Policy

The FTC is losing power just when Congress wants it to rein in tech

After a brutal loss for the FTC in the Supreme Court, lawmakers have big decisions ahead about the agency that's supposed to police tech.

The FTC is losing power just when Congress wants it to rein in tech

Congress wants the FTC to police big tech, but following a Supreme Court loss for the agency, lawmakers are struggling to decide what powers it should have.

Photo: Darren Halstead/Unsplash

In recent years, the Federal Trade Commission has gone after COVID-19 scams, deceitful payday lenders, sham drug patent litigation and of course Facebook's acquisitions — all under the same legal authority that the Supreme Court gutted last week.

The high court issued a unanimous ruling Thursday in AMG Capital Management v. FTC, finding that the agency had spent four decades vastly overstating its legal ability to quickly secure money for consumers, particularly from fraud and scams.

The rebuke will force Congress to weigh in on one of the main tools the FTC uses to police ever-broader swaths of the U.S. economy, with partisan splits already emerging. As if relying on lawmakers' ability to compromise wasn't enough to put question marks around the agency's mission, the debate over what the agency actually can do comes just as the commission is increasingly called upon to beef up its oversight of the tech industry.

"They're asked to regulate or at least oversee incredibly sophisticated companies that increasingly dominate the landscape," said Justin Brookman, a former FTC official who is now director of consumer privacy and technology policy at Consumer Reports. "You're seeing a bipartisan recognition that the FTC hasn't done a good enough job on privacy, on competition, on consumer protection more broadly."

Despite a 40-year trend of decreasing staff, the FTC tends to be asked to absorb responsibilities such as watching over new sectors of the economy, considered part of its broad mandate to protect consumers from unfair and deceptive business practices. That's how cybersecurity breaches, children's online privacy and fake COVID-19 cure websites ended up the responsibility of an agency that began in 1914 to "bust the trusts" and now also oversees mergers and monopoly enforcement.

To cope with the increase in responsibility since the 1980s, the commission more frequently turned to its powers to seek injunctions in federal court under Section 13(b) of the FTC Act. The agency asserted that the provision also allowed it to go to court to try to force bad actors to make consumers whole monetarily, circumventing a more laborious internal process for retrieving ill-gotten gains.

Courts backed this interpretation often enough that the agency made its supposed powers under 13(b) into a key tool for getting money back from fraudsters, many of whom now operate online, sometimes through large platforms. Over the years, the agency also turned the provision into an important way to police a range of consumer protection concerns, and occasionally to claw back the gains of anticompetitive abuse. The FTC says it's secured more than $11 billion in consumer refunds over the last five years, and a top agency official testified Tuesday that the decision could put roughly 24 ongoing consumer protection and competition cases seeking billions at risk. The ability to seek injunctions under 13(b) is even at the heart of the FTC's competition case against Facebook, although the commission is not seeking monetary redress in that instance.

"It's a 13(b) machine," Stephen Calkins, a former FTC general counsel who now teaches at Wayne State University's law school, said of the agency. "That's what they do for a living." He called the Supreme Court decision "a gut punch."

Yet the backlash against that machine has been rising from corporate America. In AMG, the Court struck down the FTC's ability to get money under 13(b), forcing the commission to use its own infamously bureaucratic internal court and potentially putting its consumer protection program months or years behind. Even when money isn't on the table, though, companies including Facebook are now challenging the FTC's ability to curb years-old conduct. And corporate groups such as the U.S. Chamber of Commerce are pushing to limit any bill updating the FTC's authority only to cover egregious, ongoing conduct such as scams, and to exclude competition.

"The Chamber will continue to oppose changes to 13(b) that would dramatically expand FTC authority beyond the purported reason being given to justify the legislation," the business lobby said in a recent letter to Congress. It's been working since last year with Republican lawmakers in an effort to have them unveil a bill with a narrow vision of the agency's enforcement tools focused on fraud, and to push back against Democratic hopes for something wider, according to a person familiar with the Chamber's efforts.

The FTC's top consumer protection official, Daniel Kaufman, told a Senate hearing on Tuesday that such a limited bill would result in "bad policy," and said he "could not disagree more with so many of the propositions in the chamber's letter."

Wanting it both ways

Skepticism about granting the FTC broad powers has also popped up with some Republican lawmakers, who are often caught between their dislike of government power and their hopes to curb tech in particular.

"There is a history of regulatory overreach we must consider and how that impacts our business sectors as we rebound from the COVID-19 pandemic," Rep. Gus Bilirakis, the top Republican on a House Consumer Protection panel, said Tuesday, calling for "targeted, transparent" measures. One of the FTC's own Republican commissioners, Noah Phillips, also testified to Congress last week that any bill giving the FTC the ability to recover money should limit how much the agency can seek outside of cases of pure fraud, including potential limits for data breaches where customers still got the use of the goods or services despite having their data stolen.

Democrats, meanwhile, would like to replace the authority that the FTC just lost. The lack of agreement could signal that any future additions to the FTC's toolbox would be slow to come, with "fixes" for 13(b) potentially putting off other debates. While both sides in a recent Senate hearing did suggest they want to move quickly — there is some overlap in the current House Democratic proposal on the provision and a Senate Republican effort from last year — even non-controversial legislation can take months or years to make its way through Capitol Hill. Neither reform bill received endorsement from across the aisle, and the half dozen FTC bills that House Republicans also introduced this month say little about 13(b).

Delays could threaten the hopes of many lawmakers on both sides of the aisle, who increasingly demand that the FTC tackle the digital economy even when they can't agree on how. That includes policing not just consumers' and children's privacy but also big tech mergers and anticompetitive behavior, cybersecurity, artificial intelligence and "dark patterns" that nudge consumers to grant permissions or choose more expensive goods than they might otherwise prefer.

In order to oversee the digital sector, lawmakers are discussing granting the FTC more explicit powers over privacy (because the agency can only enforce businesses' own promises on the topic right now). Both the Democratic and Republican leaders of the Senate Commerce Committee unveiled partisan privacy bills in the last Congress, for instance, while lawmakers tried to keep a House effort bipartisan. Congress is also debating giving the FTC an easier path to issuing regulations that would govern tech, the ability to issue fines as a punishment and of course, more money.

"They're going to need a lot more than 13(b)," said Consumer Reports's Brookman. "The zeitgeist definitely seems to be arguing for a more empowered and a more aggressive Federal Trade Commission."

Climate

The minerals we need to save the planet are getting way too expensive

Supply chain problems and rising demand have sent prices spiraling upward for the minerals and metals essential for the clean energy transition.

Critical mineral prices have exploded over the past year.

Photo: Andrey Rudakov/Bloomberg via Getty Images

The newest source of the alarm bells echoing throughout the renewables industry? Spiking critical mineral and metal prices.

According to a new report from the International Energy Agency, a maelstrom of rising demand and tattered supply chains have caused prices for the materials needed for clean energy technologies to soar in the last year. And this increase has only accelerated since 2022 began.

Keep Reading Show less
Lisa Martine Jenkins

Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (ljenkins@protocol.com).

Sponsored Content

Why the digital transformation of industries is creating a more sustainable future

Qualcomm’s chief sustainability officer Angela Baker on how companies can view going “digital” as a way not only toward growth, as laid out in a recent report, but also toward establishing and meeting environmental, social and governance goals.

Three letters dominate business practice at present: ESG, or environmental, social and governance goals. The number of mentions of the environment in financial earnings has doubled in the last five years, according to GlobalData: 600,000 companies mentioned the term in their annual or quarterly results last year.

But meeting those ESG goals can be a challenge — one that businesses can’t and shouldn’t take lightly. Ahead of an exclusive fireside chat at Davos, Angela Baker, chief sustainability officer at Qualcomm, sat down with Protocol to speak about how best to achieve those targets and how Qualcomm thinks about its own sustainability strategy, net zero commitment, other ESG targets and more.

Keep Reading Show less
Chris Stokel-Walker

Chris Stokel-Walker is a freelance technology and culture journalist and author of "YouTubers: How YouTube Shook Up TV and Created a New Generation of Stars." His work has been published in The New York Times, The Guardian and Wired.

Enterprise

The 911 system is outdated. Updating it to the cloud is risky.

Unlike tech companies, emergency services departments can’t afford to make mistakes when migrating to the cloud. Integrating new software in an industry where there’s no margin for error is risky, and sometimes deadly.

In an industry where seconds can mean the difference between life and death, many public safety departments are hesitant to take risks on new cloud-based technologies.

Illustration: Christopher T. Fong/Protocol

Dialing 911 could be the most important phone call you will ever make. But what happens when the software that’s supposed to deliver that call fails you? It may seem simple, but the technology behind a call for help is complicated, and when it fails, deadly.

The infrastructure supporting emergency contact centers is one of the most critical assets for any city, town or local government. But just as the pandemic exposed the creaky tech infrastructure that runs local governments, in many cases the technology in those call centers is outdated and hasn’t been touched for decades.

Keep Reading Show less
Aisha Counts

Aisha Counts (@aishacounts) is a reporter at Protocol covering enterprise software. Formerly, she was a management consultant for EY. She's based in Los Angeles and can be reached at acounts@protocol.com.

Entertainment

'The Wilds' is a must-watch guilty pleasure and more weekend recs

Don’t know what to do this weekend? We’ve got you covered.

Our favorite things this week.

Illustration: Protocol

The East Coast is getting a little preview of summer this weekend. If you want to stay indoors and beat the heat, we have a few suggestions this week to keep you entertained, like a new season of Amazon Prime’s guilty-pleasure show, “The Wilds,” a new game from Horizon Worlds that’s fun for everyone and a sneak peek from Adam Mosseri into what Instagram is thinking about Web3.

Keep Reading Show less
Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

Workplace

Work expands to fill the time – but only if you let it

The former Todoist productivity expert drops time-blocking tips, lofi beats playlists for concentrating and other knowledge bombs.

“I do hope the productivity space as a whole is more intentional about pushing narratives that are about life versus just work.”

Photo: Courtesy of Fadeke Adegbuyi

Fadeke Adegbuyi knows how to dole out productivity advice. When she was a marketing manager at Doist, she taught users via blogs and newsletters about how to better organize their lives. Doist, the company behind to-do-list app Todoist and messaging app Twist, has pushed remote and asynchronous work for years. Adegbuyi’s job was to translate these ideas to the masses.

“We were thinking about asynchronous communication from a work point of view, of like: What is most effective for doing ambitious and awesome work, and also, what is most advantageous for living a life that feels balanced?” Adegbuyi said.

Keep Reading Show less
Lizzy Lawrence

Lizzy Lawrence ( @LizzyLaw_) is a reporter at Protocol, covering tools and productivity in the workplace. She's a recent graduate of the University of Michigan, where she studied sociology and international studies. She served as editor in chief of The Michigan Daily, her school's independent newspaper. She's based in D.C., and can be reached at llawrence@protocol.com.

Latest Stories
Bulletins