Inside the Beltway (Politics)

PFF Briefing 4/16: Super-Sizing the FTC & What It Means for the Internet, Media & Advertising

by on March 28, 2010 · 0 comments

Please join us for this Progress & Freedom Foundation luncheon briefing on Friday, April 16, 12-2 pm in the Capitol Visitor Center, Room SVC 208/209 at E Capitol St NE & 1st St NE. I’ll be moderating a discussion of the growing powers of the Federal Trade Commission (FTC) and what it might mean for consumers, advertisers, media creators, and the Internet.

As I’ve discussed here, here and here, financial reform legislation passed by the House (HR 4173) and now under debate in the Senate would give the FTC sweeping new powers to regulate not just Wall Street, but also unfair or deceptive trade practices across the economy. This could reshape regulation in a wide range of areas, such as privacy, cybersecurity, child safety, COPPA, and child nutrition, affecting media online as well as offline. Unfortunately, as Adam and I have noted, there seems to be a disconnect at the FTC between concerns over the future of struggling media creators and efforts to step up regulation on a number of fronts, especially privacy. The FTC has also asserted expanded authority to regulate “unfair” competition in its lawsuit against Intel, based solely on the FTC’s Section 5 unfairness authority rather than traditional antitrust law. PFF has assembled a group of expert panelists—veteran FTC practitioners, scholars and insiders—to discuss these issues and more. Here’s our panel:

  • Jack Calfee, Resident Scholar, American Enterprise Institute for Public Policy Research (AEI) & author of Fear of Persuasion: A New Perspective on Advertising and Regulation (1998)
  • Maureen Ohlhausen, Partner, Wilkinson Barker Knauer, Consumer Protection Law and Competition Law practices, & 11-year FTC veteran
  • Jim Davidson, Chair of the Public Policy group, Polsinelli Shughart PC
  • Stu Ingis, Partner, Venable LLP Continue reading →

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A Busy Week for Tech Policy: Broadband Plan, Privacy Regulation, .COM Anniversary & FTC Authority

by on March 15, 2010 · 5 comments

This will be a busy week for tech policy in Washington! First, tomorrow the FCC is expected to release the National Broadband Plan that it’s been working on since Congress passed the “Recovery Act” passed in January 2009, tasking the FCC with formulating “a detailed strategy for achieving affordability of such service and maximum utilization of broadband infrastructure and service by the public.” Under Chairman Julius Genachowski, the FCC has issued a flurry of inquiries about extending FCC regulation to various aspects of the Internet, as we’ve lamented. Perhaps most troubling is the agency’s open-ended inquiry about regulating the use and collection of data by the private sector on the grounds that concerns about online privacy might slow broadband adoption. For the reasons I laid out in my comments on that inquiry, I very much hope the FCC does not attempt to shoe-horn this regulatory agenda into the Broadband plan. Unfortunately, the just-released executive summary suggests (mid-way down column 1 on page 2) the FCC may take a hard line on this issue.

At the same time that the FCC will be launching its “Five Ten Year Plan” for our infrastructure tomorrow, Verisign will be celebrating the 25th anniversary of the first .COM registration with a Policy Impact Forum in the Reagan Center. The all-start cast includes President Clinton, former FCC Commissioner Reed Hunt, ICANN President Rod Beckstrom, All Things Digital editor Kara Swisher, U.S. CTO Aneesh Chopra, Huffington Post founder Arianna Huffington and… my personal favorite, comedian Mo Rocca! They’ll all come together to celebrate how the private sector—symbolized by .COM—has transformed the Internet from a defense research project to a vibrant marketplace of ideas, goods, services, ads and personal sharing. Talk about Internet optimism!

On Wednesday, the Federal Trade Commission will hold its third and final Exploring Privacy Roundtable. Adam Thierer spoke at the first Roundtable on privacy polls and surveys, something I’ve written a lot about. I talked about the benefits of online advertising, as summarized in my comments to the FTC. We remain concerned that, for all the talk about improving self-regulation, this process is going to lead to increased regulation of data use and collection without first looking to the kinds of “less restrictive” we’ve been emphasizing to address real, non-conjectural harms: user education, user empowerment, increased enforcement, technological innovation at all levels, and enhanced protection from the clearest harm of all, government snooping.

Also on Wednesday (at 3pm), the Senate Commerce Committee will hold a hearing (in SR-253) on “Financial Services and Products:  The Role of the Federal Trade Commission in Protecting Consumers, Part 2.” What’s at stake in this hearing is far more than financial regulation, but how pending legislation already passed by the House—originally the Consumer Financial Protection Act (CFPA), which was reborn as the “Wall Street Reform and Consumer Protection Act of 2009” (HR 4173)—would, if enacted, expand the FTC’s powers to regulate vast swathes of our economy. Continue reading →

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Misdirected Blame on Internet Companies for Failures in International Affairs & China

by on March 3, 2010 · 5 comments

“With a few notable exceptions, the tech industry seems unwilling to regulate itself. I will introduce legislation that will require Internet companies to take reasonable steps to protect human rights, or face civil and criminal liability.” – Senator Dick Durbin, as reported by the Washington Post.

We hear you, Sen. Durbin. The practices of many nations toward free speech and political dissidents are terribly wrong. But we respectfully and strongly disagree with your statements at yesterday’s Senate Judiciary hearing on global Internet freedom and the rule of law.

The growth of IT companies throughout the world has been an enormous boon to free speech and human rights. Although these technologies present new challenges, particularly when taken together with widely varying laws, they are doing far more good than harm, everywhere that they are deployed.

But if you attended the hearing and knew nothing about the Internet, you’d think that American online companies doing business in China and elsewhere were pure evil – as if they were the ones with the power to not comply with – or change — the criminal laws of other nations.

In particular, Facebook and Twitter were called out for not joining the Global Network Initiative (GNI). The product of more than two years of study and development by companies and public interest groups, the Initiative offers a set of guiding principles for global IT companies doing business in an increasingly global environment.

But while the GNI exposes online companies to new scrutiny, it doesn’t provide any protection from aggressive governments. And at a price tag of $200,000, the GNI isn’t cheap. How effective will it be, really, at changing the practices of totalitarian nations? Continue reading →

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Reengineering the Internet for cybersecurity?

by on March 1, 2010 · 6 comments

White House cybersecurity chief Mike McConnell had a 1,400-word piece in the Washington Post on Sunday in which he stressed a public-private partnership as the key to a robust cyber-defense. One paragraph caught my attention, though:

We need to develop an early-warning system to monitor cyberspace, identify intrusions and locate the source of attacks with a trail of evidence that can support diplomatic, military and legal options — and we must be able to do this in milliseconds. More specifically, we need to reengineer the Internet to make attribution, geolocation, intelligence analysis and impact assessment — who did it, from where, why and what was the result — more manageable. The technologies are already available from public and private sources and can be further developed if we have the will to build them into our systems and to work with our allies and trading partners so they will do the same.

I’m not sure what he’s talking about, and I’d love if a knowledgeable reader would chime in. I’m not sure how such a spoof-proof geolocation system would work without a complete overhaul of how the internet works.

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Like a Kid in a Candy Store, Parental Supervision Still Needed for FTC Rulemakings

by on February 26, 2010 · 7 comments

Congress gets dinged a lot for slowing down innovation, but sometimes that is just what the doctor ordered. Thirty-five years ago, a Democratically controlled Congress passed the Magnuson-Moss Act in an attempt to check a hyperactive FTC.

Like a kid set loose in a candy store, the FTC at the time had gone on a binge of overreaching and harmful regulation. The core enabler of this action is the exceptionally broad mandate bestowed on the agency to regulate all “unfair” consumer activity. Unlike regulating the structural stability of bridges or safety in food, “fairness” is a subjective concept.

Congress’ prudent action to place special restrictions on FTC rulemaking [15 U.S.C. Sect. 57a(b)(2)(A)] was in direct response to the agency’s overreach and regulation of activities that would have included advertising children’s products – in essence, acting like a kid in a candy store. Magnuson-Moss was the equivalent of putting the candy behind the counter, providing Congress and courts control over how much candy was appropriate.

Now, 35 years later, the FTC has that ‘unfairness feeling’ again. In a NY Times interview last month, FTC Chairman Jon Leibowitz signaled his intent to change standard marketing tactics of disclosure and opt-out, by requiring users to opt-In for collection of information for targeting ads.   They are concerned about what’s “fair” in advertising, but we know that low rates of opt-in will reduce ad revenue. If the change were put into effect, free online services might have to charge a “fare” to users.

At the same time, the FTC is seeking to shed what the Chair called “medieval restrictions” on its rulemaking powers.  A change that would allow the FTC to move quickly to require opt-in. Taken together, these threats to online services and e-commerce are #1 on the NetChoice 2010 iAWFUL list. Continue reading →

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New Year, New Slate of “AWFUL” Internet Laws

by on February 18, 2010 · 0 comments

It was an awfully bad snowfall that paralyzed Washington, DC last week. And though we may curse Old Man Winter, ‘tis still the season for snow.  Unfortunately, it’s also the season for a flurry of bad legislation – and we’re already trying to dig-out the Internet from a pile of bad proposed state and federal laws.

So far this year there have been hundreds of bills introduced nationwide, many that impact the Internet. That’s why today NetChoice released its first iAWFUL list of 2010, taking stock of the most serious legislative threats facing the global Internet.

The Internet Advocates’ Watchlist for Ugly Laws (iAWFUL) is our top ten – or more accurately, “bottom ten” – list of the worst proposed Internet laws in America. We have Congress and 16 states represented on our list (the same bad bills often spread to multiple states).

Our #1 iAWFUL bill is a Congressional bill (HR4173) that would expand the FTC’s rulemaking power. Buried in the 1700 pages plus of the Wall Street Reform and Consumer Protection Act of 2009 is a four page amendment to the FTC Act that would dramatically increase the FTC’s rulemaking authority. This expansion would mean the removal of significant procedural safeguards that have existed for the past thirty-five years. Given the aggressively pro-regulatory statements made by FTC officials on privacy and online media, expanded powers could do serious damage to online services and Internet innovation. Reporter Grant Gross wrote a good article recapping the issue here.

#2 on the iAWFUL list are the advertising nexus bills in Colorado (SB 1193), Illinois (SB 3353), Maryland (SB 824), New Mexico (HB 50), Virginia (SB 660) and Vermont (HB 661). These bills declare that some forms of Internet advertising are equivalent to having sales agents in their states.  All these states want to force out-of-state advertisers to collect and remit sales tax on sales to their residents. These nexus bills are popping up everywhere, whack-a-mole style.

Check out #3 – #10. Hopefully DC is done for the year with snow. Regardless, I’ll still need my snow shovel to help dig the Internet out from a blizzard of bad legislation.

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Marginal Cost, Health Care, and the “Public Option”

by on February 18, 2010 · 18 comments

Over at “Convergences,” I write on the origins of the idea of a “public option” for health insurance. In part, I note:

At a superficial level, the “public option” for health care is both appealing and puzzling. From a competition policy standpoint, the entry into the market of a subsidized competitor offering a wide array of benefits certainly might put downward pressure on prices as well as easing humanitarian concerns about access. Equally obvious, though, are objections. What mechanism of accountability would exist to ensure that this subsidized entity is well run? It cannot be allowed to go bankrupt; nor is it likely that unhappy customers would have much leeway in suing it. How would it avoid driving private insurers out of the market for low-end service entirely? How much of a subsidy would it get, and how is this to be funded?

Since the party and administration that sponsored this proposal are associated with the intelligentsia, however, people hoping to improve the health care system probably felt entitled to trust that these questions had good answers. Somewhere, someone deep in the bowels of the brain trust had considered these issues. Curious about this, I found myself reading one of the more serious works to address the public option, a paper by Randall D. Cebul, James B. Rebitzer, Lowell J. Taylor and Mark E. Votruba entitled, “Unhealthy Insurance Markets: Search Frictions and the Cost and Quality of Health Insurance,” identified as NBER Working Paper No. 14455, from October 2008.

Read my whole piece, here.

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FCC’s Privacy Inquiry for National Broadband Plan

by on January 25, 2010 · 7 comments

Like Braden, I also filed comments on the FCC’s inquiry—written by CDT—about what, if anything, the FCC should say about online privacy in the National Broadband Plan Congress assigned the agency to write in the (so-called) “Recovery Act” last year. My comments are available here and are embedded below. Over 20 parties filed comments, available here. My argument in brief is as follows:

  • To the extent consumer anxiety about online privacy is, as many claim, actually discouraging some Americans from fully utilizing broadband, the FCC could indeed recommend that Congress take action on online privacy—even though the FCC has no jurisdiction to regulate online privacy itself (beyond the limited CPNI rules it has already imposed on the communications services it licenses).
  • But when Congress charged the FCC with drafting a plan for promoting broadband adoption, it set specific goals: The FCC may only recommend that Congress enact policies the agency concludes on the basis of real data will, on net, help achieve “affordability” and “maximum utilization” of broadband.
  • The quality and quantity of online services depends on the ability of service providers to collect and use data about web browsing habits to analyze site use, personalize content, tailor advertising, and measure its effectiveness.
  • So imposing additional regulations on the private sector comes with real costs to users and it’s far from clear that such regulations would, on the whole, promote broadband adoption.
  • The Commission simply doesn’t have the data to evaluate this trade-off,, nor the time to collect it (as the FTC is trying to do) since the National Broadband Plan is due to Congress in a matter of weeks.
  • But no such trade-offs exist with regards to government access to consumer data, which creates far more demonstrable and serious consumer harms. So the Commission should limit its legislative recommendations on privacy to endorsing enhanced limitations on government access, such as CDT has proposed.
  • The Commission should be particularly wary of opinion polls as evidence of consumer expectations because they cannot tell us about the trade-offs inherent in the real world.

Continue reading →

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More on the Independence of Genachowski’s FCC

by on December 30, 2009 · 8 comments

In a letter to the editor of the Washington Post last week, former FTC Commissioner Thomas Leary responded to a Post article describing the FTC’s suit against Intel as a  “major step for President Obama,” consistent with his campaign promise to “reinvigorate antitrust enforcement.”  Leary responded indignantly to this characterization by declaring:

People seem to forget that the FTC is a bipartisan independent agency.

As a Republican FTC commissioner appointed by a Democratic president, I can vouch for the agency’s independence. During my service from 1999 to 2005 in the administrations of presidents Bill Clinton and George Bush, I never received a direct or indirect policy recommendation on a pending matter from anyone in the White House or from any of the people in Congress who had actively supported me.

Leary’s leeriness about political encroachment on the FTC illustrates the depth of abiding faith in independent regulatory agencies as standing truly apart from the day-to-day politics of Washington—especially when the might of the regulatory state is being wielded against a particular company in quasi-judicial prosecutions, such as antitrust enforcement actions. But if the independence of the FTC is this important, what about the independence of the Federal Communications Commission, with its broad jurisdiction over the media and tools of free speech?

Leary would probably be appalled at the politicization of the FCC in recent years. Bush’s second FCC chairman, Kevin Martin, was infamous for his political Machiavellianism and widely despised by the communications law bar. By contrast, when it became clear that Obama’s high-tech advisor Julius Genachowski would succeed Martin as FCC Chairman shortly before Obama’s inauguration, he received a chorus of applause from a wide range of philosophical perspectives, including from our former president at PFF, Ken Ferree:

Julius Genachowski is an outstanding choice to chair the Commission.  He is knowledgeable, experienced, and presumably will have the ear of the most influential people within the Administration.

While no one would compare the eminently likable Genachowski to Martin, his relationship to the Obama administration appears unprecedented in its closeness, and one must ask whether that’s a good thing for the head of a supposedly “independent” regulatory agency or integrity of that agency’s decision-making. Continue reading →

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Privacy & Advertising Discussions in DC Dec. 7 & 9

by on December 4, 2009 · 7 comments

If you follow privacy policy, you won’t want to miss these two great events.

First, on Monday (12/7), the Federal Trade Commission will be holding the first of three “Exploring Privacy” roundtables at its conference center (601 New Jersey Avenue, NW). This all-day event (agenda) will include five panel discussions, and remarks by FTC Chairman Jon Leibowitz, Commissioner Pamela Jones Harbour, and David C. Vladeck, Director of the FTC’s Bureau of Consumer Protection. The lineups for all five panels look excellent.  The FTC deserves great credit for trying hard to represent the broad spectrum of expert opinion on this profoundly important issue.  PFF President Adam Thierer will be on on the Consumer Expectations and Disclosures panel (11:00?12:15), I will be on the Online Behavioral Advertising panel (1:30?2:45 p.m.), and the Cato Institute’s Jim Harper will be on the Benefits and Risks of Collecting, Using, and Retaining Consumer Data panel (9:15?10:45 a.m.).  For those who cannot attend in person, event will be webcasted, and I will be live-tweeting key highlights (except for my own panel, of course).

Here are the comments submitted to the Roundtable.  The second Roundtable will take place January 28, 2010 in Berkeley, CA with a third to follow in Washington in the spring.

Second, on Wednesday (12/9), Rob Atkinson of  The Information Technology and Innovation Foundation will be moderating a debate about targeted online advertising at ITIF (1101 K Street, Washington, DC 20005, Suite 610).  Rob is probably the single most thoughtful observer of this debate, and he’s put together a terrific panel that includes my sparring partner Jeff Chester, Howard Beales (whose excellent economic work I have cited heavily in my own writings about the benefits of one advertising), the FTC’s Peder Magee (one of the key organizers of the Exploring Privacy roundtable series, and also an exceptionally thoughtful and fair observer) and, if we’re lucky, CDT’s Ari Schwartz (a staunch defender of P3P).

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