Cybersecurity 2021 – The Year in Preview: The FTC’s Enforcement Priorities

Editors’ Note:  This is the fourth in our fifth-annual end-of-year series examining important trends in data privacy and cybersecurity in the coming year.  Read our previous posts on Energy, Cannabis, and the GDPR.

As the Trump Administration ends, it is time to look forward to what may be on the horizon with regards to law enforcement at the FTC under the Biden Administration. At this point the future is a bit hazy. It is not yet known who the Biden Administration will tap to lead the agency and without knowing the leadership, it is very difficult to determine how, if at all, the FTC’s priorities will change. However, the FTC is like a very big ship, it can move very fast in a straight line, but changing direction takes a long time and must be done gradually.

In this post we will discuss what is likely and what we can surmise based on what the FTC has been focused on this year. The first thing that is likely to change is the make-up of the commission, but the extent of that change will be depend on whether the FTC chairman continues the tradition of resigning from the commission—as chairs have in the past when the party in control of the White House changed—or if the chairman will stay on the commission and Republicans will maintain their majority. With the understanding that all of this is subject to change based on the new leadership’s priorities, and assuming that the past is a partial predictor of the future, we next evaluate what the FTC has been publicly discussing and how that might shape the future focus of enforcement activities. As an example, even though the old leadership may be gone, the litigation they initiated will be with us for some time, and so we examine a competition litigation with privacy concerns that was recently initiated by the FTC and will likely continue for the next several years. Finally, while it is difficult to predict how the change in administration will reshape the FTC’s consumer protection efforts, every expectation is that the FTC will be even more zealous in its enforcement activities under the Biden administration than it has been under the current administration.

Changes in the Make-Up of the Commission

Before we can discuss how the FTC’s substantive work will change, it is important to understand what will and will not be changing from a personnel perspective. Starting at the top, the first question will be whether the current Chair, Joseph Simons, will step down from the Commission entirely or just step down from the Chair. While Simons is not required to step down entirely, it is common for the Chair to resign upon a change in party control of the White House to allow the new Administration to also gain control of the Commission.

At the very least, President Biden is entitled to replace Simons with one of the other Commissioners as the Chair. In turn, the new Chair will then have the authority to replace the directors of the FTC’s three Bureaus: Competition, Consumer Protection, and Economics. The new Chair will also have the ability to replace a handful of other positions including the General Counsel, the Chief Technologist (currently vacant), the Executive Director, and the Directors of the Office of International Affairs, the Office of Policy Planning and the Office of Public Affairs. The Chair does not have to replace all of these positions and can choose to ask them to stay on; for example, the current Executive Director, David Robbins, and the current Director of the Office of International Affairs, Randy Tritell, are both hold-overs from previous administrations. To ensure continuity, the Chair may stagger the new appointments so that new leadership is not being put in place all across the Commission at the same time.

Other than the Chair, the other Commissioner whose future needs to be sorted out is Rohit Chopra, whose term ended in 2019. President Biden could re-nominate him for a second term or could replace him, in which case Chopra is allowed to continue serving until his successor is confirmed. The other Commissioners still have time left on their term and could choose to continue serving or could choose to resign. To date, there has been no indication that any of the Commissioners are considering resigning. If one of the Republican Commissioners, most likely Chair Simons, were to resign, that would allow the Democrats to take control of the Commission, but if two Republicans were to resign, President Biden would have to replace at least one of them with a Republican because the FTC Act prohibits more than three Commissioners from being of the same political party.

Once the make-up of the Commission is settled, along with the new Directors of the three Bureaus, the next question will be how, if at all, will the substantive work change. If history is a guide, the answer is that at first things won’t change very much, in large part due to the fact that while the leadership may change, almost all of the staff will stay on and continue working on the projects they were previously working on.

A Recent Public Workshop Provides Insight into the FTC’s Thinking on Privacy and Competition

In September 2020, the FTC hosted a public workshop titled Data to Go: An FTC Workshop on Data Portability examining the potential benefits and challenges to consumers and competition raised by data portability. While data portability is often thought of through the lens of consumer choice and consumer privacy, the FTC has increasingly viewed data portability as also an issue that impacts competition by allowing or discouraging new entrants to access data that is currently held by incumbent firms. The FTC is uniquely suited for handling privacy concerns and issues surrounding data portability because of its dual missions of consumer protection and competition. Working on issues of data portability is an opportunity for staff across all three Bureaus to collaborate. The FTC is still trying to find its footing this area and is largely still in listening mode, as demonstrated by the comments of Andrew Smith, the director of the FTC’s Bureau of Consumer Protection, that the goal of the workshop was not to make a broad policy pronouncement or legislative recommendation, but rather to contribute to “the broader discussion among global policymakers about how data portability can empower consumers and promote competition without compromising data security.” This is a discussion that is expected to continue and will likely be taken up again at the FTC’s PrivacyCon in July 2021.

The Facebook Litigation Will be the New FTC Leadership’s Responsibility

While there is still plenty to discuss regarding data portability empowering consumers and promoting competition, that has not stopped the FTC from actively pursuing enforcement actions involving allegations of the lack of data portability harming competition and stifling competition. In a move that harkens back to the FTC’s decision to file litigation against Qualcomm in the final days of the Obama Administration, the FTC filed a complaint against Facebook in December 2020 challenging Facebook’s acquisitions of Instagram and WhatsApp. While this litigation may have been filed under the Trump Administration, most of the litigation will take place under the Biden administration. As a frame of reference, the FTC’s complaint against Qualcomm was filed in January 2017 and effectively ended in October of this year when the Ninth Circuit refused to reconsider its earlier decision to throw out the case (the FTC could still file a petition for certiorari to the Supreme Court).

How the Facebook litigation unfolds will be shaped by the Commission’s new priorities and will frame the focus of future litigation. At least for now, the FTC seems to be concerned about a reduction in competition as a result of diminished consumer choices regarding user privacy. For example, amongst other allegations, the FTC claims that “WhatsApp offered a rich content-sharing ability akin to a social network and increased encryption for privacy-conscious users.” In addition, in requesting that the court order a divestiture, the FTC alleges that an independent WhatsApp’s “strong focus on the protection of user privacy would offer a distinctively valuable option for many users, and would provide an important form of product differentiation for WhatsApp as an independent competitive threat in personal social networking.” The explicit use of differences in approaches to privacy as an indicator of the anti-competitive impact may not be entirely novel, but it is certainly the most prominent example to date and it likely won’t be the last time the FTC uses it.

One last thing to keep an eye on is if there are any differences in priorities between the new leadership at the FTC and the new leadership at the DOJ. In the past, the agencies’ priorities have generally aligned, but sometimes when the priorities diverge too much, the disagreement can leak out into the public. For example, during the FTC’s litigation against Qualcomm, there was a philosophical disagreement between the FTC and the DOJ over how the inventors of new technology should be compensated, and how best to incentivize new technological development. As a result of this disagreement, the DOJ intervened in the Qualcomm case. While the DOJ did not argue directly against the merits of the FTC’s case, the DOJ did express concerns that if the court ruled against Qualcomm, overly broad remedies in the case “could reduce competition and innovation.” Although not unheard of, it is highly unusual for one of the antitrust agencies to intervene in a case brought by the other one. It is possible that this could happen again in the Facebook litigation, especially with the DOJ also pursuing antitrust litigation against Google, if the new DOJ’s priorities do not align with the FTC’s priorities and there is a disagreement about how to restore competition in the tech sector.

Consumer Protection Enforcement

Historically, one change in the FTC’s priorities that goes along with a transition from Republican to Democratic control is the FTC’s inclination to pursue deceptive practices cases, such as for false advertising, against major national consumer goods and services companies.  While both parties support the FTC’s active enforcement against fly-by-night scammers, Republican administrations generally have more confidence in private litigation, self-regulatory challenges, and the marketplace in policing advertising and marketing practices among national and multinational firms.  Under a Democratic administration, we are likely to see some enforcement actions against well-known companies and brands – although not very many, because such cases are resource-intensive.  Even Democratic administrations agree that the FTC’s time and effort are more efficiently spent prosecuting outright scams.  But occasional actions against national advertisers are necessary as a reminder that there is still a cop on this beat, and to backstop the self-regulatory process that ultimately relies on referrals to the FTC as its enforcement mechanism.

Conclusion

The FTC’s enforcement priorities have been hot topics under the current administration and they are certain to be the focus of even more attention under the Biden Administration, but until President Biden appoints the new leadership at the FTC it is difficult to know where the FTC will focus its efforts. If Biden is able to appoint a new Commissioner and swing control to the Democrats, we would expect a lot more activity in the space, but even if the Republicans retain the majority, the new Bureau directors will have significant influence over the types of cases that are brought. There likely will not be significant changes in how the FTC approaches enforcement, but next year’s recently announced PrivacyCon could be a good opportunity for the new leadership to publicly discuss any new focuses and the decisions on how to pursue the Facebook litigation may be the best indicators of what claims the FTC may pursue in the future. No matter what happens, we expect that the FTC will continue its efforts to protect consumers and promote competition without compromising privacy rights or data security.

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