FTC Commissioners Weigh In on Prominent Topics at Oversight Hearing

On Wednesday, the five Federal Trade Commissioners testified before the Senate Committee on Commerce, Science, and Transportation. They were posed questions on a wide range of consumer protection topics in the news, from Section 230 of the Communications Decency Act (CDA) to the EU-U.S. Privacy Shield to challenges to their enforcement authority. Here’s a recap of what we learned:

• CDA Section 230 and content moderation.  As we’ve noted, the Administration’s recent Executive Order (EO) on Section 230 seeks to re-write the rules for online media companies dealing with third-party content on their platforms. Part of the EO seeks to have the FTC launch inquires into the representations and practices of social media companies engaged in content moderation. This got a chill reception on Wednesday. Chairman Joe Simons stated that the FTC does not have jurisdiction over matters affecting “political speech,” and is focused instead on commercial speech. This would appear to rule out, as we predicted, inquiries into content moderation of political views. 

  As we’ve also noted, however, a bipartisan duo of Commissions has called for further investigation of algorithms used for content moderation, at least in the commercial context. Commissioner Christine Wilson pointed again to her call with Commissioner Chopra for the FTC to issue Section 6(b) orders – which can be sent widely to companies throughout industry – studying how financial incentives affect content curation and ad targeting. Commissioner Wilson indicated that nothing had been “publicly” announced on whether the FTC will conduct further studies. But industry-wide inquires in this area would not be surprising, given multiple Commissioners’ interest and the FTC’s ability to gather extensive information without needing to open formal law enforcement inquiries.

• Privacy Shield.  The EU-U.S. Privacy Shield framework was a big topic at Wednesday’s hearing. As we’ve outlined, the Court of Justice of the European Union (CJEU) recently invalidated compliance with the Privacy Shield framework as an authorized means for U.S. companies to transfer EU personal data to the U.S. The ruling – and subsequent statements suggesting there will be essentially no grace period for companies to comply – have thrown U.S. companies into limbo as they seek alternative arrangements for cross-border data transfers. At the same time, Chairman Simons indicated that companies that have certified compliance with the previous Privacy Shield framework will be held to their promises – meaning that current Privacy Shield-companies have continuing obligations that can be enforced by the FTC, regardless of the EU’s rules on data transfers.

• Right-to-repair.  One Senator took aim at the FTC’s work on “right to repair” – the argument that companies should release information or take other steps to make their products easier to repair by individual consumers or any repair business. Proponents have unsuccessfully sought legislation at the state level, and the FTC held a workshop on this issue last year and appears to be preparing a report that could affect the terms of the debate. Industry has noted (among other points) that “right to repair” bills would in fact cause consumer protection issues by disrupting manufacturers’ design decisions and authorized repair networks, which are important for protecting consumer safety and security. At the hearing, Commissioner Wilson noted that she had potential competition concerns, but also that there are important consumer safety concerns around proper device repair.

• Enforcement authority.  The Commissioners were unsurprisingly adamant in touting their federal court enforcement authority under Section 13(b) of the FTC Act. As we’ve outlined, the U.S. Supreme Court next term will consider whether Section 13(b) authorizes the FTC to seek monetary remedies in federal court. The FTC’s position is that this authority is already established, but it lost this argument in the Seventh Circuit, and a loss at the high court would strip the agency of most of its authority to seek monetary awards. The FTC would like Congress to make this litigation moot by clarifying the scope of Section 13(b) – and at a time where Senators across the aisle have been calling for more aggressive enforcement from the agency, this is within the power of Congress to provide the final word.

The hearing also featured questions that ranged from proposed federal privacy legislation – the Commissioners’ views remain unchanged – to the Commission’s somewhat esoteric contact lens rule.  Ultimately, the Commissioners remain active, engaged, and unlikely to tap the brakes for the rest of 2020.