IN THE MATTER OF NOMI TECHNOLOGIES, INC.: THE DARK SIDE OF THE FTC’S LATEST FEEL-GOOD CASE

Summary

“Last week the Federal Trade Commission (FTC) settled a privacy case – In the Matter of Nomi Technologies, Inc. – that, on its face, will seem banal, but actually raises significant questions about the FTC’s understanding of its broad consumer protection authority, especially as applied to cutting-edge technologies. Nomi is the latest in a long string of recent cases in which the FTC has pushed back against both legislative and self-imposed constraints on its discretion. By small increments (unadjudicated consent decrees), but consistently and with apparent purpose, the FTC seems to be reverting to the sweeping conception of its power to police deception and unfairness that led the FTC to a titanic clash with Congress back in 1980.

Specifically, the Nomi case illustrates that the FTC doesn’t think it needs to establish that a misrepresentation was “material” to consumers before finding a statement deceptive under Section 5 of the FTC Act — the very thing that the FTC’s 1983 Deception Policy Statement (DPS) was intended to prevent. Effectively nullifying the materiality requirement at the core of the DPS means the FTC is more likely to mis-prioritize its limited enforcement resources, proscribe conduct that actually benefits consumers, and impose remedies that make consumers worse off.

Indeed, that appears to be precisely what will happen here: Out of a desire to encourage — effectively require — companies to disclose data collection, the FTC is actually discouraging companies from doing so (at least in the short run), as Commissioners Ohlhausen and Wright note in their dissents. The FTC majority’s blindness to this obvious, but perverse, result suggests that the real purpose of the settlement is strategic: to set a quasi-precedent that the Commission will leverage in the future – probably in harder cases involving more ambiguous conduct – and perhaps also to advance a larger political agenda…”