Summary

The Commission’s interest in protecting the privacy of its citizens is commendable. This concern, however, should be well tempered by humility, and the Commission’s ultimate decision should be guided by the understanding that contemporary technology and market innovations have afforded consumers a degree of choice unparallelled in the history of the European Union. While some firms may build their products with the requirement that consumers allow them to use personal information, others will not. And when consumers defect from products that do not meet their individual mix of privacy, price, and other preferences, firms will take notice and change their behavior accordingly.

This leads to another related point: innovation moves so quickly today that uniform prescriptive regulation intended to govern the behavior of many thousands of firms and millions of consumers is doomed to frustration if not outright failure. Moreover, broad regulations meant to bring industry to heel frequently work to the benefit of incumbents, driving out smaller competitors or making entry nearly impossible, only further narrowing consumer choices and guaranteeing less than optimal results for all of society.

With that said, there are certainly actions for the Commission to take that ensure a competitive environment in which consumer interests are adequately protected. Chief among these areas would be to enact regulations that control the damaging effects of costly data localization rules. Overall, however, the Commission would do best to leave much of the implementation of privacy regulations to the individual EU members who are most in touch with the challenges and desires of their own constituents.

As regulatory review of the merger between Aetna and Humana hits the homestretch, merger critics have become increasingly vocal in their opposition to the deal. This is particularly true of a subset of healthcare providers concerned about losing bargaining power over insurers.

Fortunately for consumers, the merger appears to be well on its way to approval. California recently became the 16th of 20 state insurance commissions that will eventually review the merger to approve it. The U.S. Department of Justice is currently reviewing the merger and may issue its determination as early as July.

Read the full piece here.

As regulatory review of the merger between Aetna and Humana hits the homestretch, merger critics have become increasingly vocal in their opposition to the deal. This is particularly true of a subset of healthcare providers concerned about losing bargaining power over insurers.

Fortunately for consumers, the merger appears to be well on its way to approval. California recently became the 16th of 20 state insurance commissions that will eventually review the merger to approve it. The U.S. Department of Justice is currently reviewing the merger and may issue its determination as early as July.

Read the full piece here.

Brand drug manufacturers are no strangers to antitrust accusations when it comes to their complicated relationship with generic competitors — most obviously with respect to reverse payment settlements. But the massive and massively complex regulatory scheme under which drugs are regulated has provided other opportunities for regulatory legerdemain with potentially anticompetitive effect, as well.

Read the full piece here.

Summary

The Commission’s NPRM would shoehorn the business models of a subset of new economy firms into a regime modelled on thirty-year-old CPNI rules designed to address fundamentally different concerns about a fundamentally different market. The Commission’s hurried and poorly supported NPRM demonstrates little understanding of the data markets it proposes to regulate and the position of ISPs within that market. And, what’s more, the resulting proposed rules diverge from analogous rules the Commission purports to emulate. Without mounting a convincing case for treating ISPs differently than the other data firms with which they do or could compete, the rules contemplate disparate regulatory treatment that would likely harm competition and innovation without evident corresponding benefit to consumers.

Concerns relating to online privacy have been extensively studied by regulators and others over the past two decades. By and large, regulators responded to these concerns with a combination of a general case-by-case approach alongside tailored rules derived from the relevant information involved in particular areas of privacy concern. Few, if any, regulators have adopted an “opt-in” privacy regime for non-sensitive data such as the FCC proposes. The FCC’s proposed regime may have been cutting-edge in the 1980s and 1990s — but it makes no sense in today’s information economy in which firms from different segments of the economy fluidly enter each other’s markets and effectively compete in a separate, cross- sector, informatics and advertising market. The proposed rules instead dig in the heels of the Commission against the irresistible tide of progress, attempting to maintain arbitrary industry firewalls between firms.

The “problem” the Commission attempts to fix with this proposed rulemaking is not one of preventing ISPs from using personal information to prevent new entrants from effectively competing with their incumbent businesses — which was, in fact, the genesis of the CPNI rules.1 Rather, these rules are designed to keep ISPs from competing with edge providers like Google, Facebook, and Netflix. But, in truth, both edge providers and ISPs actually need general rules of broad applicability. This is what the FTC and other regulators have largely done to date. Such broadly applicable rules are designed to be competitively neutral, and to offer the flexibility needed to address the various concerns that may come up in these markets while balancing legitimate economic and privacy interests and providing an adequate level of notice to those subject to regulation about their expected norms of conduct.

In short, the Commission has not made a convincing case that discrimination between ISPs and edge providers makes sense for the industry or for consumer welfare. The overwhelming body of evidence upon which other regulators have relied in addressing privacy concerns urges against a hard opt-in approach. That same evidence and analysis supports a consistent regulatory approach for all competitors, and nowhere advocates for a differential approach for ISPs when they are participating in the broader informatics and advertising markets. Absent the collection and analysis of substantial evidence — which at this point has not been articulated by the Commission or those advocating the Commission’s proposed approach, and which is far beyond the scope of the present NPRM — the proposed approach is not supportable.

And all of the foregoing is particularly perplexing in light of the fact that the Commission will inadvertently create more consumer harm than benefit. At the same time, the Commission has not shown that regulatory efficacy, administrative efficiency or anything else demands such rules. Particularly given TerraCom and the demonstrated ability of the Commission to handle harms as they arise even absent prescriptive rules, the need for these aggressive new rules simply cannot be justified.

Earlier this week I testified before the U.S. House Subcommittee on Commerce, Manufacturing, and Trade regarding several proposed FTC reform bills.

You can find my written testimony here. That testimony was drawn from a 100 page report, authored by Berin Szoka and me, entitled “The Federal Trade Commission: Restoring Congressional Oversight of the Second National Legislature — An Analysis of Proposed Legislation.” In the report we assess 9 of the 17 proposed reform bills in great detail, and offer a host of suggested amendments or additional reform proposals that, we believe, would help make the FTC more accountable to the courts. As I discuss in my oral remarks, that judicial oversight was part of the original plan for the Commission, and an essential part of ensuring that its immense discretion is effectively directed toward protecting consumers as technology and society evolve around it.

Read the full piece here.

Summary

“Congressional reauthorization of the FTC is long overdue. It has been twenty-two years since Congress last gave the FTC a significant course-correction and even that one, codifying
the heart of the FTC’s 1980 Unfairness Policy Statement, has not had the effect Congress expected. Indeed, neither that policy statement nor the 1983 Deception Policy Statement,
nor the 2015 Unfair Methods of Competition Enforcement Policy Statement, will, on their own, ensure that the FTC strikes the right balance between over- and underenforcement
of its uniquely broad mandate under Section 5 of the FTC Act.

These statements are not without value, and we support codifying the other key provisions of the Unfairness Policy Statement that were not codified in 1980, as well as codifying the Deception Policy Statement. In particular, we urge Congress or the FTC to clarify the meaning of “materiality,” the key element of Deception, which the Commission has effectively
nullified.

But a shoring up of substantive standards does not address the core problem: ultimately, that the FTC’s processes have enabled it to operate with essentially unbounded discretion in developing the doctrine by which its three high level standards are applied in real-world cases. Chiefly, the FTC has been able to circumvent judicial review through what it calls its
“common law of consent decrees,” and to effectively circumvent the rulemaking safeguards imposed by Congress in 1980 through a variety of forms of “soft law”: guidance and recommendations that have, if indirectly and through amorphous forms of pressure, essentially regulatory effect.

At the same time, and contributing to the problem, the FTC has made insufficient use of its Bureau of Economics, which ought to be the agency’s crown jewel: a dedicated, internal
think tank of talented economists who can help steer the FTC’s enforcement and policymaking functions. While BE has been well integrated into the Commission’s antitrust decisionmaking, it has long resisted applying the lessons of law and economics to its consumer protection work.

The FTC is, in short, in need of a recalibration. In this paper we evaluate nine of the seventeen FTC reform bills proposed by members of the Commerce, Manufacturing and Trade Subcommittee, and suggest a number of our own, additional reforms for the agency.”

Summary

Congressional reauthorization of the FTC is long overdue. It has been twenty-two years since Congress last gave the FTC a significant course-correction and even that one, codifying the heart of the FTC’s 1980 Unfairness Policy Statement, has not had the effect Congress expected. Indeed, neither that policy statement nor the 1983 Deception Policy Statement, nor the 2015 Unfair Methods of Competition Enforcement Policy Statement, will, on their own, ensure that the FTC strikes the right balance between over- and underenforcement of its uniquely broad mandate under Section 5 of the FTC Act.

These statements are not without value, and we support codifying the other key provisions of the Unfairness Policy Statement that were not codified in 1980, as well as codifying the Deception Policy Statement. In particular, we urge Congress or the FTC to clarify the meaning of “materiality,” the key element of Deception, which the Commission has effectively nullified.

But a shoring up of substantive standards does not address the core problem: ultimately, that the FTC’s processes have enabled it to operate with essentially unbounded discretion in developing the doctrine by which its three high level standards are applied in real-world cases.

Chiefly, the FTC has been able to circumvent judicial review through what it calls its “common law of consent decrees,” and to effectively circumvent the rulemaking safeguards imposed by Congress in 1980 through a variety of forms of “soft law”: guidance and recommendations that have, if indirectly and through amorphous forms of pressure, essentially regulatory effect.

At the same time, and contributing to the problem, the FTC has made insufficient use of its Bureau of Economics, which ought to be the agency’s crown jewel: a dedicated, internal think tank of talented economists who can help steer the FTC’s enforcement and policymaking functions. While BE has been well integrated into the Commission’s antitrust decisionmaking, it has long resisted applying the lessons of law and economics to its consumer protection work.

The FTC is, in short, in need of a recalibration. In this paper, we evaluate nine of the seventeen FTC reform bills proposed by members of the Commerce, Manufacturing and Trade Subcommittee, and suggest a number of our own, additional reforms for the agency.

Yesterday a federal district court in Washington state granted the FTC’s motion for summary judgment against Amazon in FTC v. Amazon — the case alleging unfair trade practices in Amazon’s design of the in-app purchases interface for apps available in its mobile app store. The headlines score the decision as a loss for Amazon, and the FTC, of course, claims victory. But the court also granted Amazon’s motion for partial summary judgment on a significant aspect of the case, and the Commission’s win may be decidedly pyrrhic.

Read the full piece here.