Policy

Lina Khan's FTC, back on its heels, eyes a big swing at tech

The new chair led a series of wonky rule changes at the agency, but they signal it could take on everything from food delivery to facial recognition.

FTC chair Lina Khan

FTC chair Lina Khan

Photo: Pool/Getty Images

Watch out, Uber Eats. Lina Khan, the Federal Trade Commission's new chair, is taking charge of the agency's Democratic majority to broaden the FTC's ability to regulate new industries and challenge potentially anticompetitive conduct.

On Thursday, during the first of the FTC's new public meetings, commissioners cast a series of votes that signaled a desire to tighten the screws on emerging and digital sectors, as members of the public, consumer advocates and industry lobbyists begged the commission to tackle issues such as food delivery apps, right to repair, facial recognition and more.

Thursday's changes, while largely bureaucratic, could have outsized effect coming from an agency that in recent decades narrowed its own approach to the sweeping statutes that govern its powers.

The FTC has also seen Congress and the courts restrict its efforts when it tried to go big, including a recent unanimous Supreme Court decision limiting its ability to quickly secure money for harmed consumers and a federal court's (temporary) dismissal earlier this week of its marquee antitrust case against Facebook.

Khan, who seems willing to risk a backlash if it means finding viable ways to limit corporate power, made the procedural changes her first public move as chair, with big implications for tech.

The FTC has oversight of consumer protection issues such as privacy and antitrust enforcement as well as fair competition between companies, and as such has increasingly found itself becoming the nation's de facto tech regulator. Even before this week's procedural changes, commissioners had explored whether biased algorithms and designs that nudge consumers online could constitute the kinds of "unfair or deceptive acts" the agency polices under Section 5 of the FTC Act.

Section 5 was the focus of much of the action on Thursday. It is already at the core of the FTC's ability to combat data breaches as well, and Democratic Commissioner Rebecca Kelly Slaughter cited "data abuses" and practices in online ticket sales as potential new targets for rule-making during the meeting.

Khan and the two other Democrats moved to streamline the FTC's procedures for making those rules, which can govern unfairness and deception on the scale of whole sectors, particularly those that have just emerged or are changing faster than Congress tends to address them.

Slaughter, who acted as chair until Khan was named, said that Congress's grant of regulatory authority sent "a clear directive to the FTC to promulgate trade rules to protect consumers in the dynamic and changing economic landscape."

The FTC has rarely used its rule-making authority, which had long been viewed as more cumbersome than other agencies', since a series of regulations in the 1970s prompted lawmaker pushback. Most famously, the FTC's attempts to regulate children's advertising were cast as the height of nanny-state overreach after a campaign by advertisers, causing Congress to rein in the agency's regulatory powers. The rule-making was dead by the time President Reagan took office and initiated a deregulatory agenda.

During the meeting, the commission's two Republicans, Christine Wilson and Noah Phillips, slammed what they cast as the removal of guardrails against politicized and unpredictable enforcement and the possibility of costly regulation. The powerful U.S. Chamber of Commerce business lobby warned Khan's changes "will lead to litigation."

Against the government's antitrust clashes with tech giants like Facebook and Amazon, the hullabaloo going into Thursday's meeting focused on the commission's 2015 statement that it would limit its use of its authority, also under Section 5, to tackle "unfair methods of competition" and keep it in line with antitrust powers that the commission derives from other laws.

Broader theories of unfair competition could potentially help the FTC if it seeks to rewrite its complaint against Facebook to address a judge's dismissal of the agency's initial set of allegations, and more discretion could also widen the field for other future lawsuits, including against Big Tech.

Both Wilson and several tech groups argued the revocation of the self-imposed limits on the FTC's powers would have the opposite of its intended effect and instead harm consumers.

"Consumers will face higher prices, less innovation and reduction in quality," she said, noting that the 2015 approach focuses on those issues.

Critics allied with Khan, meanwhile, have said the FTC was pulling its own punches with the statement, and some celebrated its removal.

"The commission's efforts to constrain Section 5 in this way have only hindered the agency's enforcement efforts," Khan said.

Then she seemed to give a hint of her future agenda.

"Withdrawing the 2015 statement is only the start of our efforts to clarify the meaning of Section 5 and apply it to today's market," she said.

From menus to AI

Then came the speakers, after the votes. More than 30 people took advantage of the opportunity to bring up a wide array of competition, privacy and other concerns including the pharmaceutical and grocery industries, online privacy, bias in facial recognition, data collection by smart speakers, right to repair, ed tech and Chinese drones.

Many of the topics were ones in which the commission has already dabbled, but several speakers urged the FTC to come down on third-party delivery apps like Uber Eats, Grubhub and DoorDash in particular.

"These tech companies have existed for far too long with absolutely no oversight," said a woman who described herself as a Las Vegas restaurant owner, alleging the companies are "stealing" menus and have little transparency in billing.

The company did not return a request for comment. In 2018, Uber settled with the FTC over allegations it "deceived consumers about its privacy and data security practices."

Other speakers urged the FTC to support consumers' right to repair what they own. Hardware and device manufacturers have sought to curtail those rights, and the FTC recently found such efforts had "scant evidence to support" them. Another speaker brought up data collection by Amazon's Ring security cameras and its Alexa smart devices, as well concerns about Amazon's facial recognition technology.

The commission is already investigating Amazon's competitive practices, and the company sought on Wednesday to remove Khan, who came to prominence with her criticism of the ecommerce giant, from the proceedings.
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