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The Trump FTC and the Internet

Submitted on March 2, 2018

 You’re reading the Benton Foundation’s Weekly Round-up, a recap of the biggest (or most overlooked) telecommunications stories of the week. The round-up is delivered via e-mail each Friday.

Round-Up for the Week of February 26 - March 2, 2018

Robbie McBeath
McBeath

On February 28, the Senate Commerce Committee approved four of President Trump’s nominees for the Federal Trade Commission, paving the way for their full Senate confirmation. Two weeks ago, the committee convened a confirmation hearing at which the nominees described some of their positions on antitrust, mergers, and data privacy. The FTC is expected to have a larger role in the field of telecommunications policy, partly due to Federal Communications Commission Chairman Ajit Pai’s net neutrality repeal. Below, we introduce each FTC nominee, with a short bio and some relevant tech policy positions.

Why Should We Care About the FTC?

Those in the tech policy community primarily concern themselves with the FCC, occasionally looking to the FTC or Department of Justice for certain decisions on issues like mergers or privacy. But, under the deregulation of Chairman Pai, enforcement of certain internet consumer protection measures have now been shifted to the FTC. To understand why, it helps to know a little bit about the FTC and it's relationship to "common carriers."

The FTC has general statutory authority over unfair and deceptive trade practices. Many regulatory agencies that have authority over industry sectors have statutory authority over the trade practices of companies in those specific sectors. Therefore, various statutory grants of authority to the FTC contain exemptions for certain industry sectors. One of those exemptions, key in the telecommunications space, is common carriers subject to the Communications Act -- that is the purview of the Federal Communications Commission. In other words, the FCC regulates telecommunications service, not the FTC. (And, if you've been scoring at home, you're aware that much of the debate around network neutrality comes down to whether broadband internet access service is classified as a telecommunications or information service.)

The common carrier exemption sometimes has stymied FTC efforts to halt fraudulent or deceptive practices by telecommunications firms. While common carriage has been outside the FTC's authority, there’s been an ongoing debate about whether the FTC Act applies to the non-common-carrier activities of telecommunications firms, even if the firms also provide common carrier services. These disputes have arisen even when the FCC may not have jurisdiction over the non-common-carrier activity (leaving a regulatory gap). 

Some of this confusion got cleared up this week by a federal appeals court -- more on that later on. The point is, you should care about the make-up of the FTC because the Pai FCC has decided that broadband is an information service, not a telecommunications service, ceding jurisdiction to the FTC. In short, more and more consumer protections will be handled by the FTC in the future.

Today's FTC

Like the FCC, the FTC is an independent, bipartisan federal agency. Up to five people serve as FTC commissions; no more than three members of the same political party can hold seats at the same time. 

The FTC has been down several members (there's just one Republican and one Democrat now) and without permanent leadership since President Trump’s inauguration. President Donald Trump announced three nominees in October of 2017, but the White House waited to refer all four to the Senate on January 25, 2018. 

Currently, there are only two Commissioners, Acting Chairman Maureen Ohlhausen, a Republican, and Commissioner Terrell McSweeny, a Democrat. Ohlhausen plans to step down after campaigning unsuccessfully to be the president's pick to permanently head the agency. Instead, President Trump nominated her to serve as a judge on the federal claims court. Commissioner McSweeny is already serving beyond her term, which expired in September 2017.

With the expected departure of both Ohlhausen and McSweeny, the FTC is in the unique situation of having a complete turnover, and a 3-1 Republican majority, if and when the full Senate confirms President Trump’s nominees.

Meet the Nominees


Joseph Simons

Joseph Simons, Chairman Designate, Republican

Term of seven years from September 26, 2017, replacing vice Terrell McSweeny.

Joseph Simons led the FTC’s Bureau of Competition from 2001 to 2003 during the George W. Bush administration. He is a veteran antitrust lawyer who has represented the likes of Microsoft and Mastercard.

Simons told the Senate Commerce Committee that he believes the top three challenges facing the FTC are:

  1. Addressing concerns that it has been too permissive in dealing with mergers;

  2. Reducing the failure rate of some of its divestiture remedies; and

  3. Protecting consumers from cyber threats without unduly burdening them or preventing companies from using data to "enhance competition.”

Under Simons, “the agency is expected to take a free-markets and conservative approach to antitrust issues, maintaining decades-long interpretations of competition laws that put consumer welfare and the efficiencies of markets at the center of enforcement actions and merger reviews,” Cecilia Kang wrote in the New York Times.

Simons recently said, “My view is that the FTC, if it gets back its authority in the internet space, is going to be a vigorous enforcer. We’re going to take the statutory authority that we have and use it as best we can.”

Noah Phillips, Republican

Term from September 26, 2016 replacing vice Julie Simone Brill.

Noah Phillips currently serves as Chief Counsel to Senate Majority Whip John Cornyn (R-TX). Since 2011, he has advised Senator Cornyn on issues including antitrust, constitutional law, consumer privacy, fraud, and intellectual property. Prior to his service in the Senate, Phillips worked as a litigation associate at Cravath, Swaine & Moore LLP, in New York City, and Steptoe & Johnson LLP, in Washington, D.C.

In 2017, Sen. Conyers co-sponsored a bill, the Restoring Internet Freedom Act, which aimed to nullify the net neutrality rules adopted by the Federal Communications Commission (FCC) on February 26, 2015, relating to the reclassification of broadband Internet access service as a telecommunications service. If the bill had been adopted (it never got a vote in the Senate Commerce Committee), it would have prohibited the FCC from reissuing a net neutrality rule in substantially the same form, or from issuing a new rule that is substantially the same, unless the rule was specifically authorized by Congress.

Christine Wilson, Republican

Term of seven years from September 26, 2018.  (Reappointment), replacing unexpired term of seven years from September 26, 2011 for vice Maureen K. Ohlhausen.

Christine Wilson is an antitrust and consumer protection practitioner currently serving as Senior Vice President for Regulatory & International Affairs at Delta Air Lines. For over twenty years, Wilson has been an advocate of the fundamental principle that competition – not regulation – is the best protection for consumers and the strongest prescription for a healthy economy. Before joining Delta, she was a partner at Kirkland & Ellis LLP in Washington, D.C. During the George W. Bush Administration, she served as Chief of Staff to FTC Chairman Timothy J. Muris.  

Chairman Muris, you may recall, proposed to the Congress in 2003 that it amend the Federal Trade Commission Act (FTCA) to end the exemption for common carriers subject to the Communications Act from the FTCA's prohibitions on unfair or deceptive acts or practices and unfair methods of competition. "This exemption dates from a period when telecommunications services were provided by government authorized, highly regulated monopolies,” he told Congress. “The exemption is now outdated. In the current world, firms are expected to compete in providing telecommunications services."

He continued saying that the Congress and FCC "have replaced much of the economic regulatory apparatus formerly applicable to the industry with competition. Moreover, technological advances have blurred traditional boundaries between telecommunications, entertainment, and high technology. Telecommunications firms have expanded into numerous non-common-carrier activities. For these reasons, FTC jurisdiction over telecommunications firms' activities has become increasingly important."

At the time, Chairman Muris also addressed antitrust authority. He wrote, "The common carrier exemption also significantly restricts the FTC's ability to engage in effective antitrust enforcement in broad sectors of the economy. The mix of common carrier and non-common-carrier activities within particular telecommunications companies frequently precludes FTC antitrust enforcement for much of the telecommunications industry. Further, because of the expansion of telecommunications firms into other high-tech industries and the growing convergence of telecommunications and other technologies, the common carrier exemption increasingly limits FTC involvement in a number of industries outside telecommunications."

Rohit Chopra, Democrat

Term fulfills the unexpired term of seven years from September 26, 2012, replacing Joshua D. Wright, who resigned.

Chopra is currently a Senior Fellow at the Consumer Federation of America, where he focuses on consumer protection issues facing young people and military families. From 2010-2015, he served at the Consumer Financial Protection Bureau as Assistant Director, where he oversaw the agency’s work on student financial services issues. The Secretary of the Treasury also appointed him as the agency’s student loan ombudsman. In 2016, Chopra served as Special Adviser to the Secretary of Education. Prior to his government service, he was an associate at McKinsey & Company, where he served clients in the financial services and consumer technology sectors. Chopra holds a bachelor’s degree from Harvard University and a master’s in business administration from the Wharton School at the University of Pennsylvania. He was also the recipient of a Fulbright Fellowship.

At the Senate Commerce Committee nomination hearing, Chopra expressed "skepticism and concerns" regarding the agency's ability to police broadband. "Given online litigation and rulings in the 9th Circuit, the FTC may face an unlevel playing field where some major market participants are exempt from the commission’s authority while others are subject to it," he said.

The FTC and Future Tech Policy

Net Neutrality

This week, the 9th Circuit Court of Appeals ruled that the FTC does still have the authority to bring enforcement actions against common carriers for their “non-common carrier” activities, closing a potential ‘loophole that could’ve swallowed the internet’. In other words: Yes, the FTC has regulatory authority over large Internet service providers that are also common carriers.  

However, do not presume that this means the FTC can truly enforce net neutrality. Harold Feld, senior vice president at Public Knowledge, said:

Some have tried to portray today’s decision as somehow lessening the disastrous effects of the FCC’s recent net neutrality repeal. This is entirely backward. This case illustrates the problem of having the Federal Trade Commission try to do alone what it should do in partnership with the FCC... Today’s decision does not suddenly give the FTC new authority to replace the FCC on net neutrality. The need to reverse the FCC’s net neutrality repeal remains as urgent as ever.

Big Tech Antitrust

At the February 14 nomination hearing, each of the four nominees moved carefully around a question about their views on Big Tech’s increasing power, pledging to enforce antitrust laws but “not firing any broadsides against companies like Facebook and Google,” according to Axios.

Privacy & Data Protection

On the topic of data breaches, Simons said, “They’re becoming much more significant, much more frequent, and I think that’s a real serious concern for us and I think we need to pay much more attention to it.”

However, Bloomberg reported that, “None of the nominees has the level of privacy experience that acting Chairman Maureen Ohlhausen brought to the commission.” Indeed, Angelique Carson, writing for the International Association of Writing Professionals, said, “How will [Simons] approach privacy and data protection enforcement if confirmed by the U.S. Senate to become chair? It's a bit hard to say.”

 

You can be sure to follow along with the future of the FTC’s nominations everyday in Headlines.

 

Quick Bits

Weekend Reads (resist tl;dr)

ICYMI from Benton

Events Calendar for March 2018

By Robbie McBeath.

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