the same accountability standards as--for harming
consumers as offline businesses. And so, you know, what is
illegal offline ought to be, in my view, illegal online, as
well.
So let me start with you, Chairman, Chair Khan. I am going
to assume that the--you believe that the FTC can do more to
protect consumers from online harms, right?
Ms. Khan. Yes, Congresswoman.
Ms. Schakowsky. Thank you. In your view, is it unfair or
deceptive when social media platforms or online platforms fail
to follow their own terms of service?
Ms. Khan. Chairwoman, I would say, as a general matter,
there is a lot of concern around the opacity of their policies
and procedures. And so sometimes it can be difficult to know
when they are or are not following their own policies because
of that opacity. And so I think those information asymmetries
create--can create a lot of problems.
Ms. Schakowsky. So are the--just say are--do you think that
the FTC existing authority is sufficient to enforce against
violations that we see to absolutely deter further violations?
Ms. Khan. Congresswoman, I think there is certainly more we
could be doing under our existing authority. I do think that
there are areas where the courts have scaled back our
authority. There are cases where the platforms are able to
claim particular privileges under the law that can create
defenses that we have to then argue against. So I think there
is room for more work, but there are certainly challenges, as
well.
Ms. Schakowsky. Well, if you could talk a little bit about
that, and I want to ask Commissioner Chopra the same thing.
What are the kinds of things that you envision?
And the other Commissioners would be welcome after those
two.
Go ahead.
Ms. Khan. So I think some of the types of provisions that
you have proposed, including, you know, civil penalty
authority, specifically for some of these types of--being able
to go after some of these types of practices, enabling other
enforcers to also be enforcing some of these provisions, like
the State AGs, I think that could also help with deterrence.
But overall, I think figuring out how we create some of
that parity between online and offline is going to be very
important.
Ms. Schakowsky. Now, also, Commissioner Chopra, if you
could also talk about resources, whether or not, even if you
want to, what capabilities do the--does the Commission have,
not having enough resources?
Mr. Chopra. Yes, I think this is a huge issue right now.
Right now we are facing a massive merger surge. It is
stretching capacity to the limit, and the rubber band is
snapping.
And at the same time, in order to prosecute certain cases,
we have to go up against well-financed defendants who can claim
section 230 immunity with impunity. They use it for almost
every single thing when it comes to platform-related conduct.
This immunity is abused, and Congress absolutely needs to fix
it because it is an impediment to protecting consumers and
small businesses online.
Ms. Schakowsky. So, you know, we have had bipartisan
discussions about 230, and one of the bills that has been
introduced also would begin to address the 230. I am just
wondering if any of the other Commissioners--are you still
here, by the way--would want to comment on--what can the and
should the Commission be doing to protect consumers and--more
efficiently?
Ms. Slaughter. I am happy to jump in, Madam Chair, and
thank you for the question. I want to echo the comments that my
colleagues have offered, in thanking you for your leadership in
calling attention to some of the problems that 230, in
particular, has posed for enforcement. I am especially worried
about the areas where 230 provides protection for platforms for
illegal conduct, and the way that they [audio malfunction] or
facilitate illegal conduct on their platforms.
I also think the resource question can't be overstated. Not
only do we have to go into litigation, we have to go into
litigation with companies that are not willing to make
meaningful changes that will actually get to the root of the
problems in the settlement. So we are forced to sue, and that
is expensive and it is time consuming. So figuring out how to
fix those asymmetries, as the Chair said, would be very
helpful.
Ms. Schakowsky. Thank you so much. My time is expired. And
now I call on the ranking member for 5 minutes of questions.
Mr. Bilirakis. Thank you, Madam Chair, I appreciate it very
much.
During Joseph Simons' confirmation hearing to be FTC Chair,
Senators had the opportunity to ask him whether he would commit
to running the FTC in a bipartisan manner. He, of course,
agreed. Considering one of your colleagues is expected to be
confirmed to another position, the FTC may soon be in a two-two
split. And so it would be even more imperative that the FTC
proceeds on a consensus bipartisan approach.
So Chair Khan, since the Senate did not have the
opportunity to ask you will you run the FTC--again, will you
commit to doing it in a bipartisan fashion, where you will
consult and coordinate with all Commissioners and ensure they
have the resources of the Commission available to them on all
pending business? Please answer yes or no.
Ms. Khan. Certainly, Congressman, I think this is a really
fascinating moment for a new emerging bipartisan consensus,
especially around some of the concerns relating to
concentration of economic power in the digital markets. And I
am always keen to find areas of shared agreement with my
colleagues.
Mr. Bilirakis. Thank you. Our committee has worked
extensively in a bipartisan manner to protect consumers from
fraud and scams. Mr. Carter's Combating Pandemic Scams Act was
enacted at the beginning of the year, thanks to all of our
leadership here. Representative Blunt Rochester's Fraud and
Scam Reduction Act as well as Representative Kelly's Protecting
Seniors from Emergency Scams Act both cleared our Chamber with
bipartisan support this year. My bill, H.R. 2672, the FTC
Reports Act, would require the FTC to report on fraud against
our seniors.
Commissioner Phillips, how important is the work the FTC
staff does to protect Americans from scams?
Mr. Phillips. Congressman, thank you for your question. The
work we do to protect American consumers against frauds and
scams is our bread and butter as an agency. There is no work
that makes me feel better as a Commissioner than we watch our
ability to find bad guys who are taking money from American
consumers, dipping into their life savings, and get that money
back to them.
So the work that you have done on the committee to provide
funding and to provide tools for us to go after scam artists is
critical, and I think that needs to continue at the agency.
Mr. Bilirakis. Thank you.
And Chair Khan, again, as you pursue other initiatives,
will any staff and resources be shifted away from the fraud
program, which is so essential in preventing bad actors from
harming our constituents? That is the question, please.
Ms. Khan. Sorry, could you repeat the question? Using--when
should resources----
Mr. Bilirakis. Yes, of course. As you pursue other
initiatives, will any staff and resources be shifted away from
your fraud program, which is so essential in preventing bad
actors from harming our constituents?
Ms. Khan. Well, of course, we are always limited by the
appropriations bills when it comes to thinking through how we
are delegating resources across the agency. In certain
instances I think there are exigent needs that can arise in
certain aspects----
Mr. Bilirakis. But you don't anticipate moving money from
the fraud program, is that correct?
Ms. Khan. Not especially. I mean, I think overall we are
trying to look through the prism of managerial efficiency and
trying to understand how we can best use our resources,
especially given some of the exigent circumstances. And so we
will be continuing to make those determinations.
Mr. Bilirakis. I suggest that you not, because this is such
a very important program.
Commissioner Wilson, can you elaborate on why the FTC
Reports Act would also prove beneficial to increasing much-
needed transparency and the flow of information within the
Commission?
Ms. Wilson. Thank you very much for the question----
Mr. Bilirakis. Thank you.
Ms. Wilson [continuing]. Ranking Member Bilirakis. As I
explained in my opening remarks, there have been significant
concerns regarding procedural irregularities and abnormalities
in recent weeks. These are abnormalities that we did not
experience under Republican Chair Joe Simons or under Democrat
Acting Chair Rebecca Slaughter. We can agree to disagree. We
can disagree without being disagreeable. But process matters.
And so, to the extent there are ongoing procedural
irregularities at the Federal Trade Commission, I think that
even more transparency will enable Congress to exercise its
even more important oversight now, regarding the actions of the
agency.
Ms. Schakowsky. Guess what? There is a vote, another motion
to adjourn. I don't know what to say. I know that Commissioner
Slaughter has a hard stop, and I don't know about the rest of
you.
I think we need to vote, and then come back as quickly as
we can. If you are here, we will appreciate it. This is very
frustrating.
Did you want to say something?
Ms. Khan. We are happy to stay.
Ms. Schakowsky. All right, we are going to go vote.
[Recess.]
Ms. Schakowsky. OK. Next for questions is Congresswoman
Castor.
You are recognized for 5 minutes of questions.
Ms. Castor. Well, thank you, Chair Schakowsky, for calling
this hearing and for following through on working with me on a
bill to give FTC APA rulemaking authority and first-offense
civil penalty authority in our--in my 21st Century FTC Act. It
is H.R. 4447.
But before I ask questions--a question on that bill, I
would like to first discuss a top priority for me, and that is
children's online privacy. On July 9th President Biden issued
an Executive order that directed the FTC to use its statutory
rulemaking authority to address unfair data collection and
surveillance practices that may damage competition, consumer
autonomy, and consumer privacy.
The FTC should follow through. They should follow through
on President Biden's direction to use its powers to protect
consumers' privacy. But while doing so, it should make
protecting children's privacy a priority. And it is not just me
that believes this should be a priority. I helped secure
language in the financial services appropriations bill we are
voting on this week that urges the FTC to prioritize
investigations into potential violations of the COPPA Rule as
well as requiring the FTC to submit a report on its enforcement
of the COPPA Rule.
So, Chair Khan, will you commit to prioritizing enforcement
of the COPPA Rule and submitting this report in a timely
fashion?
Ms. Khan. Thank you, Congresswoman. I think ensuring robust
privacy protections for children, in particular, is paramount,
and I certainly hope the agency will be able to commit its
resources to focus on this important issue, especially during
the pandemic, when so many children have become even more
reliant on EdTech services.
Ms. Castor. So can you give us an update on the status of
the COPPA Rule?
Ms. Khan. Of the COPPA Rule?
Ms. Castor. Yes.
Ms. Khan. I understand a review has been initiated. I am
not precisely sure where we are, exactly, in that process. I
know there have been concerns relating to whether any revision
would be stronger than what we already have in place, as
opposed to weakening it.
From my perspective, I think COPPA needs to be the floor,
not the ceiling, and we need to question whether the type of
notice and consent framework that informs them of the prior
privacy rules are still adequate, especially when parents don't
really have a choice as to whether their children are even
using some of these technologies.
But I am happy to follow up with your office on the
specific--where we are in the process.
Ms. Castor. Thank you very much. And Commissioner Chopra,
you have been a leader here on--when it comes to children's
online privacy. What is your view for the agency, going
forward?
Mr. Chopra. Yes, it is very clear that many of these firms,
whether it be TikTok or YouTube, are wanting the data of
teenagers and children desperately, so that they can monetize
them and target them for the rest of their lives.
I think the Commission learned a hard lesson in its YouTube
settlement, which essentially allowed YouTube to pay a fine but
to keep the algorithms that were illegally enhanced by their
spying on children and, essentially, did nothing to fix the
underlying business model that YouTube relies on to,
essentially, target children.
So we need to look, as Chair Khan said, at the underlying
business model that is promoting so much of these privacy
abuses. And I really agree with what you said, it has to be a
priority. And we also need our State attorneys general joining
with us to prosecute more of these cases.
Ms. Castor. And stay tuned. I think the Congress is poised
to have more legislation to consider very soon.
So switching to my 21st Century FTC Act, which gives the
FTC APA rulemaking authority and first-offense civil penalty
authority, I would like to ask two quick yes-or-no questions to
each of you.
One, should the FTC have more statutory authority to pursue
civil penalties, yes or no?
Ms. Khan. Yes, Congresswoman. I think it can help with
deterrence, significantly.
Mr. Chopra. Yes.
Ms. Castor. And number two, should the FTC have more--a
more streamlined and less cumbersome rulemaking process?
Ms. Khan. Yes.
Mr. Chopra. Yes, that would be more equivalent to almost
every other agency that polices against these abuses.
Ms. Castor. I think that is important for my colleagues to
understand, that the FTC is different.
Who--I am going to ask one other followup question, Chair
Khan. Who wouldn't want the FTC to have this kind of first-
offense civil penalty authority?
Ms. Khan. Frankly, it would be the lawbreakers who would
not be disincentivized to not pursue these actions in the first
place.
Ms. Castor. Do you agree, Commissioner Chopra?
Mr. Chopra. Yes. I think a big problem with the FTC, as it
currently is composed, is that we cannot penalize some of this
egregious conduct. We just, hopefully, can get money back. But
there has to be a disincentive to do that misconduct in the
first----
Ms. Castor. In the first place.
Mr. Phillips. Congresswoman, could I add something?
Ms. Castor. Thank you very much. I have run out of time, so
I yield back. Thank you.
Ms. Schakowsky. I just want to remind Members that there
are other Commissioners, I think, that are still on, virtually,
with us, I hope.
And now let me call on Representative Latta for his 5
minutes of questioning.
Mr. Latta. Well, thank you very much, Madam Chair, and
thanks to the Commissioners for being with us today.
You know, in recent weeks the FTC has held two open
meetings. While I am glad to see that the FTC intends to
increase transparency, the reality has fallen short. Any change
in policy should not be rushed. It should be well communicated
in advance to the public and ensure input is sought and
considered ahead of any Commission votes. Most importantly,
having open, transparent meetings will allow the FTC to better
serve the public interest.
Similarly, in 2017, Chairman Pai increased the transparency
of the FCC by publicly releasing documents weeks in advance of
the open meetings, and Acting Chair Rosenworcel has continued
this practice.
Chairwoman Khan, will you agree to conduct future meetings
and policy deliberations in a truly transparent manner?
Ms. Khan. Thanks for the question, Congressman. Let me just
say up front I am so thrilled that we have been able to really
start opening up our Commission meetings. I think it can really
help with democratizing the agency and enhancing public
participation. And I am so grateful both to the agency staff
that have enabled us to do this in quick order and my fellow
Commissioners.
Of course, you know, we are still very early in the
process, and so are always thinking about ways that we can
improve our processes going forward.
Mr. Latta. So you--but you will make sure that they are
open process, and there is transparency.
Ms. Khan. Certainly, I think----
Mr. Latta. I am going to take that as a yes.
Ms. Khan. Certainly, yes. We----
Mr. Latta. Thank you, thank you.
Ms. Khan [continuing]. Want to focus on clear notice for
all market participants and the public.
Mr. Latta. Thank you.
Commissioner Phillips, the FTC recently voted along party
lines to rescind two policy statements that have been relied on
under previous administrations of both parties. Were you
consulted by the Chair prior to the notice of the open meetings
on this, or what could go into their place?
Mr. Phillips. Thank you for the question, Congressman. I
would say the level of consultation was as low as I have seen
at the agency, and it is important to note that, in terms of
transparency, we didn't make transparent what our policies
would be.
I think Congressman Guthrie's act, putting out the policies
30 days in advance, giving the public a real opportunity for
input, is a very important thing that could--you know, to
follow on the words of the Chair--really democratize the
process. Let the public know what we are going to do, allow for
consultation with the public, allow for consultation within the
Commission. That is how you have a thoughtful process.
Mr. Latta. Thank you.
Chairman Wilson, same question.
Ms. Wilson. I completely agree with the comments of my
colleague, Commissioner Phillips, and I would note that, in
terms of transparency and democratization, we actually--the
Republicans on the Commission offered motions that would
require the recision of these important policy statements to be
put out for notice and comment so that we could receive the
input of all stakeholders before these important policy
statements were rescinded. And in fact, the three Democrats
voted against the--against receiving input from the public on
these important issues.
Moreover, I would note that, while it is wonderful to hear
from the public in these new open Commission meetings, we are
hearing from them after votes are taken. And so they are not
actually having an opportunity to weigh in on the proposals
that we are considering.
Mr. Latta. Well, thank you.
Madam Chair, I would like to enter into the record the July
9 dissenting statement from Commissioners Phillips and Wilson
regarding unfair methods of competition.
Ms. Schakowsky. Without objection.
[The information appears at the conclusion of the hearing.]
Mr. Latta. Thank you, Madam Chair.
Commissioner Wilson, it goes without saying that our Nation
needs a privacy law. The longer Congress waits to enact
bipartisan legislation, the more States decide to create their
own laws. I am concerned about this patchwork of State laws
that breeds confusion and leaves gaps in consumer protection.
It is clear to me that we need a Federal privacy standard
to better protect consumers and streamline compliance. It is
not realistic for small and mid-sized companies to follow 50
different, obviously, laws. It might also be unconstitutional.
Would you expound on why it is important for Congress to
create a national privacy standard?
Ms. Wilson. Absolutely. I think this is an incredibly
important issue and one that all of us at the Commission have
spent a great deal of time talking about it. And I know, in
fact, this is an area of bipartisan consensus at the
Commission, and Commissioners Slaughter and Chopra and I have
had extensive discussions about the need for Federal privacy
legislation.
It is very difficult for businesses to understand the rules
of the road, operating in 50 different jurisdictions, with 50
different State laws, not to mention all of the international
regimes.
And with respect to citizens, privacy rights and
transmission of data doesn't stop at State boundaries, let
alone national boundaries. And so I would love to see the U.S.
step up to the plate, take a seat at the table internationally,
by enacting Federal privacy legislation that provides not just
privacy for our consumers here at home but also protection for
important civil rights that are being eroded as we speak.
Mr. Latta. Well, thank you very much.
And Madam Chair, my time has expired, and I yield back.
Ms. Schakowsky. I now recognize the chairman of the full
committee, Mr. Pallone.
Mr. Pallone. I thank the chairwoman. I wanted to ask
Chairwoman Khan about enforcement.
Why is it so essential that Congress update the FTC's
enforcement tools to maximize the Commission's limited
resources?
Ms. Khan. Thank you. Thank you, Chairman Pallone. The
agency is severely underresourced. There--we have less staff
than we did back in 1980. Of course, the size of the economy
has dramatically expanded since then, and we simply have not
been able to keep pace.
As I mentioned in my opening remarks, we are currently
living through a huge wave of mergers and acquisitions. And I
think there is a particular concern that, unless we are able to
closely scrutinized these deals, that our economy could end up
becoming even more concentrated than it currently has, and--
harming consumers, workers, honest businesses.
Mr. Pallone. And then we have heard concerns from some on
the other side of the aisle that providing the FTC with new
authorities and tools, such as civil penalty authority, APA
rulemaking might result in overreach that would put well-
intended businesses at risk of unfair enforcement actions.
But I wanted to you--to give you a chance to respond to
that concern. And particularly, do you believe that a more
flexible and dynamic FTC actually benefits honest businesses,
and how so?
Ms. Khan. Absolutely. You know, there are ways in which
rules can provide additional clarity for businesses. The
Commission recently voted out Made in USA rules that would
enable the FTC to penalize companies that are lying about their
products being made in the USA. That is an example of a rule
that is not imposing any new burdens but is simply creating
clarity and ensuring that the FTC can deter this type of
conduct.
Mr. Pallone. All right, thank you. And then let me ask
Commissioner Slaughter--I think you said everybody is still
here, right? OK.
Commissioner Slaughter, we have heard many times from the
minority--I should say from the Republicans--that we need to
move quickly to enact a Federal consumer privacy standard with
the FTC in charge of enforcement. That--in my view, some of the
bills that Republican Members are proposing today would
actually hinder the FTC's privacy enforcement.
So my two questions: Do you believe that any of the bills
under consideration today, like the TIME Act or the SURE Act,
would hinder the Commission's efforts on privacy and data
security? And if so, how?
And then, secondly, what changes to the FTC authority do
you believe are critical to ensure consumer privacy is
effectively protected, if you will?
Ms. Slaughter. Thank you, Mr. Chairman. Yes, I agree with
the principle that we need to be on top of this important area
of the economy, and I really appreciate this committee's
attention to making sure we are adequately resourced, both
funding and authority to do that work.
I also share the view that some of the bills before
consideration, while well-intentioned--before this committee
for consideration, while well-intentioned, may have some
problematic, unintended consequences, in terms of ensuring our
enforcement can be effective.
So, for example, I was concerned about limitations on the
duration of our consent decrees. I think we need to make sure
that we are tailoring case-specific resolutions that really
ensure violations do not recur and that we are doing that with
the flexibility so that we can revisit those orders as
circumstances require.
I am also concerned, for example, about the SURE Act that
might embolden large companies engaged in abuses to argue that
any perceived injury from, for example, a free service cannot
be unfair, or that it might encourage judges to take an overly
narrow view of unfairness. Our enforcement burden to
demonstrate unfairness is already extraordinarily high, and the
cost to consumers and--from that is felt every day.
And then the last point I will make is that I am very
sympathetic to the calls for transparency, for example, with
reports. But I actually very much worry that any reporting
requirement that isn't coupled with additional resourcing means
that we are taking energy away from, and staff attention away
from, protecting your constituents, and putting it instead into
paperwork.
And so, in terms of what tools we need, I absolutely agree
with my colleagues that APA rulemaking authority would be
helpful, civil penalty authority would be helpful. And I think
fixing 13(b) would be very important, and adequately resourcing
the agency to make sure that we can keep pace with the large
companies across the table from us is critically important.
Mr. Pallone. Thank you so much.
I yield back, Madam Chair.
Ms. Schakowsky. I now recognize the ranking member of the
full committee, Mrs. Rodgers, for 5 minutes.
Mrs. Rodgers. Thank you, Madam Chair. I recognize it has
been a long day. I appreciate you all sticking with us and
believe that this is a very important hearing today, as we
think through the FTC and the many issues before the FTC.
Last month we saw that the FTC went through some dramatic
changes, including when it recently voted on a 3-2 party-line
vote for structural change in its compulsory process. And this
will provide de facto control by one person to issue subpoenas
in competition cases without consultation with other FTC
Commissioners or bureaus. I don't believe that that is a new
era to celebrate.
These changes seem to be a clear attempt by the new Chair
in the Biden-Harris administration to consolidate power in
order to pursue an agenda that will completely reshape our
economy.
I continue to hear that the FTC needs additional funding,
staff, authorities. Some of the bills have been proposed today
by the majority. But if decisions are being made behind the
scenes unilaterally, it really makes it hard to justify such a
request.
So I wanted to start with Commissioner Phillips. Should
this compulsory process be at the discretion of one person?
And can you briefly explain why it is important to have
collaboration with experts and Commissioners when issuing a
subpoena under this authority?
Mr. Phillips. Thank you, Congresswoman. So we do use
single-Commissioner-authorized compulsory process for a lot of
the kind of bread-and-butter scams and frauds. But for the
larger investigations, the antitrust investigations, all
Commissioners have--until just weeks ago, had the opportunity
to look at what was going on, to ask staff questions, to try to
make sure that the resources that we ask for from Congress are
being used in a sound way.
Mrs. Rodgers. Thank you.
Mr. Phillips. These investigations are very costly.
Mrs. Rodgers. Thank you----
Mr. Phillips. Yes.
Mrs. Rodgers. Thank you, Commissioner. I am trying to get
through a lot here.
Commissioner Wilson, would you briefly elaborate on it?
Ms. Wilson. I completely agree with Commissioner Phillips.
The issue here is that there is a consolidation of power that
removes authority from the other Commissioners to weigh in on
important investigations, including the theories of harm being
pursued, and the scope of those investigations.
At the same time, we have removed a lot of--we have lost a
window into what staff is doing. And so, because we are no
longer getting compulsory process memos, we are unable to
understand the----
Mrs. Rodgers. OK.
Ms. Wilson [continuing]. Theories of harm being pursued in
investigations.
Mrs. Rodgers. Great, OK, thank you.
So Chair Khan, I just would--I know you have expressed that
the change of policy was to increase efficiency, but it seems
communication and collaboration are lost in this efficiency.
And the greatest effect is going to be the consolidation of
power in your office.
Can you commit to sharing all information related to the
FTC compulsory process with your Republican Commissioners?
Ms. Khan. Thank you for the question, Congresswoman. I
should note that these types of omnibus resolutions have been
routinely used on the consumer protection side for
investigations into diet pills or massive privacy violations.
And so we really were creating some symmetry between what is
routinely done on the consumer protection side with the
competition side.
Mrs. Rodgers. Well, what about----
Ms. Khan. And I think this type of empowering staff can
really make sure we are able to move forward on full gears and
full speed.
Mrs. Rodgers. What about communication with other
Commissioners?
Ms. Khan. Oh, absolutely, Congresswoman. Staff is always
available to Commissioners to provide analysis and assessment.
And Commissioners are routinely requesting that type of
analysis and assessment from staff, and staff is providing it.
So from that perspective, I think we are, you know, doing
the best we can to make sure that information is available,
while dealing seriously with the severe----
Mrs. Rodgers. OK, thank you.
Ms. Khan [continuing]. Resource limits we have.
Mrs. Rodgers. You are the Chair. You are the Chair. You set
the tone. And it appears that there is an effort to consolidate
power and decision making into your hands. That is not the way
that it has worked in the past, and I don't believe that that
is the way that is going to lead to the best outcomes.
I do want to ask you on privacy, because I believe it is so
important that we move forward on a national privacy standard,
and we have seen how Big Tech can trample protections for all
Americans. So to the Chair, Chair Khan, would you be willing to
support a privacy proposal from Congress that includes APA
rulemaking authority, sufficient enforcement, continued
coordination with State AGs, and additional staff and resources
that is preemptive?
Ms. Khan. Congresswoman, certainly, I think we need robust
privacy protections, and I think direction from Congress on
this front would be helpful.
I think, on the preemption question, there are always
tradeoffs, depending on the specific context. I know, in some
cases, we want to ensure that, insofar as States are providing
additional protections, we always want to be wary of the
Federal Government stepping in and overriding States' efforts
to protect their own constituency. So I think we want to keep
some of those considerations in mind, as well.
Mrs. Rodgers. I look forward to further conversations with
you, because I am concerned about rumors of the FTC acting
outside of Congress and issuing a rule on privacy.
And with that I will yield back.
Ms. Schakowsky. Did she say she yields back?
Oh, Congresswoman Trahan, it is your 5 minutes.
Mrs. Trahan. Thank you, Madam Chair, and Chair Khan, fellow
Commissioners, thank you for your patience, and for being here
today to discuss how an essential agency can better protect our
consumers.
President Biden's most recent Executive order promoting
competition in the American economy encouraged the Commission
to exercise the FTC's statutory rulemaking authority in regards
to--and I quote--``unfair data collection and surveillance
practices that may damage competition, consumer autonomy, and
consumer privacy.''
Now, in October 2020, Google Ads updated its policy to
restrict the serving of high fat, sugar, salt food and/or
nonalcoholic beverages advertising for minors under 18 in the
United Kingdom and in the European Union but has refused to
make similar changes here in the United States. A recent policy
change by Facebook is a step in the right direction, but it is
far from perfect when you consider that a May 2021 study by the
Tech Transparency Project found that Facebook allows
advertisers to target ads for electronic cigarettes, pill
parties, and extreme weight-loss products to children as young
as 13 across the U.S.
Plainly, Facebook and Google are using troves of personal
data belonging to teens and adults to target harmful
advertisements in ways that are not transparent to users. So,
Chair Khan, would you consider these examples of the types of
surveillance practices that may damage consumer autonomy and
consumer privacy?
Ms. Khan. Absolutely, Congresswoman.
Mrs. Trahan. Thank you for that.
And Commissioner Slaughter, if the Commission were to begin
rulemaking today to protect consumers, including our children,
from surveillance advertising, what would be the process under
the Commission's existing Mag-Moss authority?
And would the Commission face difficulties? If you could
speak to that, it would be great.
Ms. Slaughter. Thank you, Congresswoman. It is a great
question. And I want to start by responding to suggestions from
the ranking member of the committee that the Commission might
act without Congress or outside of congressionally delegated
authority. I want to be very clear. The Commission cannot,
should not, and will not, with my support, act outside of
congressionally delegated authority.
But we absolutely should look at the authority Congress has
delegated to us, and it has specifically delegated to us
rulemaking authority under section 18 of the FTC Act, which is
referred to as Mag-Moss, to promulgate rules to--unfair and
deceptive acts or practices that are prevalent in interstate
commerce. And so data abuses fall very much into that category.
To rulemaking under section 18, to answer your question
briefly, looks like APA rulemaking, but with much, much more
process. So we can't begin with a notice of proposed
rulemaking. We have to begin with an advance notice of proposed
rulemaking that asks questions about the issues that we will
consider. We have to notify Congress before we do that. We have
to then, in a notice of proposed rulemaking, identify any
issues of material fact that are disputed and, again, notify
Congress. And if there are issues of material fact, the statute
requires us to have an informal hearing to adjudicate them.
So it is a very process-intensive statute that requires
lots of--and provides opportunity for lots of participation. It
is absolutely burdensome to the Commission to do it. I think it
is worth it for us to try, but we should make no mistake that
it would not be a quick or fast effort.
Mrs. Trahan. I appreciate that. And it is--you know, to
note, it is unique to the FTC.
If Congress were to provide the FTC with rulemaking
authority under Administrative Procedure Act, how would that
change the Commission's ability to protect consumers from harms
associated with the surveillance advertising business model?
Ms. Slaughter. Well, what it would not change is it would
not prevent participation in the rulemaking process. It would
not allow the Commission to act outside the scope of the law,
as congressionally designated, any statute. So if it is just
FTC Act law, we would still have to be looking at rules that
target practices that are unfair or deceptive. We could not
promulgate a rule that made illegal conduct that wasn't
otherwise illegal, but we could do it with much more efficiency
and fewer burdens so that we can really get to material harms
that are affecting people throughout our economy.
Focused on children, that is an issue that is near and dear
to my heart, but it is not just kids, it is competition, it is
small businesses, it is civil rights issues, which Commissioner
Wilson mentioned. So I think it is a really, really important
area for attention.
Mrs. Trahan. OK----
Ms. Slaughter. And the last point that I will make is that
rules also provide clarity to businesses about what is
prohibited. That allows and facilitates compliance. It doesn't
prohibit it.
Mrs. Trahan. Thank you for that.
I yield back.
Ms. Schakowsky. Mr. Guthrie, you are recognized for 5
minutes.
Mr. Guthrie. Thank you, Madam Chair, and I thank Ranking
Member Bilirakis, for holding this meeting, and thanks to the
Chair and all the Commissioners for being with us today.
The Federal Trade Commission has a commitment to protect
the American public from unfair and deceptive practices and
unfair methods of competition. With that responsibility comes
proper oversight and adequate transparency. However, recent
activity by the FTC did not permit for adequate time for
vetting and input from consumers.
Before us today are two bills that I introduced, H.R. 4564,
the FTC Transparency Act, and H.R. 2690, the CLEAR Act, both of
which would allow for more transparency and accountability at
the FTC.
Some of this was brought up by my colleague, Mr. Latta, and
answered by Commissioner Phillips, but Commissioner Phillips, I
want to talk specifically about my bill. My bill, the FTC
Transparency Act, would require the FTC to publicly publish
documents to be considered by the Commission on the Federal
agencies website at least 30 days before a vote.
In your experience, Commissioner Phillips, how would a 30-
day notice be helpful to your daily work and productivity
amongst your colleagues at monthly Commission meetings?
And in your experience, how would a 30-day notice increase
accountability and transparency at the FTC for American
consumers?
Mr. Phillips. Congressman, thank you for your question, and
thank you for your leadership on this issue.
A 30-day time period, where the public could see what we
are doing and we could hear from the public, from the consumers
that are affected by the harms from the businesses that have to
work under the potential regulation, we can hear about the
impact of the policies. It would inform what we are doing, and
require us to take into account what we are hearing from the
public, both the business community and consumers.
That will create accountability. We are forced to listen to
what people have to say, and take into account what they say.
So I think that would be an essential reform.
Mr. Guthrie. OK, thank you. And I would ask--like to ask
each--the Chair and each Commissioner, would you--do you
support the language, my language in the bill, to bring
transparency to the FTC?
Ms. Khan. Congressman----
Mr. Phillips. I do.
Ms. Khan [continuing]. Certainly, we want to be thinking
through how we can increase transparency and public
participation, and I am so glad we have been able to do that.
We will still--we are still early in our thinking of how to
continue doing that, but always happy to take feedback and
continue improving our processes.
Mr. Guthrie. So you like--the bill, you are for the bill,
or--the language of the bill?
Ms. Khan. Well, I want to make sure that it is not
conflicting with other statutory obligations. For example, some
of those outlined in the Sunshine Act. And happy to follow up
with you on----
Mr. Guthrie. But you don't have a philosophical issue with
the 30-day requirement, then.
Ms. Khan. I think with the general idea of providing
notice, that is great, and we are happy to continue thinking
about how to do that.
Mr. Guthrie. Thanks. So then I guess I got another
question. I will just--oh, if the others would--the other
Commissioners would just state their support, or----
Mr. Chopra. Sure. I totally appreciate, you know, the
philosophical part of this, because the FTC, for too long, has
been notoriously secretive. Most of what the Commission does is
it votes in secret by email, you know, not even consulting
anybody. That has been standard practice under Republicans and
Democrats, and it has to stop.
We need to actually be listening to people rather than just
gathering in private and making secret decisions. I am so glad
we have moved to an open meeting concept. I think it is an
important reform. And I think other reforms, too, to make us
more transparent and accountable, are worthwhile. I am happy to
look more at your bill, and talk----
Mr. Guthrie. OK, thank you. I am going to have to move on
so I can get to the next question. Thank you for those
comments.
And then, Chair Khan, in light of the FTC's recent vote on
the revised section 18, which altered FTC's approach to
prescribing new rules for unfair or deceptive business
practices, how can you ensure that increasing efficiency by
streamlining the rulemaking process will not result in a
reduction of sharing information, transparency, oversight, and
input from pertinent experts?
Ms. Khan. Congressman, the current procedures that govern
those rules go, as Commissioner Slaughter mentioned, far above
and beyond what is traditionally required under the
Administrative Procedure Act. So, even under the more
streamlined procedures, there would be ample opportunity for
notice and comment and for us to make sure we are really doing
our homework before we issue any rules.
Mr. Chopra. And Congressman, the proceedings are public.
Mr. Guthrie. So you are--you think these--the increasing
efficiencies is going--that you are looking for is going to
ensure people have access to the information----
Mr. Chopra. So the procedures that are currently in place
continue to require extensive public input, and including
public proceedings.
Mr. Guthrie. OK, thank you. And I am running low on time,
so I will just leave it there.
So, Chair Schakowsky, I have a--I would like to submit for
the record Commissioners Phillips's and Wilson's dissenting
statement on the adoption of a revised section 18 rulemaking
procedures.
Ms. Schakowsky. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Mr. Guthrie. Thank you, and I yield back. Thank you.
Ms. Schakowsky. I understand my colleague Mr. Rush is
online.
And you are now recognized for 5 minutes.
Mr. Rush. Thank you, Madam Chair, for convening this
extraordinary hearing. You----
Ms. Schakowsky. Bobby, if you could speak up, that would be
helpful.
Mr. Rush. You, along with the ranking member, I want to
thank you for convening this extraordinary hearing.
Commissioner Chopra, as you know, earlier in this year the
FTC, along with 38 States and the District of Columbia, shut
down a massive fraudulent charity operation that bilked over
$100 million from the American consumer.
Under current law, the FTC must prove an organization is a
fraudulent entity before being able to engage in enforcement
actions. My bill, H.R. 3918, will make it easier for the FTC to
go after these fake charities by finally giving you the
authority over all 501(c)(3), tax-exempt organizations.
If my bill becomes law, how will this benefit consumers?
Mr. Chopra. So, Congressman, there is no question that we
have so many bad actors parading as nonprofits organized as
501(c)(3)s. They take in money, and the principals of these
nonprofits siphon them away. But they can block FTC enforcement
by saying that they are organized as a 501(c)(3). For years and
years, Commissioners of both parties have supported a change to
the FTC Act that would eliminate the nonprofit exemption so
that we can go after this with more clarity, and also address
other anticompetitive practices by nonprofits.
Mr. Rush. Do you foresee any--that may be a hindrance to
those not-for-profits who don't have the sophistication and the
finances to negotiate your oversight authorities in the FTC?
How would you deal with that problem?
Mr. Chopra. Well, I think where the issue is, is when the
nonprofit is engaged in egregious fraud.
Mr. Rush. Right.
Mr. Chopra. It is pretty clear that they have engaged
sometimes in even criminal activities.
Mr. Rush. Right.
Mr. Chopra. So, you know, with respect to those fraudsters,
I don't think many nonprofits are going to have a tough time
complying with that, because most nonprofits are trying to do
the right thing.
So I am happy to have further discussions on this, but I do
believe that, when we allow a nonprofit exemption, we create a
loophole for bad actors to be able to figure out a way around
law enforcement. And it is something that is just not good for
an honest marketplace out there.
Mr. Rush. Yes, I am particularly interested in the--whether
or not this will have a chilling effect. I know it is needed.
This is a necessary action, and we need to give the FTC the
power. But I am also--understand that in the real world that we
live in, that this may have a chilling effect on faith-based
not-for-profits and other not-for-profits. So I want to work
with you to make sure that we send the right kind of signal,
that this is not going to be onerous to those not-for-profits
who are doing good, honest, much-needed work--well-being of our
citizens.
Chair Khan, the FTC recently released a report and
subsequent policy statement supporting legislation that would
enable consumers to access--generated by their motor vehicles
for repair and maintenance purposes. Restriction on this access
places a financial burden on too many hard-working Americans.
And as the FTC report notes, this is particularly true for
communities of color, such as in my district. I am [audio
malfunction].
Mr. Chopra. Congressman, we lost your audio.
[Pause.]
Ms. Schakowsky. We can't hear you now, right this second,
Bobby.
Mr. Rush. All right. I am--can you hear me now?
Ms. Schakowsky. Yes.
Mr. Rush. I am pleased to report that I am currently
drafting legislation to address this very problem, by requiring
that vehicle owners have access to their repair and
maintenance--allowing them to choose how and where they want to
repair their cars.
Can you discuss why legislation like this is needed, and
what limitations does the FTC currently place under section 5
authority under the FTC Act?
Ms. Khan. Thanks so much for the question, Congressman.
Certainly, undue restrictions on repair have a very harmful
effect on communities of color and marginalized communities, in
particular. And I think the type of legislation that you are
talking about could go a long way in ensuring that
manufacturers are not able to unduly control the data in ways
that limit our ability to repair our own cars. And I would be
happy and eager to work with your office in thinking through
what that type of legislation could look like.
Ms. Schakowsky. The gentleman's time has expired. And now I
call on Congressman Bucshon for his 5 minutes.
Mr. Bucshon. Thank you, Madam Chairwoman.
Commissioners, thank you for taking the time to be here
before the committee today.
Commissioner Chopra, you have been appointed as the head of
the Consumer Financial Protection Bureau, or CFPB. Senator
Toomey and the ranking member of the Senate Finance Committee
has sent you a letter, which I don't think you have answered to
this point, asking for details on the recent personnel changes
at the organization.
And so I am going to take the opportunity to ask you some
of those questions. And now that you are in front of the
committee, would you want to have the opportunity to answer
these?
Maybe--are you aware of whether the CFPB has taken any
steps between January 20th, 2021, and the present to push out,
replace, or encourage any career CFPB employees to leave their
positions?
Mr. Chopra. Senator, I--or Congressman, I have absolutely
no involvement. I am not aware, did not direct, and have no
participation with respect to activities related to the CFPB. I
am currently an FTC Commissioner with a busy docket.
As I understand, the CFPB has replied to those letters to
explain that I have not been involved. Those are decisions that
involve human resources issues subject to very significant
Privacy Act and other requirements. But I am currently full
time at the FTC until, if I am so fortunate, to be confirmed as
Director of the CFPB.
Mr. Bucshon. Fair enough. I won't ask you the remaining
questions, then. I will just point out--I will just say that
there are reliable information that people have been offered
substantial separation packages. People have been put under
investigation to try to force them out. And also that people
have been put on administrative leave if they are not in the
correct political party. And, you know, at Federal agencies
these are people who are career people. All our Federal agency
people work very hard, regardless of their political leanings.
And I would hope that the things that Senator Toomey is
concerned about are not true.
So I am going to ask you this, then. While still--while you
are at the FTC, you have raised concerns about rebate walls and
other conduct acting as barriers to effective competition,
stunting the cost savings and innovation expected in an
unconstrained marketplace. In a statement you warned that
rebate bundling is, undoubtedly, a fixture of the competitive
environment in immunology, that such practices are suspicious
and might act as a barrier to entry and expansion for drug
makers with less bargaining leverage. Could you comment on
that?
Mr. Chopra. Yes. I am very concerned that drug makers often
engage in complex rebating strategies in ways that prevent new
drug makers from entering and challenging their dominance. The
net effect of this is that we could have less innovation and
less competition for lifesaving drugs.
I am worried that these rebate walls may also constitute
violations of the law in certain circumstances, and I think it
is important not just for the FTC but also State attorneys
general and others to really look at this.
The Trump administration also sought certain policies to
crack down on this, and it is one we have to really take
seriously if we want there to be affordable drugs.
Mr. Bucshon. Sure. As the--and again, sorry to focus just
on you--as the FTC continues to monitor for anticompetitive
practices that make lifesaving biosimilars more expensive for
people from Indiana, Hoosiers, it would make sense to perform a
cost benefit analysis on FTC recommendations to project impacts
on markets.
Would you support performing a cost-benefit analysis of
measures to address this important issue, to ensure that policy
changes will accomplish what they are designed to do?
Mr. Chopra. So during the past 3 years at the FTC, I have
been a strong advocate for more analytical rigor. I am very
concerned that the quality of rigor that is used to make
decisions across the government is far too low. We should be
incorporating information from the life sciences industry,
quantitative information and qualitative information from our
pharmacists and others in the medical supply chain.
So being--having that full range of evidence and being
rigorous--of course, economics is one part of that, but we
can't--we need a full range of data and evidence to make sure
that anything we do actually benefits competition and doesn't
make things worse off for patients.
Mr. Bucshon. Fair enough. Thank you.
So I have introduced H.R. 2676, which would require FTC's
Bureau of Economics to conduct a cost-benefit analysis for any
legislative, regulatory, or enforcement recommendations,
including a rationale for the FTC's determination that private
markets or public institutions could not adequately address the
issue that is the subject of the recommendation.
So my feeling is, if we let the market work, most of the
time it does. But occasionally, we do need the Federal
Government, like the FTC, to make sure that that is happening.
So thank you for your answers, and I yield back.
Ms. Schakowsky. Mr. McNerney?
Mr. Bucshon. Madam Chairman, can I--I forgot to--can I ask
unanimous consent to introduce Senator Toomey's letter into the
record?
Ms. Schakowsky. Without objection.
[The information appears at the conclusion of the hearing.]
Mr. Bucshon. Sorry about that. Thank you very much.
Ms. Schakowsky. Mr. McNerney, you are recognized for 5
minutes.
Mr. McNerney. Well, I thank the Chair for recognizing me,
and I thank the Commission for testifying today. And
congratulations, Chair Khan.
One of the bills----
Ms. Schakowsky. If I could just interrupt for a second, I
just want to inform everyone that Commissioner Slaughter did
have to leave. The others are here.
Ms. Slaughter. I was just--yes, I was just going to say I
really am so sorry, and I thank you for your time and would be
happy to answer any questions the committee has, promptly, in
writing. So I appreciate your indulgence.
Ms. Schakowsky. Thank you.
Excuse me, Mr. McNerney. Go ahead.
Mr. McNerney. Thank you. One of the bills we are
considering today is H.R. 4530, legislation that I authored,
which would establish an office of technologists at the FTC. As
an engineer, I think it is critically important that the agency
has that sort of expertise.
Chair Khan, can you discuss the importance of having
technologists at the agency and how having more technology on
staff can help you carry out your mission?
I know you are going to follow up on what Commissioner
Chopra just said, but thank you.
Ms. Khan. Thanks so much for raising this, Congressman. It
is imperative that the agency be fully equipped with a whole
range of skill sets. I think ensuring that we have
technologists on board is paramount, especially as we confront
all types of new business practices and digital markets.
I am so thrilled that I was recently able to announce a
chief technologist at the agency, and she is helping oversee
our expansion on this front. So I definitely plan to bring on
more technologists.
Mr. McNerney. Very good.
Commissioner Chopra, following up on that question, how
would this legislation be helpful for the agency in carrying
out its work, as it relates to artificial intelligence and how
that is impacting consumers?
Mr. Chopra. Yes, so artificial intelligence is really
changing the way so many different types of businesses operate,
in terms of making decisions when it comes to offering products
or services.
And one of the things we have to worry about is who is
accountable when those AI machines break the law. How do we
audit them? How do we know what is actually behind that?
And without technologists and people with real skills
related to data, data aggregation and analysis, we won't be
able to do it. And I think this is critical that we muscle up
when it comes to tech talent.
Mr. McNerney. Very good. What about privacy and data
security?
Mr. Chopra. Yes, I mean, the recent breaches that we have
been seeing, as well as ransomware attacks, are really a
reminder that the FTC is behind the eight ball when it comes to
catching up and making sure that we are securing the
infrastructure of our country. This is not just about
protecting consumers, it is about protecting our national
security, as well. And we need engineers and experts who can
help us inform the right types of interventions and policies.
Mr. McNerney. Thank you. And lastly, what about protecting
consumers against the new kinds of scams that are happening
online?
Mr. Chopra. Yes, you know, Chair Khan mentioned that a lot
of the scams and frauds are being amplified by Big Tech
platforms, algorithmically targeting individuals who are likely
to be susceptible. If we are not able to dig in and understand
how that targeting works, how those algorithms work, we will
not be able to hold them accountable when they are amplifying
fraud. We must--we can't just go after fraudsters one by one,
we need to look at the gatekeepers and those who profit from
amplifying them, as well.
Mr. McNerney. Thank you. I also authored H.R. 4475,
Protecting Consumers in Commerce Act. This bill would give the
FTC authority over certain common carriers.
Commissioner Chopra, if enacted, would this legislation--
what would this mean for consumers, especially in a district
like mine, which is an economically hard-hit district?
Mr. Chopra. Yes, you know, when it comes to
telecommunications common carriers, they are completely exempt,
in many ways, from the FTC's jurisdiction. That makes it harder
to go after robocallers. That makes it harder to go after some
of the ways in which companies target the elderly.
We have tried to do our best when it comes to going after
voice-over IP providers and others, but the big carriers have a
big role in all of these issues, and there is an uneven playing
field when they are completely exempt.
Mr. McNerney. Thank you.
Chair Khan, do you have anything to add to that?
Ms. Khan. I would echo that and note that I think that type
of exemption would really ensure that we can robustly enforce
in a more symmetrical way across industries.
Mr. McNerney. Thank you. Chair Khan, I also am cochair of
the House Artificial Intelligence Caucus. And a key priority
for me is to develop policies that help promote opportunities
in artificial intelligence while tamping down the--whatever
problems might arise as a result of artificial intelligence.
What potential risks are you concerned about with respect
to artificial intelligence, and what steps do you think the FTC
should be taking?
Ms. Khan. Well, I think there are a whole range of
opportunities but also potential risks as this technology
becomes more widely adopted. I know there have been a whole set
of civil rights groups that have raised concerns about how this
technology could exacerbate discrimination.
For the FTC, I think, foremost, the FTC needs to be making
sure that we are fully understanding this technology. Congress
really designed the agency to be a watchdog across the economy
and closely study new business practices, new technologies to
make sure we can keep pace. And I very much hope that we will
be doing that in this area.
Mr. McNerney. And that goes back to my H.R. 4530, to create
an office of technologists. Thank you.
I yield back.
Ms. Schakowsky. Now I am happy to call on and recognize the
always-here congressman, Congresswoman Lesko.
Mrs. Lesko. Thank you, Madam Chairman, and thank you to all
of the witnesses, whether here in person or virtually.
I am going to read a couple statements from the dissenting
statement of Commissioner Christine Wilson on the open
Commission meeting on July 1st and then just ask a couple of
questions related to it. So it is just excerpts from that. She
said, ``I only learned last Thursday of the Chair's intention
to hold this meeting. At the same time, I was informed of her
intention to hold votes to rescind the section 5 policy
statement and to pass several omnibus resolutions that would
remove from Commission oversight large swaths of Commission
business.''
Chairman Khan, the decision to hold open meetings can only
be applauded if people know about it in advance, so it gives
them enough time to prepare and actually show up to the
meetings. So it was concerning to me that it seemed like there
was not a lot of advance notice on the July 1st meeting, and
that people couldn't prepare that--why did you do that?
And what do you plan on doing in the future so that the
public has sufficient time to prepare for the FTC open meetings
and can have public input, because don't we want public input?
Ms. Khan. Absolutely, Congresswoman, and I am so thrilled
that we have been able to switch to this open Commission format
to provide more accountability and insight into the
Commission's work. This is new for the agency.
As my colleague mentioned, we have a history of doing all
of this behind closed doors. And so, as we adapt to this new
format, we will be thinking through how we can continuously
improve our processes and always appreciate feedback on that
front, as well.
Mrs. Lesko. Well, and thank you for that answer, although
it seems in contrast to what one of your other Commissioners is
saying. Again, I am going to read excerpts from Commissioner
Wilson and then, if I have time, give her an opportunity to
speak. It says, ``Unfortunately, the format the Chair has
chosen for this meeting omits our knowledgeable staff and
precludes a dialogue among the Commissioners.''
And then, in another portion, in another page, it says,
``Following our rulemaking spree in the 1970s, the FTC was
stripped of funding, stripped of legal authorities, and
required to institute new and substantial rulemaking steps to
foster public trust on our trade rules. Recognizing that this
agency was on the brink of being shuttered, our rules of
practice adopted a number of rulemaking procedures that
provided for additional public comment periods, publication of
a staff report, and multiple opportunities for the public to
weigh in on disputed issues of material fact.''
And she goes on to say that, ``The FTC has built
transparency into our rules of practice by requiring that
rulemaking staff publish a staff report containing that--their
analysis of the rulemaking record, and recommendations as to
the form of the final rule. But the new rules eliminate the
staff report requirement.''
So my second question to you, Chairwoman Khan, is actually
a question she put in here, and it says, ``In what ways will
the public's understanding of any final rules suffer because
the Commission will no longer publish a report from an expert
FTC staff highlighting key issues and formulating
recommendations based on the record?''
Why would you change this longstanding--staff being able to
do this staff report?
Ms. Khan. Well, Congresswoman, staff analyses and input is
embedded throughout our various processes. There have been
instances, frankly, when the Commission has handicapped itself
by imposing on itself procedures and processes that Congress
did not require.
And so, frankly, some of our initial efforts have been to
ensure that the FTC is abiding by instructions received from
Congress and make sure we are in close alignment with the
instructions that we are receiving----
Mrs. Lesko. And with the last 31 seconds left, Commissioner
Wilson, would you like to respond?
Ms. Wilson. Thank you very much, Congresswoman, yes. I
think it is important to recognize that the FTC is set apart
from other Federal agencies with respect to the Magnuson-Moss
Act and these special rulemaking requirements, but it is set
apart precisely because of the breadth of our jurisdiction and
the discretion that we have.
We have authority to regulate across the entire economy. We
are a generalist agency. We are not like the EPA or the
Department of Transportation that has relatively narrow
authority for a single sector. And with that broad power and
that broad discretion, we need to have sufficient guardrails to
ensure that we are receiving input, that we understand what the
evidence is with respect to impacts and possible unintended
consequences of our actions.
And so the safeguards in rulemaking that were abolished by
the majority at the Commission, unfortunately, are going to
diminish the quality of that decision making and, I am afraid,
stifle innovation, harm competition, and hurt consumers.
Mrs. Lesko. Thank you, and I yield back.
Ms. Schakowsky. I recognize now Congresswoman Dingell for 5
minutes.
Mrs. Dingell. Thank you, Madam Chair, for holding this
hearing, and to all of you who are testifying today. And I am
sorry you are all still having to be here in the craziness of
our day on Capitol Hill.
First off, there has been some discussion regarding process
concerns at the FTC. Commissioner Chopra, when Democrats were
in the minority, did you have access to all the information you
wanted access to?
Mr. Chopra. No. I was routinely denied the ability to
participate in major decisions around second requests on
mergers, the scope of subpoenas for major privacy
investigations. This--these functions are--were routinely
denied to me.
Mrs. Dingell. Thank you. Chairwoman Khan, in my view, a
number of bills we are discussing today could have detrimental
effects on the FTC's ability to carry out its essential
consumer protection mission, which is what the job of the FTC
is supposed to be, to protect consumers.
H.R. 2702, the SURE Act, codifies select portions of the
FTC's statement on unfairness. The bill focuses on portions of
the statement that discuss substantial injury but ignores other
portions of the statement, including a discussion of
circumstances in which public policy concerns will
independently support action by the FTC.
Chairman Khan, can you tell us about some cases in which
the Commission relied on the public policy standard?
Ms. Khan. Congresswoman, thanks for the question. I think,
as a general matter, ensuring that we are able to take into
account some of those public policy considerations is always
important, especially when we are encountering new contexts and
new fact patterns.
I think, with that bill in particular, there is some
concern that importing that substantial harm standard could
make it more difficult for us to go after companies that are
enabling data breaches, that are engaging in privacy
violations. In those types of cases it can be many years,
sometimes, before which that harm is concretized. And so I
think we want to be mindful about some of those potential
tradeoffs, as well.
Mrs. Dingell. So I am going to ask you for a short answer,
because I want to get to another bill. But if this bill becomes
law, could the Commission be able to bring those types of cases
in the future?
Ms. Khan. I think it would make it significantly more
difficult.
Mrs. Dingell. Thank you. Another bill I want to address is
H.R. 2677, the TIME Act, which would limit consent orders to 8
years and require review and termination of consent decrees
after 5 years in some circumstances. Instead of the company
proving that a consent decree is no longer necessary, the
burden would be on the FTC to prove that it is still necessary.
Chairman Khan, how long are consent orders usually in place
for, and why is that the case?
Ms. Khan. There is a range, depending on the consent
decree. In some cases it has been, you know, somewhere between
a decade to two decades. I will say, overall, you know, there
have been cases where firms have violated consent decrees well
over a decade after we entered into them. And so I think, from
that perspective, there would be serious concerns about
reducing the default length of some of these decrees.
Mrs. Dingell. I have heard concerns that the 5-year
requirement in this bill would effectively limit consent
decrees to 5 years. Is it possible that this bill would force
inappropriately short consent orders?
Ms. Khan. I think that is certainly a significant concern.
Mrs. Dingell. In most cases the FTC can only collect civil
penalties and entities that are under order. Can you talk about
how this bill could insulate repeat offenders from having to
pay fines for wrongdoing?
Ms. Khan. Certainly, the agency has, in several cases,
encountered recidivism and has had a difficult time ensuring
that actors that are violating the law are deterred from doing
so again. And so I think, with any type of reform, we want to
be mindful about that dynamic.
Mrs. Dingell. OK, I am going to go to another bill. H.R.
261, the SHIELD Act, prohibits the FTC from taking enforcement
action based on noncompliance with agency-issued guidance.
Chairwoman Khan, does the FTC do that now?
Are enforcement actions brought based on a company's
failure to follow guidance?
Ms. Khan. No, Congresswoman, guidance does not carry the
force of law. And so we are not permitted to do that.
Mrs. Dingell. But, in contrast, under the SHIELD Act,
companies can use adherence to agency guidance to prove that
they did not commit an unfair or deceptive act or practice.
Chairman Khan, what if the guidance was outdated?
How could this bill make it harder for the Commission to
bring cases against bad actors?
And would this add another burden on the FTC by requiring
it to prove why the guidance isn't relevant?
Ms. Khan. Certainly, I think there would be some concerns
around that, especially if we are in a world where guidance
cannot be used as a basis for finding legal violations.
But then, if it is instead being used as a way to shield
companies from legal violations, I do think that there would be
an asymmetry there that would be a little bit difficult to make
sense of. So I think we would want to be consistent across the
board there.
Mrs. Dingell. Thank you, Chairman Khan. I am out of time,
so I yield back.
Ms. Schakowsky. I now recognize Mr. Pence for 5 minutes.
Mr. Pence. Well, thank you, Chairman Schakowsky and Ranking
Member Bilirakis, for holding this hearing. Thank you to the
Commissioners for being here today.
My question is going to focus on the ownership of
telematic, or equipment-produced information--that is my word,
not a technical word. I will use one example to define my
concern. While this is a specific example, I believe that it
represents an enormous and growing IP ownership issue. And let
me begin.
As the crossroads of America, Indiana plays an important
role in the transportation industry. Our interstate highways
connect regional hubs that are critical to the delivery of
goods across the Midwest and the rest of the country. Leading
the--transportation companies such as Honda, Toyota, and
Cummins Engine Company have footprints in my district to take
advantage of local manufacturing expertise.
Considering the president--the presence of the auto
industry, I have a particular interest in the Commission's
recent actions on the alleged repair restrictions--and I say
alleged--that may be imposed by original equipment
manufacturers, or OEMs. I have heard from several Hoosiers,
both repair shops and OEMs, regarding access to repairs for
telematic data and software on next-generation vehicles, and I
think this may apply to any type of relationship between the
owner of a piece of equipment and the manufacturer.
I understand the concerns of manufacturers, the need to
protect the privacy of drivers, and mitigate cybersecurity
vulnerabilities of the vehicle. I also understand the concerns
of auto repair shops that provide a valuable service to an
industry out in the local economy. The auto repair industry
itself supports over 17 jobs in my district, and 7.5 billion in
economic activity every year.
Our rural Hoosiers that live prohibitively far from
dealerships have to use third-party repair shops. That may be
their only option, especially if the vehicle breaks down and
they can't get to, say, the dealership, if you will.
Chairman Khan, I understand that your Commission recently
issued a policy statement that seeks to address potential
concerns with limiting or restricting third-party access to
telematic information. Can you walk us through the process that
you use, that the Commission uses, to determine that this
policy statement was necessary?
And where are you really kind of going with this, as it
would apply to much more than dealerships and auto repair
shops?
Ms. Khan. Certainly, Congressman. So this policy statement
followed a whole range of work that the Commission had been
pursuing in this area. The Commission held a workshop on some
of these repair restrictions and, under my predecessor, Acting
Chairwoman Slaughter, issued a report identifying its findings
and, as a general matter, noting that, in many cases, some of
these repair restrictions are overbroad and are being used in
ways that harm individuals who are owning products, harming
independent businesses that might otherwise have opportunity in
these repair markets, and that the FTC really needs to
scrutinize some of these practices more closely.
I was pleased that we were able to adopt a policy statement
unanimously at our last open Commission meeting with an eye to
addressing some of these restrictions using a whole range of
tools, including our Mag-Moss authority, looking at them under
the unfair and deceptive acts or practices provision, as well
as scrutinizing these for potential antitrust violations.
So that is the path forward that we have laid out, with a
commitment to really devoting more enforcement in this area.
Mr. Chopra. If I can just add, Congressman, the----
Mr. Pence. Sure.
Mr. Chopra [continuing]. The existing law that has been on
the books for about 40 years restricts the ability for
manufacturers and sellers to condition a warranty based on
using certain types of repair services, or there is an
antitying provision.
Mr. Pence. Right.
Mr. Chopra. So I think there is a perception that maybe we
have not allocated enough enforcement resources to address
those. It is becoming very difficult for many people to repair
phones, tractors, so many other things which may be covered by
that warranty. That is existing law that Congress passed. It is
one of many laws that the FTC just hasn't really enforced that
Congress has told us to. And I think it is appropriate that, if
Congress has told us to enforce a law, that we do it.
Mr. Pence. So--and I will kind of get a lot more into this
as time goes by. But, you know, when I--let's say when I buy a
car--and my time is running short--I sign away that information
back to the manufacturer. And there's many things that we click
on, and we give somebody else our information. And then, when
we need it--repair or whatever--we don't have that information.
So, if you would kind of keep looking at that and find an
equitable way to protect the customer in that area, thank you.
Madam Chair, I yield back.
Ms. Schakowsky. Congresswoman Kelly, you are recognized for
5 minutes.
Ms. Kelly. Thank you to Chair Khan and all of the
Commissioners for testifying today before the committee. I know
that this past year has been particularly trying for the
Federal Trade Commission.
I also want to thank Chair Schakowsky and Ranking Member
Bilirakis for holding this legislative hearing and for
including my bill, H.R. 4460, the Consumer Equity Protection
Act.
This bill would establish a task force within the Federal
Trade Commission to advise on issues in the protection of
consumers and to prevent unfair and deceptive practices
targeted--targeting consumers on the basis of race, color,
religion, and other protected characteristics.
This legislation is urgently needed, since minority
communities are disproportionately found to be victims of
fraud. For example, African Americans are three times more
likely to experience debt-related fraud than non-Hispanic
White. Often this is the result of information not reaching
vulnerable communities, or victims not knowing how to prevent
being victims of fraud or abuse.
Chair Khan, how would forming a task force within the FTC
assist you with protecting minorities in America from fraud and
abuse?
Ms. Khan. Congresswoman, let me say up front I am just so
glad and grateful to you for drawing attention to this issue.
The FTC has confronted numerous instances in which companies
have been violating civil right protections like ECOA. And I
worry that the methods of discrimination are becoming even more
sophisticated and subtle, as some of these technological tools
are enabling discrimination and targeting. So I think this type
of focus, and bringing this lens to our work, is going to be
imperative.
Ms. Kelly. Thank you. Commissioner Chopra, do you have
anything else to add?
Mr. Chopra. No. I would just add, Congresswoman Kelly,
that, you know, we had a previous question from Mr. McNerney
about artificial intelligence and algorithms. You know, the
more and more that large firms, especially the tech platforms,
can systematically engage in, essentially, biased practices--
Secretary Carson, when he was HUD Secretary, issued a complaint
against Facebook regarding its practices on discriminating in
housing. And I think we have to really wake up to the fact that
a lot of these subtle forms of discrimination are done
algorithmically, and they must be held accountable,
particularly when it comes to the largest and most powerful
tech firms.
Ms. Kelly. Yes, my former colleague, Will Hurd, and I did a
year's study on artificial intelligence, and that was one of
the things that we looked at.
In 2016 the FTC released the ``Combating Fraud in African
American and Latino Communities: The FTC's Comprehensive
Strategic Plan.'' In the report it highlighted that the FTC
would work to build networks with community organizations and
visit areas with low rates of consumer fraud reporting.
Chair Khan, how do you plan to improve communicating
consumer protection issues to hard-to-reach communities?
Ms. Khan. Congresswoman, this is such an essential issue,
and I think we need to think hard about how we can improve on
this front.
One priority for me is really focusing on building out our
regional presence. We already have a whole set of regional
offices, and I think they can provide a really great way to
directly connect with communities that might otherwise not be
directly hearing the work and listening to the work that we are
doing. And so I think it is incumbent on us to make sure we are
directly reaching out to those communities and making sure that
we are helping all Americans.
Ms. Kelly. Thank you. I think that all of us here would
agree that the FTC is underresourced, and the role of the FTC
is only likely to increase in coming years. So Chair Khan, do
you think more resources are needed for the technology
enforcement division, given the public's attention on
competition, generally?
How would you utilize additional resources for addressing
privacy and data security?
Ms. Khan. Certainly, I think more resources would be
important for our ability to be able to do this work in a more
comprehensive and effective way.
In terms of where the specific needs are, I think hiring
more technologists, hiring more data analysts, hiring more
financial analysts, really making sure that we are equipped
with the skill sets and tools that are allowing us to, at the
very least, understand these business practices is going to be
imperative.
And so I think that will be an important step forward as we
figure out how we can make our enforcement in these markets
more effective.
Ms. Kelly. Thank you much.
And Madam Chair, I will yield back 10 seconds.
Ms. Schakowsky. Mr. Armstrong, I recognize you for 5
minutes.
Mr. Armstrong. Thank you, Madam Chair.
Commissioner Phillips, you and I have previously discussed
your hesitation in using data privacy indicators during an
antitrust analysis. Yet, as we know, the consumer welfare
standard--and that might be a little up in the air right now,
which, if I get time at the end, I would like to ask a
question--is not solely about price.
In fact, we--I mean, oftentimes when you see some of the
large tech companies' attorneys testify, they dance around this
question pretty well. We were lucky enough to have the CEOs in
this committee testifying, and they were a little more brutally
honest, which I appreciated. But it is not solely about price.
It can be applied to nonprice determinants like quality,
variety, and innovation, although it is more difficult to
assign any kind of quantitative value to those indicators.
That is a challenging aspect of the current antitrust
scrutiny on large technology firms, many of which provide
services free to their users. And this is assuming we apply the
consumer welfare standard to the user of the tech service. It
is even more complex when we understand that the user is almost
always not the customer. The user is the product, or
alternatively, their data is the product.
So ultimately, Mr. Phillips, who--I mean, who is the
consumer in this analysis, or is it both, and you have price
and nonprice price competition coexist?
[Pause.]
Mr. Armstrong. Did we lose him?
Voice. Noah, are you on mute?
Mr. Phillips. Forgive me, Congressman. Sorry about that. I
was saying----
Mr. Armstrong. No problem.
Mr. Phillips. I appreciate it.
Mr. Armstrong. I am sure it was really, really smart.
Mr. Phillips. I don't know about that. I think you hit on
two really important areas of complexity.
So one area has to do with what consumer we are looking out
for. And where you have two-sided markets--let's say I provide
you a free, online product, and I make my money on the other
side, selling ads to companies that want to sell ads. We, under
certain circumstances, are compelled to take into account
both--just in the initial part of the case that is under
prevailing law today. But at the end of the day, we absolutely
do need to think about the costs and the benefits of the
conduct in question.
With respect to privacy and consumer welfare, privacy can
be an aspect of competition, and the consumer welfare standard
absolutely can reach it. But privacy is a little more
complicated for two reasons, in particular.
The first is that people have different tastes for privacy.
If you walk by a Starbucks and get an ad--because you are
physically close to Starbucks--for a latte, you might respond
and say, ``Wow, that is creepy. They knew I was here.'' Or you
might say, ``Hey, great, I got this ad.'' And because different
people assimilate that experience differently, we have to look
with more of a fine-tooth comb to understand how the consumer
is being affected.
The second thing has to do with the fact that there are
things that consumers absolutely do prefer. They do prefer a
lower price, for example. They do prefer more choice. I mean, I
just think we have to look with a great deal of care.
Mr. Armstrong. I think there is a couple other issues with
privacy, maybe a little more fundamental, which in my
experience is, every time one of these companies increases your
privacy, which I think we all appreciate, it often has the
benefit of increasing their market share, as well. And those--
and, listen, we have had these conversations a lot. That is the
difference between Energy and Commerce sometimes, and
antitrust. Sometimes what we are trying to do on one level is
not always going to be consistent with the other level.
So--and I think that is particularly true with the consumer
welfare standard. I have concerns about the 2015 removal--
policy statement that articulated antitrust principles that
guided the Commission's authority, which included the 2015--
which included the consumer welfare standard, which has been
established as jurisprudence for decades, and the rule of
reason, which has been established for over a century.
And I will admit, and I think I--I am guessing you will all
agree with me, that some of the tech platform issues that we
face in these areas are very, very unique. And part of the
reason is who is the consumer, who is the customer.
But are--I am concerned by the fact that the Commission did
not replace the 2015 statement with a new policy that would at
least provide notice on the Commission's plan and antitrust
enforcement action. And without such a replacement policy, what
restrictions, if any, are placed on the consumers antitrust
enforcement practice right now?
But my question for Mr. Phillips, and then, if we have time
for one more--and this will probably be my last one, because I
am rambling--do we have concerns about antitrust legislation
that looks different for certain economic sectors?
Mr. Phillips. Thank you, Congressman.
Mr. Armstrong. Do you think there is challenges to
platforms that are different than other areas of antitrust?
Mr. Phillips. There sometimes are. Some of the platforms
have network effects that are a kind of efficiency, if you
will. But basically, the more people use it, the more popular
it is for the users. And they can have indirect network
effects. The more popular it is for me as the user, the better
it is for you as an advertiser.
And there are some aspects of these markets that are a
little bit different. On the other hand, they are hardly the
first markets like these. So telephone networks, railroads,
these are just a couple of examples in American history where
we have seen these effects.
But I think your point, that sometimes when people do
things in the name of privacy it can hurt competition,
underscores the point that it is not as simple as saying,
``This conduct increases privacy, ergo it is good.'' When we
are doing competition law, what we need to look at is, what is
the effect on competition?
Mr. Chopra. Congressman, could I just add? I think the--you
raised concerns--yes, the Commission did rescind the Obama
FTC's policy. The Obama FTC policy statement was unmoored from
what Congress specified in the law and has essentially rendered
it dead letter. I think the Obama FTC policy statement has
undermined our ability to scrutinize some of these tech
platform issues.
And you are right, we need to be able to communicate how
that will be applied. And I know, as the Chair has said in the
past, we will be doing so in the future. But we cannot just
relegate that policy statement to, essentially, veto the law.
It is not the Federal Trade Commission's ability--we are not
supposed to veto or repeal laws. That is what you guys do.
Mr. Armstrong. The order in which you communicate and
regulate gets important. Thank you both.
I am sorry for going over.
Ms. Schakowsky. Congresswoman Rice, I am recognizing you
for 5 minutes.
Miss Rice. Thank you, Madam Chair. The FTC has a long
history of protecting our military veterans and service members
from fraud. That is partly because protecting vulnerable
consumers is the FTC's main mission, but also because military
veterans and service members, despite making the biggest
sacrifice for our country, also have a long history of being
targets of fraud and scams.
To assist the FTC with its mission and to protect our
military veterans and service members, I introduced the
Veterans and Service Member Consumer Protection Act of 2021
with my friend, Congressman Fred Upton. The bill would
establish a coordinator within the FTC to educate military
veterans and service members on schemes particularly targeted
at them, and teach them how to react to and report these
schemes to the FTC.
It would also require the coordinator to maintain a public-
facing website with resources for military veterans and service
members, and establish a procedure for receiving complaints
made by military veterans and service members at the FTC.
So I would ask all three of the witnesses who are left, if
you could talk about the importance of having a coordinator for
military veterans and service members, and why would
centralizing this position be helpful?
Mr. Chopra. So, Congresswoman, you are totally right.
Service members and veterans actually report, for example,
identity theft at a much higher rate than the general public.
There is a whole host of schemes that target the military
community.
You know, I have been disappointed. I think the
Commission--Congress gave us jurisdiction to enforce the
Military Lending Act of 2013. We have not brought a single
action. I think that needs to change, and we need to sharpen
our focus on how we work with, for example, the Undersecretary
for Personnel and Readiness at the Pentagon, who helps, you
know, broadcast where people should be on alert.
So just as we have an elder justice coordinator, I think
you are right, that we need to really make sure we are focusing
and centralizing some of our work when it comes to policing
against abuses targeting service members and veterans.
Miss Rice. Chair Khan?
Ms. Khan. I would echo that and note that, you know, as you
stated up front, we have seen in our work that military members
and service members are particularly targeted, including by
for-profit schools and payday lenders. And so making sure that
we are squarely focused on these harms to some of the most
vulnerable members in society is imperative.
Miss Rice. And is Mr. Phillips, who is----
Mr. Phillips. Congresswoman, yes, it is.
Miss Rice. Thanks.
Mr. Phillips. And thank you for your leadership on this
issue. I think it is really important.
I think having a coordinator not only helps to focus us,
but it puts a lot of emphasis on something that you mentioned,
and that is the consumer education that we--teaching service
members and their families how to deal with some of the scams
that they see.
There is a lot of important work that we do enforcing the
law and in penalizing those who violate it. But teaching people
how to fend for themselves is a very important complement to
that. So I really appreciate your leadership on this and your
focus on that critical area.
Miss Rice. Great. I was glad to see that President Biden's
recent Executive order on economic competition urged the FTC to
ban or limit noncompete agreements. This action will go a long
way to help workers. Today it is estimated that 1 in 5 workers
without a college degree are subject to noncompete agreements,
and 30 to 40 percent are not asked to sign these agreements
until after they have accepted the position.
But we have seen that competition and labor markets
actually empowers workers to demand higher wages and can
increase innovation, as well. So I am very supportive of my
colleague from San Diego and a member of this committee,
Congressman Scott Peters' bill, the Workforce Mobility Act,
which would place strong limits on noncompete agreements.
So I would put this to Chair Khan: To what extent would a
clear expression of congressional intent, such as the passage
of the Workforce Mobility Act, help to shape the FTC's policy
and enforcement agenda with regard to noncompete reform?
Ms. Khan. Congresswoman, I think clarifications from
Congress are always helpful, especially in cases where we would
be using, say, certain types of rulemaking authorities that the
agency has neglected over recent decades. And so those types of
express authority are always a helpful way to boost our work.
Miss Rice. Would you agree, Mr. Chopra?
Mr. Chopra. Yes. I think these noncompete agreements, it is
not just low-wage workers, it is even doctors and medical
providers who are trapped and are being essentially forced to
move to entirely different metropolitan area to continue their
profession. This is bad for economic growth. It is bad for our
society. And we need to take a close look. And I am glad
Congress is looking too.
Miss Rice. Thank you, and I am out of time, so I don't
think I am going to get to Mr. Phillips, unless the Chair will
let him respond. Thank you.
Mr. Phillips. Thank you, Congresswoman. Two points. The
first is I do think, when it comes to rulemaking, it is very
important that we have a congressional directive. I think that
the focus on labor mobility in the EO, the Executive order,
from the President on noncompetes, on occupational licensing is
a great focus.
Allowing people to move around gives them bargaining
leverage in their job and helps allocate labor resources in a
way that also helps businesses.
Ms. Wilson. And this is Commissioner Wilson. I am still on,
as well. And for the sake of time, I will just echo the remarks
that Commissioner Phillips made.
Ms. Schakowsky. Now I recognize Congressman Soto for 5
minutes.
Mr. Soto. Thank you so much, Madam Chair. And to our FTC
Commissioners, thank you for your patience. We have been
through a bunch of unnecessary motions to adjourn today, and we
respect your time, so I wish things were a little smoother.
Thank you for sticking with us.
We know we just passed a key bill to help out with
restoring your restitution authority, the Consumer Protection
and Recovery Act, and allowing the FTC to get fraudsters--
allowing you to get ill-gotten gains from con artists and--even
though a recent Supreme Court case sadly took it away.
We know COVID has only increased the scams throughout this
pandemic. I mean, everything from stimulus check scams, to
paycheck protection loan scams, to vaccine scams. In Florida we
even had a miracle mineral solution scam to sell a solution
primarily made up of bleach out of Miami, Florida. They sold
tens of thousands of bottles and made over a million dollars.
It is critical that we give you all the tools you can use
to handle this. And the 10-year statute of limitations is an
important clarification, with the compromise. And we applaud
you on some major victories, including the Volkswagen and DeVry
cases that would have exceeded the 5-year statute of
limitations, if that was what we ended up getting.
So to our Commissioners--and it would be great to hear from
each of you--does the current budget give you enough resources
to be able to enforce the Consumer Protection Recovery Act when
it becomes law?
Ms. Khan. Thanks----
Mr. Soto. We will start with--yes, please continue.
Ms. Khan. Thanks, Congressman. As a general matter, the
agency is significantly underresourced, and additional
resources to be able to boost our enforcement across these
areas is essential.
I think there are questions about how we can be more
effective in our enforcement, especially when it comes to the
types of frauds and scams that you mentioned. So this is
certainly something that we will be thinking about.
Mr. Soto. And Commissioner Phillips?
Mr. Phillips. Thank you, Congressman. I would just start
with the fact that, when I began, our budget was about 309
million, I think something like that, and the latest
congressional budget justification has us at 389. So there has
been a substantial increase in the ask, including some funding
from Congress. So I think it is important to track how those
resources are used, but I do think we can do more with more.
That is certainly a true thing. But I think it is important to
take care on how we spend what we have.
Mr. Soto. Thank you.
Commissioner Chopra?
Mr. Chopra. Sir, I think I know every agency says that they
need more resources, but just looking at the data, we are
stretched completely to capacity, and the rubber band is
snapping. And if we need to effectively enforce the law, we
need the resources.
There are so many laws that Congress has recently passed,
whether it relates to opioids or so many other topics, that the
FTC has not brought a single law enforcement action on. That is
not just resources, that is also Commissioner accountability.
But resources will certainly help.
Mr. Soto. Commissioner Slaughter?
Ms. Wilson. So Commissioner Slaughter had to leave, but
Commissioner Wilson is here.
Mr. Soto. OK, Commissioner Wilson.
Ms. Wilson. And I would say that our hard-working staff
have been even harder-working during the last 18 months. They
are teleworking, but they are working incredibly hard to stay
on top of the increase in mergers as well as the increase in
COVID scams.
And I agree with Commissioner Phillips, it is important to
understand how we are spending additional appropriations, but I
also know that there are many different areas of the economy
where Congress has expressed interest in our being very active
and aggressive, and it is difficult to do that unless we have
the appropriate resources to do that.
Mr. Soto. Thank you, Commissioner. And as a practicing
civil law attorney for many years, I know how important
restitution can be to make victims whole. So this is a
fundamental function that we need to restore and make sure
there is ample statutory authority.
I want to end with a question to Chair Khan. We have the
Blockchain Innovation Act that recently passed the House, going
to the Senate, that would have you all do reports on
cryptocurrency and the importance of consumer protections. Is
that something that you all are prepared to be able to report
on?
Ms. Khan. Thanks, Congressman. I think any time we are, you
know, given another slice of the economy to be looking at and
studying, we want to make sure that we have the resources to be
able to do that faithfully and discharge our statutory
obligations. But certainly, the Commission was designed by
Congress to be a watchdog across the economy and stay up to
date on different economic trends and business practices.
So, you know, I think there is always a question about
which regulator or which enforcement body is best positioned to
oversee particular areas, so those types of considerations
always need to be top of mind. But of course, if Congress asks
us to do something, we are obliged to do so.
Mr. Soto. Sure. Thank you so much, and my time has expired.
Ms. Schakowsky. Congresswoman Fletcher, you are recognized
for 5 minutes, and I believe that is the last questioner.
Mrs. Fletcher. Terrific. Well, thank you so much,
Chairwoman Schakowsky, and thanks to you and Ranking Member
Bilirakis for today's hearing. Thank you so much to our FTC
Commissioners here and virtually, and Chair Khan, for the time
that you have spent with us today. It has been a long day. I
join my colleagues in apologizing for the interruptions, but
this has been really important and useful information for us.
So I appreciate you sticking with us, and your insights on the
issues facing the agency and the country at this time.
There has been a lot of useful discussion about how to
modernize the consumer protection capabilities, how to address
funding and resources and tools to protect consumers in what
is, clearly, a complex and ever-changing marketplace. Mr. Soto
was just talking about blockchain, and his legislation related
to that. There is so much coming at us so quickly right now.
And I think, you know, what is clear from this hearing is that
you all need the resources, and more resources to accomplish
the many, many tasks we have put before you.
In my district we talk all the time about wanting
government to be efficient, effective, and ethical. And
certainly, we know how effective the FTC can be and has been.
But we need to make sure that we are giving you the resources
and the tools that you need to be able to do that absolutely
vital and effective work. And that was one of the reasons I was
really glad to cosponsor the legislation to restore the FTC's
13(b) authority, and to see it pass the House. Like Mr. Soto, I
was also a lawyer in private practice, and know how important
it is to have those remedies available to you. And so we are
working very hard to continue to respond and move that forward
as quickly as possible.
I do want to take the--about 3 minutes I have left to put--
follow up on one issue, and then maybe, since I am the last
person, put it out for any other questions that--or any other
things that you didn't get to share.
But Mr. McNerney was talking earlier about ransomware and
other cyber-related attacks. And, you know, in my home State of
Texas, we saw, just in 2019 alone, there were 22 different
municipalities that were hit with ransomware attacks, and
really crippled core government services for days. Certainly,
the entire country was following, as--the Colonial Pipeline
incident a couple of months ago. And we have really seen the
challenges that these ransomware attacks present to people
across every sector, whether it is, you know, companies,
schools, and local governments, hospitals, critical
infrastructure. It really needs to be a concern to all of us.
So, Chair Khan, can you explain the FTC's role in
protecting consumers and small businesses--and really, all
businesses--against ransomware attacks?
And then, rather than taking a break to answer the
question, I will also ask you to tell us whether the FTC has
sufficient resources to follow up on all the ransomware
complaints it receives. How more resources can be helpful?
And any thoughts you may have on H.R. 4551 requiring
reporting to Congress, with kind of the time we have left.
Ms. Khan. Thanks so much, Congresswoman. I think it is
difficult to overstate the importance of addressing, head on,
some of these really predatory practices and the kind of
ransomware attacks that we have seen that have really crippled
our critical infrastructure, as well as targeting businesses
both big and small.
With regards to the FTC, we, of course, do use our unfair
or deceptive acts or practices authority to scrutinize data
security practices. And I think it is incumbent on us to make
sure that companies are not being reckless and are really doing
their due diligence when it comes to protecting consumers and
protecting businesses from these types of attacks.
I think there are also really interesting questions to be
asked about the ways in which consolidation and concentration
of data also render certain companies more susceptible to these
types of attacks. It means that these types of attacks have
cascading effects, in terms of exposing millions and millions
of consumers, millions and millions of businesses to these
types of breaches.
So I think, both on the consumer protection side and also,
frankly, on the competition side, we need to be thinking about
how some of these incentives are working.
Mrs. Fletcher. That is really helpful. If I can just follow
up on that with a question, and then I have a couple more
questions I will for the record at the conclusion of the
hearing.
But you know, there is a bill--I think it is part of this
hearing--requiring the FTC to report to Congress on a recurring
basis about cross-border incidents that involve ransomware and
other cyber attacks, to make recommendations both for
legislation to us, and also best practices.
Does the FTC have the resources to do this, and does it
have the information or have the ability to get the information
that we are asking for?
Ms. Khan. Certainly, these types of information asymmetries
are vast, and sometimes it is hugely burdensome on the agency
to be able to do these types of regular followups. So I think
additional resources on that front are always very helpful.
Mr. Chopra. Congresswoman, if I could just add with respect
to ransomware attacks, and--you know, you mentioned being in
Houston, an energy area. There is--energy infrastructure is--
obviously, Colonial Pipeline was a reminder of this, about how
these are just unbelievable targets by state and nonstate
actors.
In 2005 George W. Bush signed into law, with a bipartisan
majority in Congress, the ability for the FTC to put in some
data safeguards when it comes to energy and utilities. You
know, Commissioners of both parties declined to actually
implement what Congress asked.
So part of what we also have to do is look at all the
authorities you have previously given us, see where they might
solve some of the problems, and ask for resources to actually
do them. But we have to just stop ignoring these authorities
that you are giving us.
Mrs. Fletcher. Terrific. Thank you so much, Commissioner
Chopra.
I see I went over my time. I appreciate the Chairwoman
permitting me to get those complete answers. And again, I thank
you all for your time today, and for all the work you are doing
on behalf of people across the country. Thank you so much.
And I will yield back.
Ms. Schakowsky. Well, that does conclude our first panel. I
know that you had planned to be here until 20 to 4 in the
afternoon, anyway, but I really want to thank you for your
patience. It was--this conclusion is a long time in coming, but
thank you so much for those of you who are here, our Members
that are here, as well, online or in person, but especially the
Commissioners for being here.
And we look forward--the subcommittee looks forward to
working with you on many issues in a bipartisan way, as time
goes on. So thank you very, very much. I appreciate you.
Mr. Phillips. Thank you, Madam Chair.
Ms. Schakowsky. I am going to----
Mr. Bilirakis. Thank you so much.
Ms. Schakowsky. OK.
Voice. We need a couple of minutes.
Ms. Schakowsky. Yes, we are going to need just about 2
minutes or so to set up for our next panel. And I will then
introduce them. Thank you.
Ms. Wilson. Thank you, Madam Chair.
[Pause.]
Ms. Schakowsky. Before I introduce the panelists for panel
2, I just want to thank you so much. I know this has been such
a long day, and you are still here, and I appreciate it.
And you know, we may not have too many Members, but I want
you to know--and you, I think, all do know--that everything is
on the record, and we will be here forever, and so we just
appreciate that. And I am sure others will show up online, as
well.
So I am happy to introduce the witnesses today. We have
David Vladeck, professor of law at Georgetown University Law
Center. We have--Graham Dufault--am I saying it correctly? Yes?
Oh, good--who is the senior director for public policy at the
App Association. And Sally Greenberg, who is the executive
director of the National Consumers League.
And at this time, the Chair will recognize each of the
witnesses for 5 minutes.
I know that you are probably pretty familiar with this, but
I will just say it, because it is in my notes to say. Make sure
that you remember that you have got the series of lights. Green
will remain until--for 4 minutes, and then yellow will show up
for the 1-minute sign. And red means that we hope you will be
able to conclude.
So, Mr. Vladeck, you are now recognized for 5 minutes.
STATEMENT OF DAVID C. VLADECK, PROFESSOR OF LAW, GEORGETOWN
UNIVERSITY LAW CENTER; GRAHAM DUFAULT, SENIOR DIRECTOR FOR
PUBLIC POLICY, ACT, THE APP ASSOCIATION; AND SALLY GREENBERG,
EXECUTIVE DIRECTOR, NATIONAL CONSUMERS LEAGUE
STATEMENT OF DAVID C. VLADECK
Mr. Vladeck. Well, thank you, Chair Schakowsky, Ranking
Member Bilirakis, and members of the subcommittee. Thank you
for your invitation to come before you today to give you my
views on the 16 FTC bills pending before the subcommittee. What
I would like to do is highlight two proposals that I think are
of paramount importance to the FTC.
First, I think it is imperative that Congress enact H.R.
4447, the 21st Century Act, and restore to the FTC the standard
rulemaking authority that it had prior to [inaudible]. This
should not be a heavy lift. Virtually every other agency has
this power.
Now, restoration of FTC rulemaking would authorize the
Commission to set clear and specific rules on what acts and
practices are deceptive and unfair. Doing so would provide the
certainty the business community claims it wants and enable the
FTC to develop binding, enforceable norms that will both deter
violations and permit efficient and effective enforcement.
And with rulemaking, the FTC would no longer have to rely
on the archaic and resource-wasting enforcement regime that
exists today. We bring cookie-cutter cases, one by one,
shutting down one scam and then moving on to the next
essentially identical scam. That is what the FTC had to do
during the tsunami of debt relief scams at the beginning of
2019. We brought a lot of cases, but we didn't make much
headway. Once the FTC promulgated a regulation using its
authority under the Telemarketing and Consumer Fraud and Abuse
Act, we were able to chase out all of the bad actors. Why?
Because they were all in violation of the new rule, and they
were worried about redress and civil penalties. With
rulemaking, the FTC could replicate this success many times
over, and make enforcement so much more efficient.
Now, the only argument against restoring rulemaking
authority is the old canard that the FTC might abuse it. Of
course, that could be said of every agency. And here there are
strong safeguards in place to guard against that.
First, the bipartisan nature of the Commission is a real
bulwark against overreaching. Why? Because if the agency--if
the Commission breaks 3 to 2, a reviewing court is going to be
skeptical that this is a really good rule.
There is also some judicial review. And if there is a
real--you know, if the FTC does overreach, then there is the
Congressional Review Act. So there are lots of guardrails that
already exist.
In addition, the FTC should ensure that the--Congress
should ensure that the FTC has jurisdiction over the
telecommunication common carriers and nonprofit entities. The
rationale for the common carrier exemption--namely, that the
FCC comprehensively regulates all activities of monopolist
carriers--no longer exists. The line between common carriers
and the other telecommunications services has been obliterated,
and consumers face real risks of things like bill cramming,
throttling of service, false claims about internet speed, and
other unfair, deceptive acts by the carriers. There is nothing
that the Federal--communications can do to keep consumers safe
in this space.
And Congress ought to repeal the carve-out for nonprofit
entities. Too often fraudulent charities, bogus insurers, and
fake healthcare providers hide behind the veil of nonprofit
status. Piercing that veil is always difficult, and at times
impossible, leaving consumers unprotected.
So those are the things that I would urge this subcommittee
to take on, along with the point that everyone has made all
day, which is the FTC is resource scarce. The SEC has four
times the number of employees and a $2 billion budget. The CFPB
has 500 more employees than the FTC does and a substantially
greater budget. It is time that the FTC got its reasonable
share. Thanks so much.
[The prepared statement of Mr. Vladeck follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Schakowsky. Thank you so much.
And now, Mr. Dufault, you are recognized for 5 minutes.
STATEMENT OF GRAHAM DUFAULT
Mr. Dufault. Thank you, Chairwoman Schakowsky, Ranking
Member Bilirakis, and members of the subcommittee. My name is
Graham Default, and I am senior director for public policy at
the App Association. The App Association is the leading trade
group representing small, connected device and mobile software
companies in the app economy. It is a $1.7 trillion sector that
is global and that supports 5.9 million jobs in the U.S. I am
here to share the perspectives of App Association members, many
of which are in your districts, on the several measures you
consider today to modernize the FTC.
In the Chicago area Tom Gorczynski cofounded Devscale, a
custom app development company focused on a transparent
development cycle. In the Tampa area Ann and Jon Adair founded
Thinkamingo, an app that helps students develop writing skills.
A narrow focus on how many billions of dollars a fine needs to
be to deter social media giants from privacy violations ignores
the impacts of FTC reform on our member companies. Our hope is
that the subcommittee just carefully considers any proposal's
impact on companies like Thinkamingo and Devscale, even though
the primary impetus might involve much larger companies.
The last time Congress reauthorized the FTC was in 1996, so
the subcommittee is right to consider updating the statute.
Some argue that the FTC must be more transparent in its
processes and accountable to Congress and constituents. Others
point to the inadequacy of FTC authority to pursue consumer
protection harms. There is merit to both views, and we applaud
the subcommittee for its review of legislation to better equip
the FTC and to improve clarity around its authority.
The proposals you consider today fall into three related
categories.
Number one, expanding the FTC's enforcement and regulatory
capabilities. We agree with the intent behind these measures to
enhance the FTC's ability to punish and deter consumer
protection harms. However, we recommend that rulemaking
authority and civil penalties be tied to clearly defined
privacy and data security requirements. Congress needs to set
guardrails in order to avoid 180-degree shifts from
administration to administration and to ensure the agency
carries out Congress's intent.
Number two, clarifying the contours of FTC authority. The
SURE Act, for example, would codify more of the FTC's own
unfairness statement and require the Bureau of Economics to be
consulted in cases brought under the FTC's unfairness prong,
although economic considerations are never the only relevant
ones that are important, especially for small companies with
small compliance and legal budgets.
The CLEAR act would also help covered entities better
understand what the FTC views as legal conduct under an
otherwise intentionally vague statute.
Bills like these should be coupled with more authority to
better--and better enforcement tools for the FTC to pursue
privacy and data security harms, with direction from Congress.
Number three, reporting and transparency requirements. Many
of these are welcome measures to enhance the subcommittee's
oversight efforts and the FTC's own enforcement planning. The
Consumer Equity Protection Act would help ensure the Commission
develops a meaningful record on harmful activities targeting
protected characteristics like sexual orientation, race,
disability, and others. FTC reports would also give the
subcommittee a better sense of the Commission's plans and would
help the Commission make informed decisions on how to
prioritize enforcement acts against schemes targeting older
Americans.
The subcommittee should provide more resources for the FTC
to fund these reporting and transparency requirements.
On the competition side of the FTC, withdrawal of the
unfair methods of competition statement has sparked
understandable concerns. There is an opportunity for the
Commission to clarify the applicability of its UMC authority to
standard essential patents, or SEPs. Anticompetitive SEP abuse
harms consumers and competition alike. This is an example of
where FTC guidance can help.
On the consumer protection side of the FTC, establishing
strong national privacy rules is especially important to App
Association members. We want to help Congress work toward a
bipartisan agreement. In February we sent a letter to this
committee urging action on privacy in the wake of the FTC
settlement with Flo, a fertility and period tracking app. The
settlement highlighted the lack of available tools at the FTC's
disposal to stop and prevent privacy harms.
As the creation and transfer of health data outside the
HIPAA umbrella proliferates, the FTC needs better privacy tools
based on the risks data processing activities pose to
consumers. In doing so, Congress should set forth the
overarching purposes and specify the limits of FTC rules.
We hope the discussion today helps carve a path toward a
modernized FTC that can better meet the challenges of the 21st
century. Thank you for the opportunity to share our views, and
I look forward to your questions.
[The prepared statement of Mr. Dufault follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Schakowsky. Thank you, Mr. Dufault, and now I welcome
Ms. Greenberg for 5 minutes.
[Pause.]
Ms. Schakowsky. Your microphone.
Ms. Greenberg. Oh, sorry.
STATEMENT OF SALLY GREENBERG
Ms. Greenberg. Good afternoon, Chairwoman Schakowsky,
Ranking Member Bilirakis, and members of the subcommittee. My
name is Sally Greenberg. I am executive director of the
National Consumers League, which was founded in 1899 and is
America's pioneering consumer and worker advocacy organization.
Today NCL works, via our fraud.org campaign, to educate
consumers about scams and rip-offs. For more than a century,
the FTC has enforced laws that protect competition and prohibit
unfair or deceptive practices.
The Commission is responsible for enforcing or
administering more than 70 laws, ranging from labeling of wool
products to protecting online privacy and data security. It is
with this unique consumer protection charge in mind that I am
pleased to offer NCL's support for many of the FTC reform bills
currently before the subcommittee. While my remarks won't cover
all of the proposed bills, I would like to discuss why we are
supporting the proposals that would give the FTC what it needs
most: more authority and more capacity to execute on its broad
mandate to protect consumers.
First, authority. Faced with an onslaught of fraud and
misinformation threats, consumers need a nimble FTC that can
address new industry uses and hold wrongdoers accountable. If
we want the threat of enforcement to truly deter criminals in
the marketplace, we need an FTC that can do more than simply
try to recover ill-gotten gains, as important as that authority
is. Even this central function of the agency was significantly
hamstrung by the Supreme Court's recent decision in AMG Capital
Management.
It is for these reasons that NCL strongly supports
Congresswoman Castor's 21st Century FTC Act, which would give
the Commission Administrative Procedure Act rulemaking
authority and first-offense civil penalty authority.
We are also pleased to support Chairwoman Schakowsky's FTC
Autonomy Act, which would allow the Commission more freedom to
seek civil penalties by eliminating burdensome regulations that
can delay enforcement activity.
I would like to turn now to the reforms needed to expand
the Commission's capacity. Expecting the FTC to adequately
police the technology industry with its current staff resources
is akin to bringing a water gun to a thermonuclear war. The
Commission is being asked to consider extremely detailed
regulation and enforcement in the ad tech, privacy, application
store, and data security spaces with what can only be described
as a skeleton crew.
To oversee and rein in the tech sector's refusal to police
its own platforms, the FTC must have highly qualified expertise
on staff to do the detailed analysis necessary to produce
effective enforcement and regulatory policies.
That is why we are pleased to support Congressman
McNerney's Federal Trade Commission Technologists Act. This
much-needed bill would authorize the FTC to establish an office
of technologists staffed with more than two dozen experts on
information technology, cybersecurity, computer science, and
related fields.
I also want to address the need for more FTC action to
combat disinformation. The deluge of misinformation and
disinformation online, particularly on social media platforms,
is a constant threat to consumers. While most platforms
prohibit such disinformation in their terms of service, their
willingness to enforce their terms has often been far too lax.
This allows fraudulent schemes that cost consumers billions of
dollars to proliferate. It fuels vaccine hesitancy that is
costing lives every day. And perhaps most troubling, it enables
some of the vilest elements of our society--Holocaust deniers,
White supremacists, extremists, and other online trolls who
threatened our very democracy on January 6th--to proliferate.
Reducing the ability of purveyors of disinformation,
falsehoods, and conspiracy theories to abuse social media tools
must be a pressing national priority. To the extent that
current laws make it hard to protect consumers for
disinformation online, Congress should consider reforming those
laws. The Online Consumer Protection Act should serve as a
catalyst for Congress to engage in more robust debate.
In conclusion, my remarks have focused on specific
proposals that would help the Commission better protect
consumers. Consumers do not need new laws that burden the
Commission with needless red tape. What consumers need today
is, instead, a robust Commission, empowered to go after truly
bad actors in the marketplace.
Chairwoman Schakowsky, Ranking Member Bilirakis, and
members of the subcommittee, thank you for including the
consumer perspective in today's hearing.
[The prepared statement of Ms. Greenberg follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Schakowsky. I thank our witnesses so much, and we have
concluded with the witness opening statements now.
And at this time we will move to Member questions. Each
Member will have 5 minutes to ask questions of our witnesses,
and I will recognize myself at this time.
So we have heard a lot about ways that the FTC can update
the authorities that it has, the resources that it has, in
order to do the job to protect consumers that we expect. And
that is why I introduced the FTC Autonomy Act. And that bill
would allow the FTC to bring enforcement actions seeking civil
penalties without having to first consult with the Department
of Justice.
Professor Vladeck, how would independent litigation
authorities for the FTC benefit consumers?
Mr. Vladeck. Well, you know, it would shorten the time that
the FTC has in order to get a civil penalty from a defendant
that has already been found to be a violator, has violated a
rule.
And so the current practice is that the FTC has to make a
referral to the Department of Justice. The Department of
Justice must agree to take the referral. The FTC does most of
the drafting of the legal documents that need to be filed in
court. But ultimately, the Justice Department will do that. And
so in cases, for example, that need to go to trial, there is an
enormous duplication of work. Lawyers do the first cut, then
the Justice Department lawyers review it. It is just an
incredible waste of resources on both the FTC's part and the
Department of Justice's part.
But there is another concern, which is the FTC was designed
to be an independent agency, bipartisan, not beholden to the
President through the executive branch. But if the FTC has to
rely on the Justice Department to enforce its own orders, well,
that independence sometimes can be compromised. And so I think
this is an important step forward. The FTC has long asked
Congress to give us that kind of independent litigation
authority. And I would urge that the subcommittee focus this
bill----
Ms. Schakowsky. Thank you so much. I wanted to ask the
same--around the same question, so we know--to Ms. Greenberg.
And we know that some stakeholders are critical of the idea
that we are talking about now, of giving the FTC this
authority--you said you support the legislation--arguing that
it could lead to the FTC--the FTC to overreach and unfairly
harm businesses. And I am wondering how you would respond to
those concerns that have been raised, because it seems to me
that we want to empower the FTC in the ways that we just heard
the professor mention.
Ms. Greenberg. Yes, and the FTC is a critically important
consumer protection agency. I think it punches above its
weight. We need to give it the power and the authority it needs
to hold bad actors accountable, and the authority that it would
provide the FTC in your legislation, I think, will be
ultimately more protective of consumers.
And the FTC, unfortunately, is hamstrung by the processes
and procedures which other agencies do not have to confront.
Ms. Schakowsky. How would you respond to the critics,
Professor Vladeck?
Mr. Vladeck. I--the criticism doesn't make any sense. The
court is going to do the right thing, and it is going to base
its decision on the facts and on the law. The fact that the
Department of Justice lawyer is standing before the court or an
FTC lawyer is standing before the court doesn't really matter.
And to be clear, it is rare that the Department of Justice
disagrees with the FTC. It is not a question that there is a
clash between the two enforcement agencies. It is just an
incredible duplication of effort by underresourced
organizations. It just doesn't make any sense.
Ms. Schakowsky. Thank you. I am going to state my last
question, but I think I am going to have to get it for the
record.
The theme of today's hearing is ensuring that the FTC has
the tools that it needs to protect consumers in the modern
marketplace and into the future and practice. This often means
adapting our online, interconnected world.
What I am going to ask--and put--submit for the record--is
how has this shift to online commerce, the proliferation of
social media, and the general dependence on the Internet
changed consumers' expectations?
I think this is a really important area for us to explore.
But I will yield back and recognize Mr. Bilirakis, the
ranking member of the subcommittee.
Mr. Bilirakis. Thank you, Madam Chair. Madam Chair, I don't
mind if the witnesses want to answer that question. I know how
important it is, but I know we are running a little late today.
So whatever you feel, but----
Ms. Schakowsky. Well, if--you know, brief answers, or at
least outlines, and then we can get more in writing, as well.
Ms. Greenberg. Well, I think we have seen an uptick in our
fraud center over the last several years, about--with cases of
fraud through social media platforms and internet fraud. And it
has resulted in, at the FTC, needing more resources to go after
these fraudsters. And we really need to properly resource this
agency, because consumers rely on it.
And we have heard several witnesses say it is
underresourced, is underresourced now. And we--they are--far
fewer employees than they need to address the, really,
explosion of consumer fraud and bad actors out there.
Ms. Schakowsky. And I think the technologists will also be
very helpful among the things that we need to add.
Ms. Greenberg. Yes, we really need to ramp up the
technology side, because, certainly, the industry is very well
equipped to, on their end, to defend against concerns about
fraud and disinformation and misinformation on the--on
platforms.
Ms. Schakowsky. Thank you. And thank you, Mr. Ranking
Member.
Mr. Bilirakis. I appreciate it. Very good, thank you.
Well, first of all, thank you. I want to thank the
witnesses for their testimony today. And I want to thank you
for your patience.
So according to a paper published by the Regulatory
Transparency Project, State and local data privacy laws run
into constitutional problems in at least three ways: first, the
dormant commerce clause; second, the First Amendment; and
third, conflicts with existing Federal law. The article goes on
to say that policymakers should carefully consider consequences
of a patchwork of State laws.
So the first question for Mr. Dufault: Can you speak to
this growing patchwork of State laws and how they may be
impacting the dormant commerce clause?
Mr. Dufault. Thank you, Congressman Bilirakis. That is
right. I think that the dormant commerce clause really just
upholds that, even where Congress has not legislated, that
there is an area of regulation or an area of government
activity that is sort of reserved for the Federal Government
rather than for the States. And what the courts usually look at
is whether or not a State law unduly burdens interstate
commerce or whether it discriminates against a business or
commercial activity that occurs in other States.
And so, in this context, what you would look at is whether
or not the law enacted in California--or let's say there was a
privacy law enacted in Florida--unreasonably discriminates
against commerce that is occurring in other States. And so that
is an open question, and I think it is going to be a question
of growing importance as more and more States jump in.
You have got a law in California that has been already
amended. You have got--you have also got a law, general
applicability, general privacy law now in Colorado and in
Virginia. It was a close call also in Florida and Connecticut.
And so more and more States are going to be legislating in the
coming years.
And so, unless we have a single set of Federal privacy
requirements that preempt State laws while avoiding preempting,
necessarily, laws that just deal with consumer protection
generally, like many FTC Acts--I don't think necessarily that
is what we are looking for.
But just to your point, you know, that is going to be a
question going forward, and it does leave open the question
whether or not some of those State laws could run into that
constitutional question.
Mr. Bilirakis. Thank you very much. I know it is a real
concern.
Mr. Vladeck, do you believe multiple State laws are at risk
of the dormant commerce clause?
Mr. Vladeck. I do. I think it is a fair concern. I don't
think we are quite there yet, given the absence of a Federal
law. The dormant commerce clause really looks not just to the
factors Mr. Dufault mentioned but to the question about whether
these acts are so different that compliance with multiple laws
would be possible. I don't think we are there yet.
And I think Mr. Dufault made the point that, as new States
enact new laws that may be very different from the California
law, yes, I think the possibility of a Federal court
invalidating State privacy laws will grow. And I think that is
one of many good reasons Congress ought to finally enact a
comprehensive privacy and data security----
Mr. Bilirakis. Agreed. Mr. Dufault, the next question, in
your testimony you referred to H.R. 4447, the 21st Century FTC
Act, which would authorize the FTC to issue APA rulings and
enable the Commission to seek civil penalties for first-time
offenses of any provision of the FTC Act. I have very serious
concerns about granting unchecked powers to the FTC, something
my colleagues--some of my colleagues--seem to agree with.
What are the consequences that may arise as a result of
passing this legislation? Specifically, I am concerned about
our honest small businesses. If you could elaborate on that, I
would appreciate it.
Mr. Dufault. Congressman Bilirakis, the problem that we see
with general APA rulemaking authority and the general ability
to seek civil penalties for first-time offenses of unfair or
deceptive acts or practices is just that the law is
intentionally very broad, and it is an intentional--
intentionally fairly ambiguous. What is an unfair or deceptive
act or practice in X, Y, or Z case?
Because the FTC has such broad jurisdiction, I think that
is probably why the Congress initially made the decision not to
give the Commission first-time civil penalty offense authority.
And you don't--what we don't want to see is a situation that
invites innovations on new theories of liability along with
civil penalty, which can have the effect of having a, I think,
a chilling effect on innovation in the market, because now
small businesses are wondering whether or not and to what
extent they are going to be liable for up to $44,000 per
violation, per-person civil penalties, when they are
considering going into something that is somewhat novel,
because now they are sort of building that into their budgets,
and that causes--whether they have investors, or just the
company leadership, as they are looking at their 18-month plan,
setting aside a lot more money for compliance and legal
liability, and probably paying more in business insurance
rather than looking at going into new markets or expanding and
hiring new people.
Mr. Bilirakis. Thank you very much.
Madam Chair, I have introduced H.R. 2672, the FTC Reports
Act. I am going to submit my questions for the record, but I
would like to hear from the--not right now, but if you could
answer my questions to elaborate, and give me your opinion on
this particular bill.
Again, FTC Reports Act, H.R. 2672, has to do with
protecting our elders.
And I will yield back, Madam Chair, thank you.
Ms. Schakowsky. Congresswoman Castor, you are recognized
for 5 minutes.
Ms. Castor. Well, thank you, Madam Chair, and thanks to our
witnesses for lending your opinions and expertise on these
legislative proposals.
Professor Vladeck and Ms. Greenberg, you have examined and
testified in support of my bill, H.R. 4447, the 21st Century
FTC Act. You say that it will benefit consumers by giving the
FTC APA rulemaking authority and first-offense civil penalty
authority, really help the FTC hold back--bad actors
accountable.
And Professor, you have--in your testimony today you said
this bill is imperative. I just heard my good friend from
Florida say that this would allow--that APA rulemaking would
promote unchecked powers. Do you agree with that?
Everything I know about the very detailed APA rulemaking,
that doesn't jibe with me. What about you?
Mr. Vladeck. That is just not correct. APA rulemaking is a
very deliberative process. The agency has to promulgate a
proposed regulation, it has to have notice and comment.
In response to Mr. Dufault's point, there are--small
businesses may be affected. SBREFA, the Federal Small Business
Act, requires all sorts of additional protections before an
agency can finalize a rule. Once a rule is adopted by an
agency, it is often subject to intense judicial review. If a
Commission were divided on the--of a regulation, that would be
a signal to a court to look at the regulation very carefully.
So, you know, the business community has long argued that
the FTC fails to give it adequate guidance so they have clear
and specific standards. Well, that is what rulemaking does. But
it is a transparent, open process. Every record that is used by
the agency in formulating the rule has to be available. And so
there is no more clear and transparent process in formulating
policy that is binding than our APA rulemaking.
Ms. Castor. And Professor, you cited an example today when
you went through the bill. Can you provide a little more detail
on that case, or maybe some other examples to really help us
understand what this would mean for the consumer and carrying
out the FTC's mission?
Mr. Vladeck. Sure. So take robocalls. I mean, it is a
violation of an FTC rule for a telemarketer to call someone
whose phone number is listed on the national registry. That
person risks a civil penalty. Why? Because the rulemaking is
public, the rule is crystal clear, and violators are subject to
a very substantial civil penalty.
The fact of the matter is all FTC rules are enforceable by
civil penalties. So there is nothing new about that aspect of
your proposal. That is just the way things work. The rulemaking
is that, if you care about transparency, public participation,
judicial review, scrutiny, and real attention to the needs of
small business, rulemaking is your best option.
Ms. Castor. Ms. Greenberg, who would oppose this? Who would
oppose the FTC--21st Century FTC Act to give them the APA
rulemaking authority and first-offense civil penalty authority?
Ms. Greenberg. The example of legislation last year, the
COVID-19 Consumer Protection Act, really laid the groundwork, I
think, very nicely for APA rulemaking authority and first-
offense civil penalty authority for the--and it worked
beautifully, and it wasn't abused, I think, or wasn't an
overreach by Commission.
Who would oppose? I suppose those who don't want to see the
Commission be a strong consumer protection agency.
Ms. Castor. So the scam artists of the world?
Ms. Greenberg. I am sure the scam artists of the world
would be right up there----
Ms. Castor. The fraudsters of the world?
Ms. Greenberg [continuing]. As opposing----
Ms. Castor. Those telemarketers that the professor
referenced?
Ms. Greenberg. Yes. And, you know, the vast majority of
businesses are honest, but there are those who are not, and
they do not want to get in the crosshairs of the FTC.
Ms. Castor. Thank you very much.
Madam Chair, I yield back.
Ms. Schakowsky. We have the vice chair of the full
committee, and I recognize--I mean the--not vice chair, the
ranking member of full committee, and now I recognize the
ranking member for 5 minutes, Mrs. Rodgers.
Mrs. Rodgers. Thank you, Madam Chair.
Mr. Vladeck, you have significant historic knowledge on the
Commission. How important is it for the FTC Commissioners to
engage with staff and seek their input, especially from the
Commission bureaus?
Mr. Vladeck. When I was a bureau director, there was a
robust discussion within the Commission, including staff of BE,
the Bureau of Economics, on any policy issue. And the
discussion was robust. And a lot of it bubbled up from the
staff, not top down but bottom up.
Mrs. Rodgers. Thank you. Ms. Greenberg, have you been able
to work with all the Commissioner offices, and do you believe
it is important for the FTC to work in a bipartisan manner?
Ms. Greenberg. Yes, I think one of the hallmarks of the FTC
has been its bipartisan working relationships among
Commissioners. And yes, we do go talk with all the
Commissioners over time about consumer protection issues.
Mrs. Rodgers. Great. Mr. Dufault, as you know, Republicans
are very committed to enacting a Federal privacy framework this
Congress. Would you speak to how important, and just explain
what a national framework would mean for small businesses?
Mr. Dufault. Absolutely, Congresswoman. A national
framework should be very strong, and should have--it should
contain consumer rights, so the rights to access correction and
deletion of information about themselves. There should be data
minimization provisions, and it should be a single set of
strong national rules. And that is really important for our
member companies, because they are trying to figure out how to
comply with privacy requirements simultaneously across several
different States, and a growing number of States.
The State of Washington considered privacy legislation in
the last couple of legislative sessions in the State, in the
State of Florida, as well, and now multiple other States are
really considering jumping in and regulating privacy,
generally.
And so, for our member companies, what they want to be able
to do is comply with a strong set of requirements. And I always
think of the one example one of our member companies described
coming into compliance with GDPR. It cost them about $100,000
to come into compliance. They were able to compete in Europe.
What sets GDPR apart from the situation in the United States is
that GDPR applies across the continent. Here in the United
States, it is unclear what the new privacy requirements are
going to be with each year that passes right now in the current
environment.
And so compliance is not necessarily just a matter of
paying $100,000 to come up into compliance. It is just unclear
how much it will cost in the coming years.
Mrs. Rodgers. If--thank you.
Mr. Dufault. Yes.
Mrs. Rodgers. If Congress fails to pass a privacy law,
would you elaborate on what impact data privacy rules solely
offered by the FTC would mean for small businesses and their
ability to comply with such rules
Mr. Dufault. Yes, Congresswoman. So if the FTC went ahead
and conducted a rulemaking on privacy on its own, I think the
concern for us would just be that, with each administration,
you might see a completely different approach. So you might see
all of the rules sort of scrapped.
I know that there is judicial review for changes that the
new administration would make to those rules. But we would feel
a little bit better if there were guardrails from Congress that
the--would make those rules that come from the FTC, frankly,
stronger because they have the statutory backing, and they
would have--they would be less mutable, from--depending on who
inhabits the FTC.
Mrs. Rodgers. One of the reasons I think a national privacy
standard is so important is because it would--otherwise, there
is confusion by a patchwork of laws that are being developed at
the State level. There is confusion for consumers and for
businesses. Obviously, they need the certainty across State
lines.
If--would you speak to the potential of FTC writing a rule,
and how much they would be able to address?
How much--do you--how much would they be able to
accomplish, versus what Congress would be able to do?
Mr. Dufault. Yes, Congresswoman, there would be a number of
things that the FTC could try to accomplish on its own. Using
Magnuson-Moss rulemaking authority, it would take a little bit
longer. I think it would take longer than if they had APA
rulemaking authority granted by Congress. And that is why we
were supportive of measures that would also authorize the FTC
to make use of APA rulemaking procedures in narrow
circumstances.
You know, to the extent that Congress can set guardrails
and specify exactly what they want the Commission to
accomplish, the better off we are going to be. And it leaves
less of the question to the courts. As we saw with the AMG
decision, there is some risk that the courts will go a little
bit too far in removing the authority of the FTC, and we would
rather have Congress imbue the FTC with that authority.
Mrs. Rodgers. Thank you all. I yield back.
Ms. Schakowsky. The gentlewoman yields back. And now I
recognize Mr. McNerney for 5 minutes.
Mr. McNerney. I thank the chairwoman, and I thank the
panelists for being here today and being patient.
As I noted in the last panel, one of the bills we are
considering today is H.R. 4530, legislation that I authored,
which would establish an office of technologists at the
Commission. As an engineer, I think this is critically
important. Ms. Greenberg already voiced support of that bill.
Professor Vladeck, would you agree that empowering the
agency with the necessary technical expertise and having more
technologists on staff would help the agency carry out its
mission?
Mr. Vladeck. Well, it is essential. And, you know, I hired
the first technologists in the FTC in 2009. We did not have a
single one on staff.
And, you know, there--let me just make two quick points:
one is we need more technologists, the other is we need to be
able to retain them.
And one of the problems is there is just enormous
competition for, you know, top-of-the-line technologists. And
one of the things I would urge this committee to think about is
whether there should be different GS scales for paying
technologists. Attracting, you know, top-tier technologists to
the FTC would be a challenge. And so I applaud your bill. I
hope it is enacted, and I hope it is authorized, the money is
appropriated for it.
But there is a broader problem in government in terms of
attracting and keeping top-line technologists, and I think that
is an issue that needs to be really addressed.
Mr. McNerney. Well, thank you, Professor.
Ms. Greenberg, in your testimony you discuss why this
legislation is important with respect to our role, as a nation,
in driving the global regulatory agenda. Could you explain that
a little?
Ms. Greenberg. I am sorry, your question was about the----
Mr. McNerney. The----
Ms. Greenberg. Would you mind repeating the question?
Mr. McNerney. The office of technologists at the
Commission----
Ms. Greenberg. In terms of--yes, well, we made the
observation that we need to compete globally as well as with
companies that are based here in the United States. And we need
to really ramp up our level of expertise in the technology
area.
And as Professor Vladeck pointed out, we need to figure out
how to not just hire technologists but retain them, as well.
Though I do think there is a certain personality type that
likes public service, and we can probably never compete with
some of the salaries that we are going to see at the big tech
companies, but I think a competitive salary and an opportunity
to do--to go toe-to-toe with some of these companies is a very
attractive job possibility for people with expertise.
But we just can't--now we cannot compete. So I think your
bill is essential, and it is essential for our ability to
compete globally as well as across the United States.
Mr. McNerney. Thank you. Again, Professor Vladeck, what
potential risks do you see with respect to artificial
intelligence, and what can be--what steps can be taken at the
agency to help address these risks?
Mr. Vladeck. Oh, the risks are enormous. You know, there
are risks of algorithmic bias. There are pricing decisions that
may be based on personal characteristics. And, you know, the
FTC has been looking at this issue since 2010.
But it is--you know, there are challenges. And part of the
challenges are that the FTC does not have the--technology. And
so, you know, unless your legislation gets through, we may be
behind the curve in trying to figure out how to harness all the
good things that algorithms and AI bring us but not really
understand some of the risks that are attached to it.
And there are just enormous strides being made at MIT and
Caltech about the use of algorithms in government regulation,
not just outside the government. And so we really need to get
the resources to understand the benefits and the risks of AI,
and I am not sure we are anywhere near there.
Mr. McNerney. Well, thank you, I am going to yield back at
this point.
Ms. Schakowsky. The gentleman yields back. And Mr.
Armstrong, your staying power pays off, and I recognize you for
5 minutes.
Mr. Armstrong. Thank you, Chair Schakowsky.
I recently introduced H.R. 2671, the SHIELD Act. And the
bill essentially contains two provisions. The first provision
prohibits the FTC from relying on guidelines for similar
documents to prove a violation of law. This is simple. The
Commission should only bring enforcement actions for violations
of law.
Now, Mr. Vladeck, I know you have some concerns with the
second portion of this bill, but your testimony generally
agrees with the first provision, which, essentially, reaffirms
that the FTC guidance on provisions of law do not carry the
force of law, correct?
Mr. Vladeck. That is correct.
Mr. Armstrong. Now, the second----
Mr. Vladeck. Sorry, I didn't----
Mr. Armstrong. OK, thank you, thank you. The second
provision clarifies that a defendant may offer, as evidence of
compliance with a provision of law, any guidelines, general
statements of policy, et cetera. And your objection to this--
you do object to this provision in your testimony. You raise
concerns that a guidance document--offered as evidence of
compliance with the law, even though it is outdated or
superseded.
If a guidance is outdated or superseded, it would no longer
be useful. And I would argue that the burden should be on the
Commission to remove outdated or superseded guidance to provide
the public with relevant information. Is there anything that
prevents the Commission from removing outdated or superseding--
superseded guidance?
Mr. Vladeck. Yes, there is a tremendous amount. I mean, a
guidance document under the law is almost anything anyone at
the FTC says, assuming that they are a reasonably senior
person. So a tweet is a guidance document. A speech taking a
position is a guidance document. And in order to--for the
Commission to sort of pull back on guidance, they would have to
really just sort of rewrite its own history by deleting
speeches, tweets, you know, other----
Mr. Armstrong. Well, statements from a Commissioner and
guidance from the Commission aren't the same thing. Like, the
defendant may offer as evidence of compliance these types of
guidance documents. The bill doesn't provide that offering
these guidance documents is an affirmative defense, which would
negate a defendant's liability. The defendant would have to
demonstrate that the guidance supports its compliance with the
provision of law.
Your concern that pointing to any guidance document is
arguably exculpatory might be sufficient as a defense. That is
not how evidence works, and it is not what the bill says. The
defendants can't simply claim a document provides absolution. A
guidance document is only useful as evidence of compliance when
it tends to prove that there is a matter asserted.
Mr. Dufault, is there any objection to allowing a defendant
to simply offer Commission guidance as evidence of compliance
with the provision of a law enforced by the Commission?
Mr. Dufault. No, it seems to us to be a reasonable
provision, that it simply completes the circle when it comes
to--you know, this is a statement as to the Commission's
understanding of its own determination as to what is legal
under its broad purview over unfair or deceptive acts or
practices. And so that interpretation is meant to be relied
upon.
So this is just a statement that says, if you are relying
upon that guidance, then it is evidence. And like you said, it
is not definitive. And there are different weights that you can
assign to evidence, right? And so that--merely having it be
evidence does not negate liability, as you said.
Mr. Armstrong. And I think I can give a little real-world
relevant example of how outdated or superseded language isn't
always very persuasive. There is a 2015 version of this bill
that, while similar, had some cumbersome and ambiguous
language.
And Mr. Vladeck, you testified against that bill, and
raised similar objections in 2016. The problem is, your
testimony today quotes the 2015 bill language that was amended
prior to the introduction of H.R. 2617.
And with that, I will yield back.
Ms. Schakowsky. The gentleman yields back, and now I yield
5 minutes to Mr. Soto.
Mr. Soto. Thank you, Madam Chair. You know, last term we
had put forward a working draft for privacy, something that I
applaud you, Madam Chairwoman, for starting the ball rolling
on. Sadly, here we are a year or two later because of partisan
bickering over this stuff. And we still see another year or two
wasted, gone by, where we could be protecting privacy.
And so I am committing to you, Madam Chair, that we will
keep up the fight together and try to bridge gaps with my--our
colleagues across the aisle, including the great ranking member
here, my dear friend, Representative Bilirakis, my fellow
Floridian, who I get to work with all the time on a lot of
these issues.
You know, the American people rely on the FTC to protect
them from fraud, scams, false advertising, and unfair and
deceptive trade practices, often without even knowing the
agency exists. In the first panel we heard from Commissioners
about just some of the things the FTC is doing on behalf of
American consumers. But we also heard about some of the
constraints and need for resources to improve the FTC's ability
to protect consumers.
Ms. Greenberg, would you agree that the FTC faces unique
burdens that other consumer protection agencies do not?
Ms. Greenberg. Yes, Congressman. I--the FTC is hampered by
onerous obstacles that it must jump through to do its really
important work of protecting consumers.
Mr. Soto. And for years we have advocated for giving the
FTC certain authorities, such as civil penalty authority and
APA rulemaking. Ms. Greenberg, how would these tools improve
the FTC's ability to fulfill its consumer protection mission?
Ms. Greenberg. Well, APA rulemaking is a transparent
process that--it is a very democratic process, because it opens
up the rulemaking process to comment, notice and comment, and
final rules, and a final rules can be challenged judicially.
But it is an open process. It is a somewhat time-consuming
process. But it does take in all perspectives, and certainly
civil penalties are really important deterrents to the bad
guys, the bad actors in the--in our marketplace. And I think
you just improve the agency's ability to protect consumers by
providing both of those, so civil penalty and APA rulemaking
authority.
Mr. Soto. Thank you, Ms. Greenberg.
Mr. Vladeck, we know technology has increased the ways for
scams to happen. Internet, cell phones, social media all
provide new opportunities for scammers. I know privacy is a key
concern for both you and I and others on the committee. What
role can artificial intelligence assist in spotting scams and
protecting privacy, if used by the FTC?
Mr. Vladeck. So there is a lot of work being done by
technologists, academic technologists, on exactly that
question. And, you know, my hope is that AI will help control
the boundaries of the internet, and alert agencies like the
FTC, law enforcement agencies, when there is something that
looks like a scam that is afoot so we can get--you know, we can
sort of get an enforcement case, move quickly, before too many
people are injured. So I think AI, as a tool, may, you know, be
a great bolster for law enforcement agencies for just
detection. And that is an important aspect of this.
So I do have expectations that, within this Commission, you
will start seeing these kinds of tools, as there are tools for
content moderation.
Mr. Soto. And when we are talking about all the commerce on
the Internet, all the information and different transactions
conducted, really, would you argue that artificial intelligence
is essential, in order to accurately be able to identify scams
on the internet?
Mr. Vladeck. Yes. I mean, the internet is the crook's best
friend. It is the best thing that ever happened to scam
artists. And, you know, the volume of--you know, simply the
sheer volume of what is going on on the internet makes it
impossible for individuals to control, which is why AI is going
to be a key tool to law enforcement, I hope, soon, because it
is really needed.
Mr. Soto. Well, thank you, Mr. Vladeck. With deep fakes,
with using code words, with going into the dark web, among so
many other abilities to push for scams, we are going to have to
also use technology to help out the good guys at the FTC.
And I yield back, Madam Chair.
Ms. Schakowsky. The gentleman yields back, and now I just
want to thank our witnesses. And I really, really appreciate
all--the three of you being here, but especially the two that
were here pretty much all day.
Professor, you, as well. I don't know if you were waiting
around for us, but I just want to thank you so much for your
participation.
And are there--there are? OK, so now I--well, let me first
see if you want to say anything.
Mr. Bilirakis. I don't want to delay things. We got it
done, and I appreciate your patience, the witnesses' patience
and the Members', and particularly our chair. So thank you very
much for a very informative hearing.
Ms. Schakowsky. I want to remind the witnesses--and we will
convey that also--oh, before we adjourn, I request unanimous
consent to enter the following documents into the record.
But I--actually, let me say to the witnesses that the
Members will have 10 business days to submit additional
questions for the record, and we are asking you to respond in a
timely way to that.
I wanted to say that before I read all this--because I
think it is fair enough to say that you don't have to stick
around for this--but I am going to read all the communications
that we received. So thank you so very much.
We have a letter from Senator Toomey to Commissioner Chopra
dated June 17, 2001, a letter from Senator Toomey to
Commissioner Chopra dated July 13th, 2021, a--I don't know what
this----
Voice. A dissenting statement.
Ms. Schakowsky. Oh, a dissenting statement from
Commissioner Phillips and Wilson regarding withdrawing of
section 5, a statement of enforcement principles; we have a
dissenting statement of Commissioner Phillips and Wilson
regarding revision--no, revised section 18; a letter from
Secretary--no, I am sorry, from Security Industry Association;
a letter from the Committee for Justice; and a letter from the
Chamber of Commerce.
That wraps it up.
[The information appears at the conclusion of the hearing.]
Ms. Schakowsky. So with that, the Subcommittee on Consumer
Protection is adjourned.
[Whereupon, at 4:50 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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