I thought this was going to be a slow week. The Senate is in recess and, with so much recent attention focused on the Senate and AICOA – and the FTC’s had only just started things with the Meta/Within suit – it seemed this would be a slow week. We actually considered taking a recess of our own this week. But then Monday happened, and then Tuesday, and then Wednesday, and it was clear a roundup was justified. And then today happened and suddenly we have a privacy rulemaking underway. Or do we? Well, we have a roundup, that’s for sure!
This week’s headline is not, however, the FTC’s Advance Notice of Proposed Rulemaking (ANPR). Rather, it is that Commissioner Noah Phillips has announced that he will be leaving the Commission, just four years into his seven year term. One could speculate that the timing of this announcement is related to the ANPR – but I’ll leave that to others. Commissioner Phillips has been a model of principled antitrust and consumer protection enforcement. He has not shied away from enforcement actions, but has reserved them for cases where agency action is warranted. And his approach has been vindicated by the courts in cases like 1-800 Contacts and Impax, where his views – both as a dissenting Commissioner and as a member of a unanimous Commission – have been embraced by reviewing courts.
He has also expressed caution about FTC Chair Lina Khan’s approach to the power of the agency – an approach that stands in contrast to his efforts to faithfully operate within bounds of the agency’s statutory authority. He discussed his concerns about Khan’s potential broad UMC rulemaking efforts in a recent interview. Invoking concerns about the likelihood today that the courts will find the FTC has substantive rulemaking authority (as the DC Circuit did in Petroleum Refiners (1973)), as well as about what the scope of that authority would enable the Commission to do, he explained:
You can only regulate or ban that which is an unfair method of competition if we have that authority, just like you can only regulate or ban what is an unfair and deceptive act or practice. And as broad as the words may sound, and however much we may have repealed our policy on what the limits of Section 5 are, I don’t think it’s true that courts will just say, whatever you want is what the law means. And so, we have to color within the lines.
Which brings us to what will certainly be the headline for weeks to come: The FTC today issued an ANPR for a rule on “Commercial Surveillance and Data Security.” This sprawling document poses 95 questions relating to a wide range of ways that companies make use of consumer data. Actually, while there are 95 numbered questions, the document contains 233 question marks – so quite a few more questions.
We will have more analysis of this potential rulemaking in coming days, so won’t endeavor to summarize the rule here. But some initial observations are due.
Since this is the “FTC UMC Roundup,” we should start with the statutory basis for the rules. It sounds primarily in the FTC’s consumer protection authority (to prescribe unfair or deceptive acts or practices, or “UDAP”). Under Section 18 of the FTC Act, the FTC is required to use a unique-to-the-FTC rulemaking process when making these rules. This process was put in place in Congress as a check on potential abuses by the Commission of its authority stemming from … well, abuses of that authority by the agency in the 1970s. More on this in a moment.
The ANPR also invokes the Commission’s antitrust, or Unfair Methods of Competition (UMC) authority as a potential avenue for rulemaking. In the grammatically curious footnote 47, the ANPR explains that some of the conduct the Commission is considering under the ANPR might also be relevant in the UMC setting. As such, the ANPR “invites comment on the ways in which existing and emergent commercial surveillance practices harm competition and on any new trade regulation rules that would address such practices. Such rules could arise from the Commission’s authority to protect against unfair methods of competition, so they may be proposed directly without first being subject of an advance notice of proposed rulemaking.” For those reading tea leaves, in other words, the Commission has arranged them to spell out UMC in this ANPR.
The key difference between UDAP and UMC rulemaking goes back to the amendments Congress made in the Magnuson–Moss Warranty Act (often referred to as Mag-Moss). Adopted in response to concern about aggressive agency regulations in the 1970s, Mag-Moss requires the FTC to issue ANPRs for UDAP rules. Importantly, under Mag-Moss this notice doesn’t only get published in the Federal Register, but also gets sent to the House and Senate oversight committees with jurisdiction over the FTC. This is so they can oversee what the FTC is doing.
Section 18 requires that “the Commission shall publish an advance notice of proposed rulemaking,” and specifies that it shall include “a brief description of the area of inquiry under consideration, the objectives which the Commission seeks to achieve, and possible regulatory alternatives under consideration by the Commission.” It also should provide opportunity for public comment, by “invit[ing] the response of interested parties with respect to such proposed rulemaking, including any suggestions or alternative methods for achieving such objectives.”
Note the clear expectation that the ANPR outline the regulatory alternatives that the Commission is considering, and that the public be able to engage with those alternatives. The purpose of the ANPR is not to inform Congress that the Commission might be making rules or to collect information to assist in a rulemaking process. It is precisely to inform Congress and the public about what those rules may be.
(As a brief historical aside, Mag-Moss was inspired by a concept known as hybrid rulemaking under which ANPRs would be used primarily to provide greater opportunity for public engagement early in the rulemaking process – perhaps even without the benefit of specific proposed rules. But when Congress drafted Mag-Moss, it was more specific in what it expected to be included in the ANPR – again, precisely because of its experiences with FTC overreach in the 1970s. In this sense, the FTC’s ANPR process is notably different than that governing other agencies’ use of ANPRs.)
I would posit that the document circulated by the FTC on Thursday is not, in fact, an ANPR. It provides no indication of the possible rules that the Commission may adopt. Indeed, the document itself makes no claims to articulating proposed rules or possible regulatory alternatives under consideration by the Commission. It explains that
Through this ANPR, the Commission is beginning to consider the potential need for rules and requirements regarding commercial surveillance and lax data security practices. Through this ANPR, the Commission aims to generate a public record about prevalent commercial surveillance practices or lax data security practices that are unfair or deceptive, as well as about efficient, effective, and adaptive regulatory responses. These comments will help to sharpen the Commission’s enforcement work and may inform reform by Congress or other policymakers, even if the Commission does not ultimately promulgate new trade regulation rules.
These concerns echo those raised by Commissioner Phillips in his dissent: “The ANPR provides no clue what rules the FTC might ultimately adopt. In fact, the Commission expressly states that the ANPR does not identify the full scope of approaches it could undertake, does not delineate a boundary on issues on which the public can comment, and in no way constrains the actions it might take in an NPRM or final rule.”
Here it is worth noting that the Commission has myriad other ways of collecting this information. It can study industries and gather information about its own prior activities, issuing its findings in reports. It has the power to conduct studies that can require firms to produce information. It regularly hosts hearings and other workshops. Indeed, as a colleague commented to me, this “ANPR” feels very much like the documents the Commission circulate when it is announcing a workshop – announcing the wide range of questions that it is interested in third parties bringing to the table for discussion and ultimate inclusion in a report (one that the Commission may or may not ultimately issue).
The language and tone of these questions also bear note. As Commissioner Wilson notes in her dissent from today’s notice, “Many practices discussed in this ANPRM are presented as clearly deceptive or unfair despite the fact that they stretch far beyond practices with which we are familiar.” Despite being presented as several score questions, the notice often seems to assume the answers it expects to find to those questions.
To not beat around the bush, this ANPR seems more like an effort to circumvent the statutory ANPR process, so that the Commission can avoid the required advance notice to Congress of the rules it intends to propose and the concomitant waiting period that that notice triggers.
I would expect plenty of admin law scholars (hey, that’s me!) gnashing their teeth about this in the coming weeks and months. Is this a satisfactory ANPR? Does the “logical outgrowth test” apply to ANPR? If it does, does this notice satisfy that test? Perhaps these are easily answered by caselaw – I will concede to not yet having spent those hours in Westlaw.
There is also the question of why the Commission has taken this approach. It can only invite scrutiny. One senior agency official suggested to me that I not be too hasty to discount “incompetence” as an explanation. Though I wonder if the agency might not be racing against potential Congressional Review Act review by the next Congress. Again, I concede I have not done the math to see whether it is even viable that rules could be issued soon enough to avoid that window. But it would at least explain the Commission’s apparent haste.
But that’s enough rampant, wanton, reckless speculation for one day. What else is going on in the UMC and UMC-adjacent world? Commissioner Alvaro Bedoya has come out in support of AICOA. No surprises there. (On a side note, I commend the Commissioner’s comments at today’s press conference announcing the ANPR. He had thoughtful comments throughout and, notably, I believe he was the only of the Democratic commissioners to directly acknowledge the concerns or work of the majority’s Republican colleagues.)
Svetlana Gans and Gene Scalia had an important op-ed about potential pitfalls the FTC may face with its UMC rulemaking efforts in Monday’s Wall Street Journal. I discussed it here. Jonathan Barnett looks at the recent treatment of big tech by the markets, arguing that “If antitrust law is to be based on fact and evidence, rather than rhetoric and narrative, legislators and regulators who are keen to intervene may be wise to hit the pause button. The equity markets have already done so, which reflects new information showing that once-indomitable platforms face new or overlooked competitive threats.”
And, lest we forget, the FTC is suing Meta. Perhaps recognizing that its acquisition of Within will be litigated on the merits no matter the outcome of the FTC’s push to enjoin the deal, Meta has voluntarily agreed to pause that acquisition pending trial. And perhaps feeling excluded by the FTC’s avalanche of recent activity, the Department of Justice is preparing to file suit against Google over its ad business.
This week was supposed to be a lazy one. But after all its news we deserve a day off. There’s no suggested reading for your commute home. Check out early and go spend the afternoon with someone you love. Now is the time to rest up for the coming storm.
The FTC UMC Roundup, part of the Truth on the Market FTC UMC Symposium, is a weekly roundup of news relating to the Federal Trade Commission’s antitrust and Unfair Methods of Competition authority. If you would like to receive this and other posts relating to these topics, subscribe to the RSS feed here. If you have news items you would like to suggest for inclusion, please mail them to us at firstname.lastname@example.org and/or email@example.com.