FCC Weighs in Against Curb on FTC Enforcement Power

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By Lydia Beyoud and Kyle Daly

An appeals court ruling that the Federal Trade Commission’s enforcement power doesn’t extend to common carriers threatens to jeopardize consumer privacy protections if it isn’t reversed, the Federal Communications Commission argued in a court filing.

The FCC contended the decision effectively reined in the FTC's enforcement authority over a range of companies. In its Oct. 24 brief backing an FTC petition for the case to be heard by the full U.S. Court of Appeals for the Ninth Circuit, the FCC said the FTC’s role in enforcing privacy practices of websites and apps by Alphabet Inc.'s Google, Facebook Inc. or Snap Inc.'s Snapchat could be sidelined due to the court's “literalist approach” to the Federal Trade Commission Act in an Aug. 29 ruling FTC v. AT&T Mobility LLC , 9th Cir., No. 15-16585, amicus brief filed 10/24/16 .

A panel of Ninth District judges ruled that the FTC was excluded from bringing enforcement actions against any company owned by internet service providers or other companies classified as common carriers under the FCC’s 2015 Open Internet Order. That would include technology and other companies that the FCC doesn’t have the authority to regulate, the FCC said. Such companies could include Yahoo! Inc., which Verizon Communications Inc. plans to acquire.

Yahoo recently revealed it was the target of a massive data breach of more than 500 million accounts, an event the FTC would normally investigate. However, it's unclear from the Ninth Circuit ruling whether the agency would be able to proceed with such an investigation if Verizon completes the acquisition.

Both agencies argue this interpretation would create an enforcement gap that the FCC called “at odds with the realities of the marketplace, in which entities that provide communications common carrier services have expanded their lines of business to include non-common-carrier offerings (or vice versa).”

‘Wide Hole.'

Several other opponents of the ruling also filed briefs Oct. 24 against it. Sen. Richard Blumenthal (D-Conn.) sided with the agencies in his own court filing. The panel ruling, if allowed to stand, would leave a “wide hole in FTC jurisdiction” that would undermine regulators’ ability to protect consumers from unfair or deceptive behavior by companies that provide both telecom and unrelated services, said Blumenthal, a member of the Senate Commerce Committee.

Such diverse offerings are increasingly common, he said, pointing to AT&T Inc.'s plan to acquire Time Warner Inc. for roughly $85.4 billion.

The case, originally a dispute over AT&T's alleged throttling of subscribers' “unlimited” mobile data plans, became a jurisdictional fight in the midst of the FCC's net neutrality rulemaking process. The three-judge panel that decided the case may not have been fully briefed on the privacy implications of the case prior to its ruling, a group of 45 privacy law professors told the court in another filing.

The FTC's record of bringing more than 170 privacy- and data security-related enforcement actions against companies such as Google, Microsoft Corp. and others that handle massive amounts of sensitive consumer data has raised the agency to the status of the nation's foremost privacy enforcement agency, the professors said.

“Yet these are the very same companies that are most likely to fall within the panel opinion’s overly broad definition of common carriers — and thereby to be insulated from essential FTC oversight,” the professors said. Without a reversal, the panel opinion provides “an easy strategy” for companies to “manipulate regulatory jurisdiction and escape legal responsibility for privacy infractions” by acquiring a small telephone company or providing internet services, they said.

The panel decision has major implications for the future of privacy law jurisdiction and regulation, the group said. “These heightened stakes could distort future determinations about the boundaries of the “common carrier” definition itself, because policymakers might avoid decisions that, while presenting the best choice for telecommunications policy, could have perverse effects on privacy law,” the group wrote.

Consumer and public interest groups took a similar tack in their own briefs. Public Knowledge, a public interest advocacy group, said FCC and FTC statutes, as well as years of agency and court precedent, hold that FCC versus FTC intervention relies on an “activity-based” approach in which the nature of a given service offering or practice determines which agency will step in, rather than a “status-based” approach. If the panel decision isn’t overturned, Public Knowledge said, it would leave a “regulatory vacuum,” that would harm consumers.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com ; Kyle Daly in Washington at kdaly@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com

For More Information

Text of the FCC's filing is at http://src.bna.com/jBR.

Text of Sen. Blumenthal's filing is at http://src.bna.com/jB1.

Text of privacy law professors' filing is at http://src.bna.com/jCI.

Text of the consumer groups' filing is at http://src.bna.com/jBZ.

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