By AARON BOYDAUGUST 19, 2022
Commissioners are split on whether new regulations—and even the act of gathering information on a proposed new regulation—is the right way forward.
The Federal Trade Commission is considering establishing new rules for how companies collect, secure, use and sell consumers’ data that go beyond asking users to agree to opaque and often misleading terms of service.
On Monday, the commission will post an advanced notice of proposed rulemaking, or ANPR, that outlines current consumer data issues and asks for public feedback on creating new regulations that focus on baseline privacy, data security and corporate accountability rather than user consent.
“Specifically, the commission invites comment on whether it should implement new trade regulation rules or other regulatory alternatives concerning the ways in which companies collect, aggregate, protect, use, analyze, and retain consumer data, as well as transfer, share, sell, or otherwise monetize that data in ways that are unfair or deceptive,” states the notice set to publish Aug. 22 in the Federal Register.
“Whether they know it or not, most Americans today surrender their personal information to engage in the most basic aspects of modern life,” commissioners wrote. “When they buy groceries, do homework or apply for car insurance, for example, consumers today likely give a wide range of personal information about themselves to companies, including their movements, prayers, friends, menstrual cycles, web-browsing and faces, among other basic aspects of their lives.”
The agency notes data collection is “an elaborate and lucrative market,” both in trading information and using it to target consumers and maximize sales and profits.
“While, in theory, these personalization practices have the potential to benefit consumers, reports note that they have facilitated consumer harms that can be difficult if not impossible for any one person to avoid,” the notice states.
And while companies are required by law to get consumers’ consent—usually through lengthy terms of service documents—necessity and fatigue often lead people to accept those terms whether or not they would like to, or even fully understand what they are agreeing to.
Further, “The commission’s enforcement actions have targeted several pernicious dark pattern practices, including burying privacy settings behind multiple layers of the user interface and making misleading representations to ‘trick or trap’ consumers into providing personal information,” the notice states. “Given the reported scale and pervasiveness of such practices, individual consumer consent may be irrelevant.”
Even harder to avoid are data uses outside of the agreed upon terms of service, whether by the company collecting the data or after it gets bundled and sold to third parties not bound by the original terms.
“These practices also appear to exist outside of the retail consumer setting,” the FTC wrote. “Some employers, for example, reportedly collect an assortment of worker data to evaluate productivity, among other reasons—a practice that has become far more pervasive since the onset of the COVID-19 pandemic.”
And the harms are real.
At the individual level, the agency cites a wealth of research showing how data collection is used to push fraudulent or harmful products and services to vulnerable users, enabling “cyber bullying, cyberstalking and the distribution of child sexual abuse material,” as well as exacerbating underlying issues such as “depression, anxiety, eating disorders and suicidal ideation among kids and teens.”
On a societal scale, “companies’ growing reliance on automated systems is creating new forms and mechanisms for discrimination based on statutorily protected categories, including in critical areas such as housing, employment and health care,” FTC wrote, citing several recent examples.
As the commission considers new regulatory options, FTC is using this comment period and an upcoming virtual public forum on Sept. 8 “to generate a public record about prevalent commercial surveillance practices or lax data security practices that are unfair or deceptive, as well as about efficient, effective, and adaptive regulatory responses.”
Commissions said they want to build this record as Congress debates enacting the American Data Privacy and Protection Act.
“Given the uncertainty of the legislative process and the time … rulemaking necessarily takes, the commission should not wait any longer than it already has to develop a public record that could support enforceable rules,” FTC Commissioner Rebecca Kelly Slaughter said in a statement. “Case-by-case enforcement has not systemically deterred unlawful behavior in this market. As our own reports make clear, the prevailing notice-and-choice regime has failed to protect users, and the modes by which sensitive information can be discovered, derived, and disclosed have only grown in number and complexity.”
The notice asks 95 specific questions across 11 subject areas, including:
- To what extent do commercial surveillance practices or lax security measures harm consumers?
- To what extent do commercial surveillance practices or lax data security measures harm children, including teenagers?
- How should the commission balance costs and benefits?
- How, if at all, should the commission regulate harmful commercial surveillance or data security practices that are prevalent?
- Information on collection, use, retention and transfer of consumer data.
- Information on automated decision-making systems.
- Information on discrimination based on protected categories.
- Information on consumer consent.
- Information on notice, transparency and disclosure.
- Potential remedies.
- Obsolescence of past rulemaking.
The notice also includes a rundown of how the FTC monitors and regulates these issues now and the extent of the agency’s statutory authority to make new rules in this space.
Comments are due no later than Oct. 21.
While the Democratic commissioners wrote statements in favor of updating data privacy rules, Republican commissioners dissented, citing potential adverse economic impacts and a preference for letting Congress legislate over administrative regulations.
“Any law our nation adopts will have vast economic significance,” Commissioner Noah Joshua Phillips wrote. “It will impact many thousands of companies, millions of citizens and billions upon billions of dollars in commerce. It will involve real trade-offs between, for example, innovation, jobs and economic growth on the one hand and protection from privacy harms on the other.”
Phillips said the proposed rulemaking is an overstep for the FTC, calling the notice for public comment an attempt to “recast the commission as a legislature,” and chided the commission for not including specifics on the “scope and parameters of what rule or rules might follow.”
“So I don’t think we should do this,” Phillips said. “But if you’re going to do it, do it right.”
The commission’s other Republican member, Christine Wilson, also dissented, preferring to see Congress pass “a sound, comprehensive and nuanced approach to consumer privacy and data security” that she says will be better for companies, consumers and the economy as a whole.