The Federal Trade Commission will hold a series of public hearings beginning later this year as part of a sweeping evaluation of the agency’s enforcement approach, self-examination that comes amid mounting scrutiny of whether regulators have done too little to limit the power of tech companies.
FTC chairman Joseph Simons, a former antitrust partner at Paul, Weiss, Rifkind, Wharton & Garrison, told reporters that the FTC will hold public hearings to examine whether the agency keeps pace with changes in the U.S. economy, including the rise in market power of tech giants such as Google and Facebook.
“Twenty years ago, I think there was a pretty broad consensus about what antitrust enforcement should look like from both sides of the aisle. It wasn’t completely congruent between the Democrats and the Republicans, but it was pretty close. Now the consensus … people are challenging the consensus. So that’s what causes us to want to have hearings like this,” Simons said, noting that tech companies are becoming “so important.”
Last month, a coalition of left-leaning advocacy groups called on the FTC to break up Facebook’s social platforms, including Instagram and WhatsApp, into competing networks. And various scholars have questioned whether antitrust laws are even equipped for the internet age.
In addition to the upcoming hearings, Simons discussed vertical mergers—a timely topic in light of a judge’s decision last week to approve AT&T’s acquisition of Time Warner—and Simons addressed the concerns about his consumer protection chief. What follows are three highlights.
‘Nervous’ about authority in data security and privacy cases.
As part of the public hearing process, Simons said the FTC would examine the extent of its authority to penalize companies for lax cybersecurity practices. In its efforts so far, the FTC has required companies to establish comprehensive data security programs.
Simons said the hearing process could lead the FTC to pursue legislation that would give the agency additional authority, possibly including the power to assess civil penalties. (Currently, the FTC can only assess fines in data security cases if a company is found to have violated a previous order with the commission.)
“Our remedial authority with respect to data security and also privacy is something that’s of serious concern to me,” Simons said. “And I’m very nervous that we really do not have the remedial authority that we need in order to create a sufficient deterrent to deter the kind of conduct that we want to deter.”
This month, a federal appeals court struck down the FTC’s finding that a now-defunct medical testing company, LabMD, failed to adequately protect the personal information of nearly 10,000 patients.
A three-judge panel of the U.S. Court of Appeals for the Eleventh Circuit rebuked the FTC over its demand that LabMD establish a comprehensive data security program, ruling that the cease-and-desist order was too vague to be enforced. Data security programs similar to the one ordered in LabMD’s case have been a fixture of the FTC’s cybersecurity enforcement efforts, so the Eleventh Circuit decision could have wider implications for the agency’s future efforts.
Simons declined to comment on the decision, which the FTC still has the opportunity to appeal to the full Eleventh Circuit or to the U.S. Supreme Court.
Controversial consumer protection chief is ‘on board.’
Just two weeks into their tenures together, the FTC commissioners divided along party lines to approve Simons’ pick to lead the FTC’s bureau of consumer protection. Democratic commissioners voted against Andrew Smith, formerly a Covington & Burling partner, over concerns that his past at the firm would force him to recuse from the commission’s high-profile investigations into Facebook and Equifax.
Simons defended Smith on Tuesday, saying that “he is now working for the government and his client is the commission.”
“And so, he knows, and he came on board knowing that we were wanting to do vigorous enforcement, and he’s completely on board with that.”
Pointing to career staff he described as “fantastic,” Simons also dismissed the notion that Smith’s recusals would create issues for the consumer protection bureau.
“When Andrew is recused, the people who are running the matters are the senior career staff, and those folks are terrific,” Simons said. “So I don’t have any problems at all with that.
Stay tuned after the landmark AT&T-Time Warner decision.
A week after a federal judge approved AT&T’s proposed takeover of TimeWarner, striking down a rare Justice Department challenge to a so-called vertical merger, Simons declined to “comment directly” on the decision. But he indicated that the ruling would not necessarily influence the FTC’s own antitrust enforcement efforts and said decisions to challenge vertical mergers are “very fact dependent.”
“Any one particular case I wouldn’t think would have a particularly important impact on whether we bring vertical cases or not. When I was bureau director, we did have vertical cases,” Simons said.
Simons also signaled the FTC might issue new merger guidelines for vertical deals following the upcoming hearings.
“On the vertical stuff, I wouldn’t count anything out. We haven’t had vertical guidelines in quite a while, so I wouldn’t count that out,” he said. “That will be one of the things that’ll be subject of the hearings.”
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