Modernizing the FTC’s Enforcement of Privacy Law: Takeaways From the July 28 House Energy and Commerce Hearing

On Wednesday, July 28, the House Energy and Commerce Committee Subcommittee on Consumer Protection and Commerce held a hearing to discuss 16 bills aimed at modernizing the FTC’s consumer protection authority. In her first appearance before the body as Chair, Lina Khan and her fellow commissioners fielded questions from a bipartisan committee on topics ranging from fraud and COVID-19 disinformation to anti-competitiveness and the current “merger surge.” However, discussions about the FTC’s limited resources and role in privacy regulation dominated the hearing. While the debate over how exactly to modernize the FTC continues, lawmakers and Commissioners alike understand that in order to better achieve its consumer protection mission, the FTC both needs more resources and needs to utilize the tools it already has to their fullest potential.

Underfunded Agency vs. Big Tech

Members and witnesses both focused on issues caused by the FTC’s lack of resources. As Chair Khan explained, the FTC today has fewer employees than it did in the early 1980s, but is responsible for a significantly larger economy and more technical issues, including consumer privacy. The Commission has broad jurisdiction over consumer privacy, and uses enforcement, policy initiatives, and education to protect the information of consumers. With inadequate resources, the Commissioners argued, the FTC cannot properly enforce laws that protect consumer privacy when they face some of the wealthiest and most powerful companies in the world. Particularly, four bills discussed aim to alleviate the strain on the FTC’s resources.

Two bills—Rep. Kathy Castor’s (D-Fla.) 21st Century FTC Act and Rep. Jan Schakowsky’s (D-Ill.) FTC Autonomy Act—could alleviate some of the strain, according to Chair Khan, by helping the Commission seek civil penalties against lawbreakers. Additionally, Schakowsy’s Online Consumer Protection Act and Rep. Jerry McNerney’s (D-Calif.) Protecting Consumers in Commerce Act of 2021 could prove to be beneficial by ending special protections for industries such as social media.

Conversely, other proposals discussed at the hearing, Commissioners argued, would actually exacerbate the Commission's resource shortage, and make going after privacy offenders more difficult. Rep. Brett Guthrie’s (R-Ky.) Clarifying Legality and Enforcement Action Reasoning (CLEAR) Act, for example, amends the FTC Act to require the Commission to compile reports for Congress detailing investigations into unfair or deceptive acts or practices in an effort to increase transparency. Commissioner Rebecca Kelly Slaughter argued that imposing such requirements without first addressing the Commission's lack of resources would make matters worse, shifting the FTC’s already-scarce manpower to administrative tasks instead of enforcement action. Similarly, Rep. Michael Burgess’s (R-Texas) Technological Innovation Through Modernizing Enforcement (TIME) Act would further strain the Commission, argued Rep. Debbie Dingell (D-Mich.), limiting the effectiveness of the use of consent decrees. Consent decrees are a particularly important way for the FTC to exercise enforcement authority and ensure compliance with consumer privacy regulations, and limitations such as the TIME Act could severely constrain their use.

Using Rulemaking Power to Regulate Data Abuses

Commissioners and members of the Committee also discussed the Commission’s role in privacy enforcement, the potential use of FTC rulemaking, and the need for comprehensive federal privacy legislation. Particularly, Commissioner Slaughter advocated for the Commission to use its authority under Section 18 of the FTC Act to institute a rulemaking proceeding based on “unfair and deceptive practices” of data abusers. While using the FTC’s Congressionally granted powers in this way would be process intensive, Slaughter argued, it would still work to protect consumers. What’s more, the 21st Century FTC Act also promises to provide the Commission with notice and comment rulemaking (the standard procedures most agencies follow under the Administrative Procedure Act), making the rulemaking process far less resource intensive and time consuming than the current regime under the Magnuson Moss Warranty-Federal Trade Commission Improvements Act. In July, the Commission indicated its preference to move away from the procedure-heavy process and voted to update these procedures; Castor’s bill is a further expansion of this. In lieu of a federal privacy law, many argue that this type of rulemaking is an obvious next best step.

The FTC plays a hugely important role in protecting the privacy rights of consumers, especially in the absence of a comprehensive federal privacy law. As lawmakers continue to debate the bills discussed in this most recent Energy and Commerce Committee hearing, ensuring the Commission has the tools necessary to enforce compliance against companies misusing consumer data and abusing privacy is paramount.