The FTC fails to level the playing field on privacy rules
The formal privacy rules watchdog, the Federal Trade Commission (FTC) has looked the other way in regards to how companies use the data they collect about consumers. Companies such as Google and Facebook thrive on customer personal data- the bits of information that tell advertisers how old you are, what brands you like.
In addition, a big unexpected defeat for the FTC in court is putting the agency’s power to protect privacy rules for consumers. The ruling seems to be giving Google and Facebook – not to mention other companies – the ability to escape all consumer-privacy rules protection actions from the FTC, and possibly from the rest of government, too. Now the question is will Congress intervene?
In its lawsuit, the FTC said AT&T had unacceptably tricked customers with its marketing surrounding unlimited data plans. AT&T’s unlimited data plans aren’t truly “unlimited,” regulators argued, because AT&T actually slowed down its heaviest data users to dial-up speeds after they consumed a certain amount of mobile data.
The FTC has used this truth-in-advertising approach for decades to go after numerous companies, and it represents one of the agency’s core legal tools. But this time, the FTC’s lawsuit never got off the ground. The regulators’ claims of “unfair and deceptive” behavior don’t apply, Judge Richard Clifton ruled, because no part of AT&T falls within the FTC’s jurisdiction.
“The decision will enable a company like Google … to engage in unfair marketing and data-gathering practices without having to worry about possible FTC consequences,” Monday’s court decision, the result will be “a fatal blow” to consumer protection, said Jeffrey Chester, executive director of the Center for Digital Democracy.
As a telephone and Internet provider, AT&T is known in legal circles as a “common carrier,” and the FTC is explicitly forbidden by Congress from taking action against common carriers. Until now, most legal experts interpreted this ban to mean that the FTC could still go after such firms for their marketing and advertising claims, because only the core parts of the business were actually engaged in common-carrier activities such as offering home phone service or mobile data. Clifton’s opinion surprised some policy analysts because it went much further, saying that all parts of AT&T, not just the core business, qualify for the FTC’s common-carrier exemption.
“The immediate effect [of the ruling] is that the FTC can’t pursue AT&T” for not being transparent enough about its unlimited data plans, said Paul Gallant, a telecom analyst at Cowen and Company, in a research note. “However, the court also ruled that the FTC is precluded from regulating any aspect of an ISP for privacy rules, even other units of the company. So [Monday’s] ruling seems encouraging for some ISPs like Verizon.”
Verizon, of course, is increasingly becoming an online content player with its recent acquisitions of AOL and Yahoo. Under the 9th Circuit’s decision, the FTC would be barred from going after either subsidiary, analysts say, because Verizon also provides phone and Internet service out of a separate department and can claim common-carrier status.
What’s confusing is that the court case doesn’t talk about Facebook or Google at all. The substance of the case concerns AT&T. The ruling lets companies effectively avoid consumer protection regulations simply by setting up or buying a phone or Internet service provider.
Playing this forward, consumer protection advocates say Clifton’s argument would allow any company to evade FTC oversight simply by launching or buying a small telecom service. Google already benefits from this line of reasoning because it operates Google Fiber. A company such as Facebook, whose goal is to connect a billion additional people to the Internet, could acquire its own broadband provider and claim common-carrier status.
Monday’s ruling shines a spotlight on the only federal agency with a mandate to regulate common carriers such as AT&T and Google Fiber: The FCC is currently developing a set of privacy rules specifically for Internet providers. But unlike the FTC, the nation’s top telecom regulator is limited to regulating only the parts of telecom companies that actually deal with Internet and phone service.
As it stands
FCC – can regulate only communications related units of a company +
FTC – can’t regulate common carriers =
Big gap in consumer protection law specifically for privacy rules.
Companies like Yahoo and AOL, all based the court decision, may fall into a no man’s land of consumer protection, policed by neither agency.
More Here [washingtonpost]