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One big reason the FTC wants to do rule-making

Protocol Policy

Hello, and welcome to Protocol Policy! Today I’m looking at how the FTC’s longtime pining — and recent defeats — brought the Democratic commissioners to the moment in which they’re considering privacy rule-making. Plus, someone actually said no to Elon Musk, and all kinds of cars are slamming on their brakes.

Feelin’ fine

The FTC finally took the first official steps toward regulating the vast data economy, from cybersecurity to Big Tech’s “surveillance.” The move, long signaled by chair Lina Khan, could result in sweeping new rules that touch on tech, finance, health care and more — or it could end up a politically fraught and much-litigated gap-filler that just adds here and there to what Congress is trying to do. In either case, there’s a quiet reason the commission’s Democrats are interested in rules: the ability to get money.

To understand why, you first have to understand how the FTC has usually gone about enforcing the laws that apply to tech and data.

  • The agency has prioritized enforcement against one-off instances of law-breaking, usually when companies commit “deceptive acts” by lying about their privacy practices.
  • The FTC often comes to settlements, which remind the companies that are allegedly doing bad things they will face fines for future violations — monetary penalties that the commission, unlike your average traffic cop, can’t often impose on its own.
  • Only if these companies are later found to be violating these settlements is the agency finally able to extract actual penalties, such as the $5 billion total fine on Facebook in the wake of the Cambridge Analytica scandal.

The commission, under both Republican and Democratic leadership, has long contended that having so-called first-time fining authority would do more to stop law-breaking — and if you follow privacy or cybersecurity news at all, it’s hard to say the industry is well policed.

  • The FTC also feels like it got put on its back foot last year when the Supreme Court ruled unanimously that the agency’s practice of quickly restoring money to victims of fraud and other corporate misdeeds wasn’t based in the law.
  • That practice focused just on making consumers whole, not on punishing companies above any ill-gotten gains the way that penalties do.
  • In either case, though, the gloomy feeling inside the FTC is that it’s only getting easier both to deceive consumers about data and to get away with it.

But one of the few exceptions to the FTC’s limits on imposing fines is if companies violate regulations, not just laws, against deceptive or unfair acts that are prevalent.

  • In that case, it’s OK for the FTC to fine companies if they’re already on notice about what they shouldn’t do, and the existence of rules probably goes a long way toward informing them.
  • Plus, regardless of what companies know about regulations they may have violated, the FTC can at least get consumers their lost money back if a company does break the rules.

In other words, regulations on data usage would fill what the agency seems to see as a hole in its ability to get consumer redress and make law-breaking expensive.

  • The commissioners don’t generally say this outright, especially because they have to start this whole process with an open mind about whether or not there should even be rules.
  • But if you listen, it’s there: “Case-by-case enforcement may fail to adequately deter lawbreaking or remedy the resulting harms,” Khan told reporters after the FTC issued its notice of potential rule-making.
  • Deterrence and remedies? Hmm …

It’s worth saying this isn’t a cash grab: Redress goes to consumers, and penalty money goes to the Treasury, not into the commission’s coffers.

  • And although both GOP commissioners voted against kicking off the proceedings, Republicans at the FTC, including former chair Joe Simons, have flirted with the idea that the FTC should at least be able to make rules.

It’s also worth saying that any potential rules could prove far narrower than the questions posed, especially because the Democratic commissioners stressed they’d defer to Congress if a privacy bill passes. Rules would also take months to years to write and finalize. If regulation does get off the ground, though, the data economy might have to function a whole lot differently.

— Ben Brody (email | twitter)

In Washington

The FCC rescinded nearly $886 million in funding that Elon Musk’s Starlink had secured during the Trump administration to help connect rural areas. The award — one of the pricier parts of the satellite company’s extensive and contentious history with the agency — had been criticized as a “boondoggle.” Skeptics said Starlink proposed to connect a lot of parking lots and universities already providing their own internet. Commission chair Jessica Rosenworcel said the technology is promising but still “developing,” and suggested it was under-performing.

The Federal Election Commission declined to raise legal concerns about Google’s plan to make sure campaign emails don’t go to spam folders. Just ahead of the midterms, the proposal is a sop to Republicans who had misrepresented a study, claiming it showed evidence of spam filters’ political bias and threatening to legislate on the issue.

Coinbase disclosed it is the subject of an SEC probe, including into “existing and intended future products.” In a filing, the company also said it had received “investigative subpoenas and requests from the SEC for documents and information.”

Elizabeth Warren and Bernie Sanders are among the senators asking a key federal banking regulator to withdraw guidance that gives banks some ability to engage in crypto-related business, including holding cash reserves, backing stablecoins and using blockchain and stablecoins to verify bank-to-bank payments.

In the states

California lawmakers killed a bill that would have allowed government lawsuits against social media companies over features that get kids addicted. Lawmakers around the world want to stop or limit the negative effects of apps like Instagram on kids, but the companies and free speech advocates have said the broad definitions in the bill could go way beyond the intended purpose.

California plans to develop 25 gigawatts of offshore wind capacity by 2045, the most ambitious such target in the U.S. It would be enough to meet the electricity demands of 25 million homes.

A pilot program in New York City is putting technology in 50 government cars that will prevent them from exceeding the speed limit.

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Around the world

The EU is in preliminary talks with SpaceX to use its rockets, according to Reuters. The European Space Agency lost access to Soyuz launchers in the wake of Russia’s invasion of Ukraine.

Australia has fined Google more than $40 million over Android settings that purported to allow users to get out of the company’s location tracking, but did not.

In the media, culture and metaverse

Meta rolled out expanded testing of end-to-end encrypted chat for Facebook Messenger. The plans have long been in the works, but the sudden announcement comes on the heels of Nebraska authorities charging a teen with obtaining an illegal abortion after accessing her Messenger history. Meta said it’s a coincidence, though security advocates say the technology will do more to protect people seeking abortions than trying to get Meta to defy court demands ever would.

Twitter is reviving enforcement of its civic integrity policy as social media companies gear up for the midterm election in November. New features include a redesigned label on misleading information. Twitter said its tests showed that the new label prompted more click-through to reliable sources.

A University of Pennsylvania researcher suggests TV viewing is doing more to polarize the U.S. body politic than social media does. Homa Hosseinmardi said her studies show TV viewers are more likely to stay in their bubbles and expose themselves to only a narrow range of views than social media users are.

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Mark your calendars

An update to the Twitter user who said they wanted to do a little DIY testing of Teslas’ ability to brake when a kid runs out in front: The child’s mother, whose permission hadn’t previously been secured, is now “on board as we explained how safe it will be,” according to follow-up tweets. The account also posted, hopefully cheekily: “We plan to run over the child on Saturday.”

Thanks for reading — see you Monday!

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