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FTC’s Demand for Tech Company Data Shows ‘Underutilized’ Power

Dec. 16, 2020, 10:01 AM

The Federal Trade Commission’s orders to Amazon.com Inc., Facebook Inc., and seven other companies to turn over information on their use of consumer data shows how a little-used inquiry authority has been exercised lately to regulate the tech industry.

The authority comes from Section 6(b) of the FTC Act, which allows for wide-ranging studies that don’t have a specific law enforcement purpose. The FTC has used this power to launch a handful of similar studies in recent years.

There’s some skepticism over the studies’ impact, since they can take years to complete, but they can signal future agency action.

Earlier this month, for example, the commission sued Facebook for alleged violations of antitrust laws after launching a similar ongoing study in February on acquisitions by large tech companies. Seeing FTC action before the study’s completion makes it an outlier amid heightened scrutiny of the tech industry, as other studies from 2019, including one on broadband privacy, are still pending.

The study on tech companies’ data collection and use could reveal information that’s later used for enforcement action against some or all of the nine companies targeted in the order, according to Rory Van Loo, a law professor at Boston University.

“It seems pretty clearly like the FTC is informing itself about what kinds of cases it might bring against these companies in the future,” Van Loo said.

That could include pursuing any alleged consumer privacy violations as unfair or deceptive trade practices, he said.

Privacy Policy

The FTC has faced pressure to more regularly use its “underutilized” authority to demand data from companies, according to Justin Brookman, a former FTC official who’s now director of consumer privacy and technology policy at Consumer Reports.

That’s especially true for privacy policy, where Brookman said the FTC is seen as “understaffed,” “under-resourced,” and regulating industry without a federal consumer privacy law.

“So this is the FTC trying to use relatively novel tools to move the debate and inform policymakers,” he said. Brookman added that the study could lead to the FTC calling on Congress to provide more power to oversee privacy protections for consumer data.

The FTC is seeking information on the tech companies’ data privacy policies and practices. The agency is also asking about the companies’ advertising and user engagement practices, and how their practices affect children and teens.

The information gathered could shed light on data flows in Silicon Valley, according to Quentin Palfrey, president of the International Digital Accountability Council, a tech watchdog group. The group investigates issues such as apps sharing the data they collect with third parties and brings concerns to app platforms like Apple Inc. and Alphabet Inc.'s Google.

“It’s important for the FTC to use the tools it has to get a handle on some of the unseen data flows and what the companies are doing that’s not visible to consumers,” said Palfrey, who used to work in the Obama administration and the Massachusetts attorney general’s office.

Company Response

The nine tech companies could fight back by seeking to limit how much information must be handed over or by trying to quash the information orders in court, according to Van Loo. The companies have 45 days from the date they received the FTC orders to respond.

NetChoice, a trade association that represents companies including Amazon, Google, and Twitter, called the orders an arbitrary use of the FTC’s study authority.

“The Federal Trade Commission’s 6(b) orders are nothing more than a fishing expedition and a prime example of government overreach,” Carl Szabo, NetChoice’s vice president and general counsel, said in a statement Monday.

Szabo said agency orders have historically been used to study common practices across an industry. But the latest orders target “well-known but widely different businesses,” from online retailer Amazon to ByteDance Ltd.'s popular video streaming service TikTok.

The trade group’s comments echo those of FTC Commissioner Noah Phillips, who was the only one on the five-member agency to vote against issuing the information orders.

Phillips said in a statement Monday that the orders are too broad and intended to give “the appearance of action on a litany of gripes with technology companies.”

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bloomberglaw.com

To contact the editors responsible for this story: Kibkabe Araya at karaya@bloomberglaw.com; Keith Perine at kperine@bloomberglaw.com

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