We expect regulators, at least those within a single administration, to speak with a common voice. Hopefully, they agree on key principles and seek regulations that are finely tuned, based on expert judgments and carefully evaluated.
So when the Federal Trade Commission (FTC) staff took the unprecedented action of criticizing proposed internet privacy rules being considered by the Federal Communications Commission (FCC), it became clear we must hit the pause button.
The FTC is this nation’s leading privacy enforcer with expertise based on decades of careful enforcement action. When the FTC speaks we must listen carefully — not because the FTC gets every issue right, but because of its longstanding expertise. Rather than attempt to sing along with the FCC, the FTC made clear the FCC is singing from the wrong hymnal and consumers will be worse off if the FCC doesn’t get in tune.
Why does the FTC object? Perhaps because the FCC rules stray so far from the core principles behind the administration’s broader multiyear work protecting consumer online data.
The FTC’s main point is simple and compelling — it makes no sense to have one set of privacy standards for broadband providers and a different, inconsistent set for everyone else. With diplomatic understatement, the FTC comments call that patchwork approach to consumer protection “not optimal.” Inconsistent regulation creates barriers to competition and innovation. Why should one set of competitors be handicapped — like making them run while carrying a refrigerator on their back.
Consumers are obviously going to be confused if two different sets of rules apply to their data on different parts of the internet and different participants in the online ecosystem. And that confusion will undermine any effort to ensure consumers can understand and enforce their rights, especially because it conflicts so directly with what consumers expect. Recent survey data submitted to the FCC shows that 94 percent of internet users believe “all companies collecting data online should follow the same consumer privacy rules.”
Second, the FTC explains how the FCC’s patchwork approach will distort markets for advertising and other services online, arbitrarily applying different rules to different competitors. Many companies are able to offer free or low-cost products by collecting data consumers don’t consider sensitive — like a widely available IP address or a record of public websites that are visited. The FCC approach destabilizes this market by arbitrarily and illogically imposing regulations on some competitors but not others, even though they collect and use the same data.
Third, beyond this inconsistency, the FTC also questions the basic substance of the FCC rules, which abandon the bedrock FTC principle that the protection given consumer data should be based on consumer expectations regarding its sensitivity. Under the FTC approach, things like financial and medical information receive a higher level of protection, such as requiring consumers to specifically “opt in” to any collection and use. But more mundane data like the kinds of websites or ads a person clicks on receive somewhat less protection, such as transparency about how data is used and an opportunity to “opt out.”
The FCC proposes to replace that system with much broader “opt in” requirements that wholly ignore the sensitivity of the data. But unmooring the level of data protection from consumer expectations is counterproductive and wrong — 83 percent of consumers believe online privacy should be based on the sensitivity of data, not the kind of company or organization gathering it. As one FTC Commissioner put it, the FTC filing “politely recognizes that the FCC’s current proposal would impose more restrictions than are necessary to protect consumer privacy in many cases, and yet would fail to protect consumer privacy in others.”
But the main lesson of the FTC filing doesn’t rest in this laundry list of problems with the FCC approach — it is the bigger message that the FCC is clearly in over its head on these issues. Lacking the hard-earned privacy expertise of the FTC, it has proposed undeveloped rules that will hurt consumers, distort markets, and weaken protection for our data in fundamental ways.
When I was in the leadership of the FTC we often filed comments guiding states or other regulators to recognize the need for regulatory humility. Regulations and legislation can become permanent impediments or handicaps to competition.
When the nation’s leading consumer protection enforcer says you have got it wrong, its time to rethink and return to the drawing board.
• David Balto served as policy director at the Federal Trade Commission and as a lawyer in the Justice Department’s antitrust division.
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