May 25, 2016–Members of the House Energy and Commerce Committee’s subcommittee on commerce, manufacturing, and trade took aim today at several aspects of the Federal Trade Commission’s activities under section 5 of the FTC Act, featuring issues contained in a laundry list of 17 pending and proposed pieces of legislation that include the length of consent decrees that the agency negotiates with companies. Many of the 17 pending and proposed bills that were discussed at today’s hearing were recently introduced, and subcommittee members did not indicate a great degree of urgency in pushing them toward final passage by Congress in the near term. Many of the bills do not involve specific telecom issues, but a few of them do, including a draft of proposed legislation that would repeal the current common carrier exemption.
Rep. Michael Burgess (R., Texas), chairman of the subcommittee, noted that the FTC was last reauthorized 20 years ago, and that Congress was “long overdue to revisit the FTC Act and ponder some targeted adjustments.”
“The basic FTC framework for policing unfair or deceptive conduct after the fact is a good one,” he said in his prepared statement. “However, the FTC faces tough decisions when it encounters cases presented by new products or services in fast evolving markets.
“For example, it must revisit the length of its consent decrees against the speed of business and what other agencies do. Twenty-year consent decrees easily move away from after the fact remedies to prospective, ‘Mother May I’ regulation,” he said.
“Other areas need fortification,” he said, adding, “It is widely understood that informal policy guidelines are helpful [and] do not create liability independent of enforceable rules or statutes. Clarifying that the FTC will not use them to pressure a settlement would provide incremental definition to a company’s liability while maintaining the FTC’s current authority.”
“Similarly, providing analyses showing why the FTC believes certain investigations reveal no liability would also help define legality under section 5. Along with policy guidance, previous complaints, and consent orders, this additional information would be another strong signal for the market,” Chairman Burgess added.
Rep. Fred Upton (R., Mich.), chairman of the full Energy and Commerce Committee, said the subcommittee’s current interest in the FTC was “more focused on future-proofing the commission and keeping it focused on after-the-fact enforcement.”
“This may mean prompting more input from economists and more participation at the commissioner level,” he said. “It may also mean making sure that if the concern is only possible harms, we are also examining possible benefits and treading carefully.”
He continued, “As the FTC encounters new technologies and is incentivized to prevent new harms to further its consumer protection purpose, there must be countervailing incentives not to thwart innovation. It cannot be overstated that hindering innovation is often the same thing as hindering consumer welfare.”
“Many of the bills we unveiled are a step forward and an invitation to begin the real work of reconciling differences,” he said.
Included in the list of 17 bills discussed by the committee today are the Revealing Economic Conclusions for Suggestions Act (HR 5136), which would require the FTC to accompany any legislative or regulatory recommendation with an economic analysis and rationale for the recommendation; the Solidifying Habitual and Institutional Explanations of Liability and Defense Act (HR 5118), which would specify that FTC guidelines and statements of policy would not confer rights upon any state, locality, or person, and that would specify the FTC must prove a violation of law enforced by the agency in any enforcement action that it takes; the Start Taking Action on Lingering Liabilities Act (HR 5097), which would require the FTC to terminate inactive investigations after six months; and the Statement on Unfairness Reinforcement and Emphasis Act (HR 5115), which would state the FTC has no authority to declare unlawful any practice on the grounds that the practice is unfair unless the practice was likely to cause “substantial injury” to consumers that is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.
Also among the bills discussed today are the Technological Innovation through Modernizing Enforcement Act (HR 5093), which would require that FTC consent orders run no longer than eight years unless the order relates to fraud and requires a longer term; the Consumer Review Fairness Act (HR 5111), which would prohibit the use of clauses in form contracts that restrict the ability of consumers to communicate about the goods or services that are the subject of the contract; the Freeing Responsible and Effective Exchanges Act (HR 5116), which would permit a bipartisan majority of FTC commissioners to hold a meeting that is closed to the public to discuss official business; the Clarifying Legality and Enforcement Action Reasoning Act (HR 5109), that would require the FTC to give annual reports to Congress about the status of investigations of unfair or deceptive acts or practices that impact commerce; the draft Protecting Consumers in Commerce Act, which would permit the FTC to enforce the FTC Act against common carriers; and an unnamed legislative draft that would permit the FTC to enforce the FTC Act against tax-exempt organizations.
Testifying at today’s hearing, FTC Chairwoman Edith Ramirez reiterated that the agency supports removing the common carrier exemption, especially as the FCC has reclassified broadband service as a common carriage service. “Although the FCC would retain its jurisdiction over common carriers, consumers would benefit from the FTC having shared jurisdiction because the enforcement provisions of the FTC Act provide for consumer redress,” she said.
Ms. Ramirez said the agency also supports HR 5255, saying that extension of the agency’s jurisdiction to non-profit entities would help it take more action in the healthcare and university arenas, including actions related to data breaches in those sectors.
She said the FTC supports HR 5116 that would allow for closed, bipartisan meetings between agency commissioners, calling such opportunities “another way in which to meet and deliberate.” She asked that as the House Energy and Commerce Committee considers the measure, it ensure that the bill provides a mechanism for such meetings that would be in addition to, rather than in lieu of, Sunshine Act procedures.
She said the FTC “generally supports” HR 5111.
Regarding HR 5093 and HR 5097, Ms. Ramirez said the FTC already has procedures in place to address “these concerns in a flexible manner that still allows the Commission to protect consumers effectively,” including by modifying the terms of consent orders. She noted that FTC administrative consent orders generally sunset after 20 years, but that it has agreed to shorter terms in the past “when appropriate.”
Regarding HR 5097, she said that commission rules already incentivize staff to engage in ongoing communications with entities subject to investigation, and that the bill “may impede the Commission’s ability to protect consumers without adding corresponding benefits.” She said the bill could also terminate important investigations “due to lost mail or a procedural oversight.”
Ms. Ramirez said that HR 5109 and HR 5118 “may have unintended adverse effects and could also undermine the FTC’s ability to perform its mission efficiently, effectively, and fairly.” As well, she said HR 5115 “may have the unintended consequence of impairing the Commission’s ability to stop harmful practices and provide meaningful recommendations.”
Testifying as a witness at today’s hearing, former FTC Commissioner Joshua Wright, who left the agency last year, said he would like to see HR 5116 amended to allow for a bipartisan meeting of two commissioners, rather than three as stated in the bill, which would allow for “one-on-one, bipartisan discussions to occur” when recusals or vacancies reduce the quorum to fewer than three commissioners.
He also said he viewed HR 5093 as a “step in the right direction” that would help to align FTC consent decrees “with current market realities.” A shorter lifespan for consent decrees, he said, “makes legal, technological and economic sense,” but he added, “How much shorter is an open question.” – John Curran, john.curran@wolterskluwer.com
Courtesy TRDaily