The FTC should reward, not penalize, companies that innovate in good faith

[Commentary]The Federal Trade Commission (FTC) announced that it has filed a lawsuit against Amazon.com, alleging that the company had failed to set sufficiently tight controls for purchases made by children while using mobile apps.

The Amazon suit reflects an unfortunate trend. By forcing companies into consent decrees, instead of using its own rulemaking authority or waiting for Congress to act, the FTC circumvents the democratic process, reduces transparency and limits public participation. These agreements can end up serving as de facto policy, which is a problem since they only reflect the agreement of two parties, rather than all stakeholders. At times, consent decrees may even be anti-competitive, by creating greater barriers for new entrants and entrenching established interests.

Rather than fostering disruptive innovation, these types of 20-year agreements lock companies into stagnant business practices and discourage companies from taking risks lest they be subject to the wrath of the FTC. A better approach is for the FTC to take ambiguity out of the equation by establishing clear rules and taking action against companies that knowingly violate them, or by going after companies that knowingly and willfully harm consumers, such as any app developers who try to exploit the in-app payment system in apps directed at children.

[Castro is a senior analyst with the Information Technology and Innovation Foundation]