March 28, 2017
New People, New Policy: Transition at the FTC
As technology continues to shape and transform society, the FTC has used its traditional consumer protection power to venture into new technological territory. However, it’s still unclear what the scope and extent of the FTC authority is under its consumer protection power. While a recent 3rd Circuit decision recognized the FTC’s authority to regulate data security generally, the FTC has spent the last several years, under the leadership of Chairwoman Edith Ramirez pushing the boundaries and restraints of that authority through enforcement actions and litigation.
In the last couple of weeks, however, the FTC has undergone significant leadership turnover, resulting in a possible change of priorities. On February 10, Ramirez resigned as Chairwoman of the FTC, after having served as a commissioner for almost seven years. Ramirez focused on expanding the FTC’s footprint in privacy and data security during her tenure, and believes it is vital for the FTC to continue to hire tech-talent moving forward. President Trump was quick to appoint Maureen Ohlhausen as acting chairwoman of the FTC. As the only current Republican commissioner, Ohlhausen was the straightforward choice. Additionally, on February 17, Jessica Rich, a 26-year FTC veteran, will also be leaving the agency. Rich was a pioneer in privacy and data protection, creating the FTC’s Office of Technology Research and Investigations, and significant policy-maker on issues such as Big Data, the Internet of Things, drones, and crowd funding. Thomas Pahl, a deregulation advocate with prior FTC experience, will be replacing Rich as acting head of the Bureau of Consumer Protection.
The personnel changes at the FTC are likely to have significant impacts to the direction and priorities of the agency moving forward.
Ohlhausen will continue exercising the FTC’s newfound consumer protection powers in technological arenas, but the focus will be different. Ohlhausen has dissented in recent enforcement actions pushed by Ramirez. Furthermore, in a February 2nd keynote address to the American Bar Association’s Consumer Protection Conference, Ohlhausen stated the priority of the agency will be on “concrete consumer injury,” which is a departure from the FTC’s position in recent litigation.
In re LabMD, the FTC specifically argues on appeal that it has authority to police intangible harms, namely exposure of sensitive personal information by a company that did not result in any economic harm. The 11th Circuit issued a stay in this case, questioning, inter alia, the reasonableness of FTC definition of harm. In its response brief, however, the FTC has doubled-down on the position that mere privacy violations constitute substantial harm, and thus the FTC’s authority extends over LabMD. Overall, the FTC’s aggressive expansion of its data breach authority may be slowing down. Based on the stay granted, there is a strong likelihood that the 11th Circuit will circumscribe the FTC’s consumer protection power in this area. But, moreover, the greatest change to the FTC is internal, where it’s top leaders now have a different perspective on the agencies power and priorities.