Podcast - The FTC Agenda & Data Privacy

Good day and welcome to another podcast of Clearly Conspicuous. As we've noted in the previous session, our goal in these podcasts is to make you succeed in this current environment, make you aware of what's going on with the federal and state agencies and regulators, and give you practical tips for success. It's a privilege to be with you today. Today, we talk about something that's on the mind of every single business that deals with consumer information, privacy, information, security and data security. Today's topic is data privacy and the FTC agenda.

Data Privacy Is a Top Priority

Data privacy remains a top priority on President Biden's agenda. While Congress made attempts to legislate these areas in recent years, their efforts have been largely fruitless as opportunities to advance legislation grew increasingly uncertain in the months and years ahead. The Federal Trade Commission, or the FTC, will be instrumental in advancing the Biden Administration's data privacy agenda. This podcast examines the outlook for these policy initiatives at the FTC and potential legislative action by Congress. In a December 2021 letter to Senator Blumenthal, FTC Chair Khan said that, quote, "Rulemaking may prove a useful tool to address the breath of challenges and harms that can result from commercial surveillance and other data practices," close quote. He disclosed that the FTC is considering initiating a rulemaking, under Section 18 of the FTC Act, to address lax security practices, data privacy abuses and algorithmic decision making that may result in unlawful discrimination. That's a heavy quote. That process began in earnest in August of last year when the FTC issued an Advance Notice of Proposed Rulemaking asking a series of questions about practices related to commercial surveillance and data security. Comments were due by November 21 of last year. The administration is continuing to pursue its commercial surveillance rulemaking, and the FTC is in the process of reviewing the comments before issuing a formal Notice of Proposed Rulemaking.

The Current FTC Composition

Now, let's step back and look at the current FTC composition to understand the context that's going on here. The FTC's composition changed significantly in recent months. In October of 2022, Commissioner Phillips, a Republican nominated by former President Trump, resigned from his post. In his resignation letter, Phillips criticized the commission's Democratic majority for not facilitating, quote, "the serious discussion of counter argument," close quote. In mid-February of this year, Republican Commissioner Christine Wilson said she would resign from the commission. And then in a fiery opinion piece published in the Wall Street Journal, Wilson accused Chair Khan of abusing her authority and, quote, "undermining the commission structure that Congress wrote into law," close quote. With the departures of Phillips and Wilson, the FTC will continue its work without its traditional 3-to-2 split. Federal law prohibits the nomination of more than three commissioners of the same political party, but the agency will continue its work while Republican nominees are named and confirmed. As the FTC eyes enforcement actions against Big Tech, all three Democratic commissioners are expected to play an important, critical role. Chair Khan has said that the FTC, quote, "should approach data privacy and security protections by considering substantive limits rather than just procedural protections, which tend to create process requirements while sidestepping more fundamental questions about whether certain types of data collection and processing should be permitted in the first place," close quote. As part of these actions, Chair Khan said that the FTC will reassess the frameworks it uses to examine unlawful conduct, specifically with respect to which she characterized as outdated and insufficient notice and consent paradigms. In addition, Commissioner Slaughter and Bedoya will also be a driving force with their outspoken positions on growing threats of consumer data. The White House states that Commissioner Slaughter, quote, "believes that the FTC's dual missions of promoting competition and protecting consumers are interconnected and complementary," and she is mindful that enforcement or rulemaking in one area can have a far-reaching implications for the other. Interestingly, Commissioner Bedoya's previous academic work centered on the intersection of civil rights and privacy, with a focus on facial recognition. For example, he co-authored a 2016 study on facial recognition that revealed, among other things, half of American adults, or over 117 million, people are in a police facial recognition database, and that facial recognition may be least accurate for African Americans. Bedoya has called the passage of a federal data privacy law the ideal approach compared to direct FTC action. But in his view, federal privacy legislation would not be technology specific, include both consent-based collection restrictions and post-collection use restrictions, and include general fiduciary duties, and include provisions allowing for robust enforcement short of federal legislation. Bedoya supports the FTC using its congressionally granted authority to issue rules to combat unfair or deceptive trade practices affecting privacy. However, he does not think FTC privacy rules should be considered a substitute for federal legislation. He explained that the FTC, quote, "would only be able to issue privacy rules under its Magnuson-Moss rulemaking authority, which would reach only unfair or deceptive trade practices deemed to be prevalent," close quote. Even so, he does not think this will, quote, "encompass the full range of privacy invasions Americans face today," close quote.

Biden Administration's Priorities

Now, looking at the legislative or political context, in his February 2023 State of the Union address, President Biden said, quote, "it's time to pass bipartisan legislation to stop Big Tech from collecting personal data on our kids and teenagers online," close quote, calling on Congress to ban targeted advertising to children and impose stricter limits on the personal data that companies collect. The remarks are the furthest President Biden has gone in calling for data privacy legislation. And they come at a time when bipartisan gridlock in Congress means little legislating will be accomplished. House Republicans are working to build off their previous attempts to pass privacy legislation. The House Energy and Commerce Committee has begun consideration of the American Data Privacy and Protection Act, which the committee approved by a vote of 53 to 2 in Congress. This legislation is a priority for Chair McMorris Rodgers, and the committee is holding a series of hearings over the coming months to consider stronger national data privacy standards. Meanwhile, the Senate Commerce Committee Chair Cantwell remains the largest impediment to any federal data privacy legislation moving through the chamber. Last year, Chair Cantwell opted to not hold a hearing on that proposed act, instead preferring to focus on narrow legislation focused on children's data privacy. Children's data privacy could be an area of bipartisan compromise, especially with the growing scrutiny over popular social media apps like Tik Tok.

Key Takeaway

In conclusion, that's a lot to digest. We really tried to look at the entire ecosystem politically and from a regulatory perspective. But here's the key takeaway. Privacy and data security are on the minds of every single company executive. Privacy breaches, litigation, brand damage and consumers' lack of trust are huge risks. And the FTC's current administration has privacy and data security on this front burner. So please stay tuned to further programs as we identify and address the key issues and developments and provide strategies for success. I wish you continued success and a meaningful day. Thank you.