[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
     

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                        energycommerce.house.gov
                        
                        
                        
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             U.S. GOVERNMENT PUBLISHING OFFICE 
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                    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:]
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    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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