Transforming the FTC: Legislation to Modernize Consumer Protection, House hearing transcript (July 28, 2021), GovInfo CHRG-117hhrg52433, PDF
Summary
This printed edition of Serial No. 117-46 records the House Energy and Commerce Subcommittee on Consumer Protection and Commerce hybrid hearing of July 28, 2021, Transforming the FTC: Legislation to Modernize Consumer Protection. FTC Chair Lina Khan and the other commissioners testified, followed by outside witnesses. The hearing print lists the bills before the subcommittee, among them H.R. 2671, H.R. 4447, the 21st Century FTC Act, H.R. 4488, the FTC Autonomy Act, and H.R. 4483, the Veterans and Servicemember Consumer Protection Act of 2021.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
TRANSFORMING THE FTC: LEGISLATION TO
MODERNIZE CONSUMER PROTECTION
HYBRID HEARING
BEFORE THE
SUBCOMMITTEE ON CONSUMER PROTECTION AND
COMMERCE
OF THE
COMMITTEE ON ENERGY AND
COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
JULY 28, 2021
Serial No. 117–46
(
Published for the use of the Committee on Energy and Commerce
govinfo.gov/committee/house-energy
energycommerce.house.gov
U.S. GOVERNMENT PUBLISHING OFFICE
52–433 PDF WASHINGTON : 2023
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COMMITTEE ON ENERGY AND COMMERCE
FRANK PALLONE, JR., New Jersey
Chairman
BOBBY L. RUSH, Illinois CATHY MCMORRIS RODGERS, Washington
ANNA G. ESHOO, California Ranking Member
DIANA DEGETTE, Colorado FRED UPTON, Michigan
MIKE DOYLE, Pennsylvania MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois STEVE SCALISE, Louisiana
G. K. BUTTERFIELD, North Carolina ROBERT E. LATTA, Ohio
DORIS O. MATSUI, California BRETT GUTHRIE, Kentucky
KATHY CASTOR, Florida DAVID B. MCKINLEY, West Virginia
JOHN P. SARBANES, Maryland ADAM KINZINGER, Illinois
JERRY MCNERNEY, California H. MORGAN GRIFFITH, Virginia
PETER WELCH, Vermont GUS M. BILIRAKIS, Florida
PAUL TONKO, New York BILL JOHNSON, Ohio
YVETTE D. CLARKE, New York BILLY LONG, Missouri
KURT SCHRADER, Oregon LARRY BUCSHON, Indiana
TONY CÁRDENAS, California MARKWAYNE MULLIN, Oklahoma
RAUL RUIZ, California RICHARD HUDSON, North Carolina
SCOTT H. PETERS, California TIM WALBERG, Michigan
DEBBIE DINGELL, Michigan EARL L. ‘‘BUDDY’’ CARTER, Georgia
MARC A. VEASEY, Texas JEFF DUNCAN, South Carolina
ANN M. KUSTER, New Hampshire GARY J. PALMER, Alabama
ROBIN L. KELLY, Illinois, Vice Chair NEAL P. DUNN, Florida
NANETTE DIAZ BARRAGÁN, California JOHN R. CURTIS, Utah
A. DONALD MCEACHIN, Virginia DEBBBIE LESKO, Arizona
LISA BLUNT ROCHESTER, Delaware GREG PENCE, Indiana
DARREN SOTO, Florida DAN CRENSHAW, Texas
TOM O’HALLERAN, Arizona JOHN JOYCE, Pennsylvania
KATHLEEN M. RICE, New York KELLY ARMSTRONG, North Dakota
ANGIE CRAIG, Minnesota
KIM SCHRIER, Washington
LORI TRAHAN, Massachusetts
LIZZIE FLETCHER, Texas
PROFESSIONAL STAFF
JEFFREY C. CARROLL, Staff Director
TIFFANY GUARASCIO, Deputy Staff Director
NATE HODSON, Minority Staff Director
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SUBCOMMITTEE ON CONSUMER PROTECTION AND COMMERCE
JAN SCHAKOWSKY, Illinois
Chair
BOBBY L. RUSH, Illinois GUS M. BILIRAKIS, Florida
KATHY CASTOR, Florida Ranking Member
LORI TRAHAN, Massachusetts FRED UPTON, Michigan
JERRY MCNERNEY, California ROBERT E. LATTA, Ohio
YVETTE D. CLARKE, New York BRETT GUTHRIE, Kentucky
TONY CÁRDENAS, California, Vice Chair LARRY BUCSHON, Indiana
DEBBIE DINGELL, Michigan NEAL P. DUNN, Florida
ROBIN L. KELLY, Illinois GREG PENCE, Indiana
DARREN SOTO, Florida DEBBIE LESKO, Arizona
KATHLEEN M. RICE, New York KELLY ARMSTRONG, North Dakota
ANGIE CRAIG, Minnesota CATHY MCMORRIS RODGERS, Washington
LIZZIE FLETCHER, Texas (ex officio)
FRANK PALLONE, JR., New Jersey (ex
officio)
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C O N T E N T S
Page
Hon. Jan Schakowsky, a Representative in Congress from the State of Illi-
nois, opening statement ....................................................................................... 2
Prepared statement .......................................................................................... 3
Hon. Gus M. Bilirakis, a Representative in Congress from the State of Flor-
ida, opening statement ........................................................................................ 4
Prepared statement .......................................................................................... 5
Hon. Frank Pallone, Jr., a Representative in Congress from the State of
New Jersey, opening statement .......................................................................... 7
Prepared statement .......................................................................................... 8
Hon. Cathy McMorris Rodgers, a Representative in Congress from the State
of Washington, opening statement ..................................................................... 9
Prepared statement .......................................................................................... 11
WITNESSES
Lina Khan, Chair, Federal Trade Commission ..................................................... 12
Prepared statement1 ........................................................................................ 15
Answers to submitted questions ...................................................................... 165
Noah Joshua Phillips, Commissioner, Federal Trade Commission ..................... 19
Prepared statement1
Answers to submitted questions ...................................................................... 186
Rohit Chopra, Commissioner, Federal Trade Commission .................................. 20
Prepared statement1
Answers to submitted questions ...................................................................... 188
Rebecca Kelly Slaughter, Commissioner, Federal Trade Commission ................ 22
Prepared statement1
Answers to submitted questions ...................................................................... 192
Christine S. Wilson, Commissioner, Federal Trade Commission ........................ 24
Prepared statement1
Answers to submitted questions ...................................................................... 195
David C. Vladeck, Professor of Law, Georgetown University Law Center ......... 61
Prepared statement .......................................................................................... 63
Answers to submitted questions ...................................................................... 198
Graham Dufault, Senior Director for Public Policy, ACT, The App Association 93
Prepared statement .......................................................................................... 95
Answers to submitted questions ...................................................................... 206
Sally Greenberg, Executive Director, National Consumers League .................... 106
Prepared statement .......................................................................................... 108
Answers to submitted questions ...................................................................... 214
SUBMITTED MATERIAL
H.R. 2671, the Solidifying Habitual and Institutional Explanations of Liability
and Defenses Act2
H.R. 2672, the FTC Robust Elderly Protections and Organizational Require-
ments to Track Scams Act2
H.R. 2676, the Revealing Economic Conclusions for Suggestions Act2
H.R. 2677, the Technological Innovation through Modernizing Enforcement
Act2
1 The Federal Trade Commission witnesses submitted one joint prepared statement.
2 The legislation has been retained in committee files and is available at https://
docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=113972.
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VI
Page
H.R. 2690, the Clarifying Legality and Enforcement Action Reasoning Act2
H.R. 2702, the Statement on Unfairness Reinforcement and Emphasis Act2
H.R. 3067, the Online Consumer Protection Act2
H.R. 3918, a Bill to amend the Federal Trade Commission Act to permit
the Federal Trade Commission to enforce such Act against certain tax-
exempt organizations2
H.R. 4447, the 21st Century FTC Act2
H.R. 4460, the Consumer Equity Protection Act of 20212
H.R. 4475, the Protecting Consumers in Commerce Act of 20212
H.R. 4483, the Veterans and Servicemember Consumer Protection Act of
20212
H.R. 4488, the FTC Autonomy Act2
H.R. 4530, the Federal Trade Commission Technologists Act of 20212
H.R. 4551, the Reporting Attacks from Nations Selected for Oversight and
Monitoring Web Attacks and Ransomware from Enemies Act2
H.R. 4564, the Federal Trade Commission Transparency Act2
Letter of July 28, 2021, from Don Erickson, Chief Executive Officer, Security
Industry Association, to Ms. Schakowsky and Mr. Bilirakis, submitted by
Ms. Schakowsky ................................................................................................... 132
Letter of July 28, 2021, from Ashley Baker, Director of Public Policy, Com-
mittee for Justice, to Mr. Pallone, et al., submitted by Ms. Schakowsky ....... 134
Letter of July 28, 2021, from Neil L. Bradley, Executive Vice President
and Chief Policy Officer, Chamber of Commerce of the United States of
America, to Ms. Schakowsky and Mr. Bilirakis, submitted by Ms. Scha-
kowsky .................................................................................................................. 142
Letter of June 17, 2021, from Senator Pat Toomey, Ranking Member, Senate
Committee on Banking, Housing, and Urban Affairs, to Commissioner
Chopra, submitted by Mr. Bucshon .................................................................... 144
Letter of July 13, 2021, from Senator Pat Toomey, Ranking Member, Senate
Committee on Banking, Housing, and Urban Affairs, et al., to Commis-
sioner Chopra, submitted by Mr. Bucshon ......................................................... 147
Dissenting Statement of Commissioners Phillips and Wilson, Federal Trade
Commission, on the ‘‘Statement of the Commission on the Withdrawal
of the Statement of Enforcement Principles Regarding ‘Unfair Methods
of Competition’ Under Section 5 of the FTC Act,’’ July 9, 2021, submitted
by Mr. Latta ......................................................................................................... 150
Dissenting Statement of Commissioners Phillips and Wilson, Federal Trade
Commission, on the Adoption of Revised Section 18 Rulemaking Procedures,
July 9, 2021, submitted by Mr. Guthrie ............................................................. 159
2 The legislation has been retained in committee files and is available at https://
docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=113972.
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TRANSFORMING THE FTC: LEGISLATION TO
MODERNIZE CONSUMER PROTECTION
WEDNESDAY, JULY 28, 2021
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON CONSUMER PROTECTION AND
COMMERCE,
COMMITTEE ON ENERGY AND COMMERCE,
Washington, DC.
The subcommittee met, pursuant to call, at 10:33 a.m., in Room
2123, Rayburn House Office Building, Hon. Jan Schakowsky (chair
of the subcommittee) presiding.
Members present: Representatives Schakowsky, Rush, Castor,
Trahan, McNerney, Clarke, Cárdenas, Dingell, Kelly, Soto, Rice,
Craig, Fletcher, Pallone (ex officio), Bilirakis (subcommittee rank-
ing member), Upton, Latta, Guthrie, Bucshon, Dunn, Pence, Lesko,
Armstrong, and Rodgers (ex officio).
Also present: Representative Burgess.
Staff present: Jeffrey C. Carroll, Staff Director; Katherine
Durkin, Policy Coordinator; Lisa Goldman, Senior Counsel; Wa-
verly Gordon, General Counsel; Tiffany Guarascio, Deputy Staff Di-
rector; Ed Kaczmarski, Policy Analyst; Zach Kahan, Deputy Direc-
tor, Outreach and Member Service; Mackenzie Kuhl, Digital Assist-
ant; David Miller, Counsel; Kaitlyn Peel, Digital Director; Chloe
Rodriguez, Clerk; Andrew Souvall, Director of Communications,
Outreach, and Member Services; Caroline Wood, Staff Assistant;
Anna Yu, Professional Staff Member; Sarah Burke, Minority Dep-
uty Staff Director; Michael Cameron, Minority Policy Analyst, Con-
sumer Protection and Commerce, Energy, Environment; Nate
Hodson, Minority Staff Director; Peter Kielty, Minority General
Counsel; Emily King, Minority Member Services Director; Tim
Kurth, Minority Chief Counsel, Consumer Protection and Com-
merce; Brannon Rains, Minority Professional Staff Member, Con-
sumer Protection and Commerce; Michael Taggart, Minority Policy
Director.
Ms. SCHAKOWSKY. Welcome, everyone. The Subcommittee on
Consumer Protection and Commerce will now come to order.
Today we will be holding a hearing entitled ‘‘Transforming the
FTC’’—the Federal Trade Commission—‘‘Legislation to Modernize
Consumer Protection.’’
Due to the COVID–19 public health emergency, Members can
participate in today’s hearing, either in person or remotely.
The online—via video conference. Members are—and witnesses
who are participating in person—these are the new guidelines—
must wear a mask, and Members and witnesses who are not vac-
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2
cinated must also be socially distant. Such Members and witnesses
may remove their masks when they are under recognition and
speakers from—and speaking from a microphone. Staff and press
who are present in the committee room must wear a mask at all
times, and staff and press who are not vaccinated must be socially
distant.
Too bad that we had to move to different guidelines, I might say,
but here we are.
To be clear, mask wearing is now required, regardless of vaccina-
tion status.
For Members participating remotely, your microphones will be
set on mute for the purpose of eliminating inadvertent background
noise. Members participating remotely will need to unmute your-
selves, and your microphones, when you are—each time that you
wish to speak.
Please note that, once you unmask, that once you unmute your
microphone, anything that is said in Webex will be heard over the
loudspeaker in the committee room, and subject to be heard by the
live stream and C–SPAN. So, you know, watch what you are saying
into the microphone if you are not muted.
Since Members are participating from different locations at to-
day’s hearing, all recognition of Members, such as for questions,
will be in the order of the subcommittee seniority.
Documents for the record can be sent to Ed Kaczmarski at the
email address that we have provided to staff. All documents will
be entered into the record at the conclusion of the hearing.
So the Chair now recognizes herself for 5 minutes.
OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REP-
RESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
We—today we are considering 16 pieces of legislation intended to
modernize the Federal Trade Commission’s ability to pursue the—
its consumer protection mission.
For over 100 years the FTC has been the premier Federal con-
sumer protection agency. But despite its broad mandate to protect
consumers and to promote competition, the Commission has been
sorely underresourced for decades now. Today it has a smaller staff
and fewer resources than other consumer protection regulators.
And—however, it is a new era for the Federal Trade Commission
now.
In a breath of fresh air, the Commission held two open meetings
this month. These public, accessible meetings increased trans-
parency and public input on important topics, like the Made in
USA Rule and Right to Repair. It is time to recommit to restoring
the cultural—the culture and the—of the FTC to put consumers
first.
Many of the 16 bills that we are considering today will help them
to accomplish this mission. These include the Online Consumer
Protection Act, which I have introduced, and—with Representative
Castor. This legislation will hold technology platforms accountable
for failure to live up to the promises that they made with their—
made to consumers in their terms of service.
The 21st Century FTC Act, sponsored by Representative Castor,
and my own FTC Autonomy Act, will provide the Commission with
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additional enforcement tools, including rulemaking, civic—civil
penalties, and independent litigation authority.
Legislation from our colleagues, Representatives Rush and
McNerney, will give the Commission authority over consumer pro-
tection violations by nonprofit organizations and telecommuni-
cations—communications carriers.
A few of the bills that are being considered today will also—will
allow the FTC to more efficiently—scams that target vulnerable
groups. This includes bipartisan legislation from Representatives
Rice and Upton focusing on fraud affecting military veterans and
service members.
And legislation from Representative Kelly would establish a task
force to bolster the communications work—the Commission’s work
on equity issues and would inform the public about scams targeted
specifically to other groups.
Representative McNerney has legislation that would create the
office of technologists to provide additional technical assistance to
the Commission, and update in—every technology consideration.
Today these bills will force—will forge a new path forward for
the Federal Trade Commission.
I am going to ask my ranking member for permission to go over
time. As you can see, I do have some reading issues that are ham-
pering me in some ways. It is a physical thing that I have got. OK,
thank you very much.
So today these bills will forge a new path forward for the Federal
Trade Commission. They strengthen the Commission’s consumer
protection capacity and provide the tools necessary to guide today’s
increased innovation and dynamic marketplace. It is essential that
the Commission have the tools it needs to hold technology plat-
forms accountable.
The era of self-regulation is over. Self-regulation has threatened
our democracy and now threatens our health and our very lives, as
vaccine misinformation continues to spread across social media.
Consent decrees and fines have proven ineffective in improving the
behavior of technology companies. Violation after violation under-
scores that stronger enforcement today—enforcement tools are ur-
gently needed.
The American people deserve a 21st-century consumer protection
agency that meets 21st-century threats, and I am looking forward
to hearing from the witnesses that are here today on how more—
how modernizing the Federal Trade Commission and protecting
consumers can happen.
I want to say a special thank you to our witnesses. I am so grate-
ful to the Commissioners who are all here today: three virtually
and two in person. Thank you so much.
And also from our experts that we will hear—for the second
panel.
[The prepared statement of Ms. Schakowsky follows:]
PREPARED STATEMENT OF HON. JAN SCHAKOWSKY
Today we will consider 16 pieces of legislation intended to modernize the Federal
Trade Commission’s ability to pursue its consumer protection mission.
For over 100 years the FTC has been the premier federal consumer protection
agency.
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Despite its broad mandate to protect consumers and promote competition, the
Commission has been for decades sorely under-resourced.
Today, it has a smaller staff and less funding than other consumer protection reg-
ulators.
However, it is a new era at the Federal Trade Commission.
In a breath of fresh air, the Commission held two open meetings this month.
These publicly accessible meetings increased transparency and public input on im-
portant topics like the Made in USA rule and right to repair.
It’s time to recommit to restoring a culture at the FTC of putting consumers first.
Many of the 16 bills we are considering today will help them live up to that com-
mitment.
These include the Online Consumer Protection Act which I have introduced with
Representative Castor.
This legislation will hold technology platforms accountable for failing to live up
to the promises they make to consumers in their terms of service.
The 21st Century FTC Act, sponsored by my colleague Representative Castor and
my own bill, the FTC Autonomy Act, will provide the Commission with additional
enforcement tools, including notice and comment rulemaking, civil penalty, and
independent litigating authorities.
Legislation from my colleagues Representatives Rush and McNerney will give the
Commission authority over consumer protection violations by non-profit organiza-
tions and certain common carriers.
A few of the bills we are considering today will allow the FTC to more efficiently
police scams targeting vulnerable groups.
This includes bipartisan legislation from Representatives Rice and Upton focusing
on fraud affecting military veterans and service members, and legislation from Rep-
resentative Kelly that would establish a task force to bolster the Commission’s work
on equity issues and would inform the public about scams targeting specific con-
sumer groups.
Representative McNerney’s legislation would create an office of technologists to
provide additional technological expertise to keep the Commission up to date in an
ever-changing consumer landscape.
Together, these bills will forge a new path forward for the Federal Trade Commis-
sion.
They strengthen the Commission’s consumer protection capabilities and provide
the tools necessary to regulate today’s increasingly innovative and dynamic market-
place.
It is essential that the Commission have the tools it needs to hold technology plat-
forms accountable.
The era of self-regulation is over.
Self-regulation has threatened our democracy and now threatens our health and
our very lives as vaccine misinformation continues to spread indiscriminately across
social media.
Consent tools have proven ineffective at improving the behavior of technology
companies.
Violation after violation underscore that stronger enforcement tools are urgently
needed.
The American people deserve a 21st century consumer protection agency that
meets 21st century threats.
I am looking forward to hearing from the witnesses here today on how to mod-
ernize the Federal Trade Commission and protect consumers.
Thank you to the witnesses for joining us today. I now recognize Mr. Bilirakis for
5 minutes.
Ms. SCHAKOWSKY. The Chair—thanks for the indulgence. I am
practicing on how to use my new disability to speak more properly.
But here we are.
And the chairman now recognizes Mr. Bilirakis, the ranking
member of our subcommittee, for 5 minutes.
OPENING STATEMENT OF HON. GUS M. BILIRAKIS, A REP-
RESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA
Mr. BILIRAKIS. Thank you so much, Madam Chair. I appreciate
it. Thank you for holding this important hearing. And to both pan-
els appearing today, we really appreciate it very much. I would like
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5
to welcome all five of our FTC Commissioners—I guess, three vir-
tually and two in person—in front of our subcommittee, where we
can not only examine the legislation before us but also conduct
overdue oversight of the Commission.
Chair Khan, congratulations on your recent confirmation as
Commissioner and Chair of the FTC. This is a very important
agency, as you know, and I am eager to learn how you will con-
tinue leading on its important work, especially in the protection of
our constituents from fraud and scams, and how you can enforce
a national privacy standard we want to enact. It is critical we get
the ball rolling on that effort.
I am also interested in learning how the FTC can assist with pro-
tecting Americans from ransomware and other cyber attacks. I re-
cently introduced H.R. 4551, the RANSOMWARE Act, which would
amend the Safe Web Act to focus on such attacks. The FTC can
play an important role in securing our Nation from ransomware. So
I hope today’s conversation may assist in fine-tuning my legislation
to best accomplish this goal.
Given the majority scheduled this as an oversight hearing, as
well, I would be remiss if I did not inquire about recent changes
at the FTC.
Chair Khan, I understand that change comes when a new team
is in charge, and we will have our policy differences here in DC,
but that should not stop you from working with your fellow Com-
missioners in a collegial manner. So you must understand why I
am concerned when we hear reports of individuals inside the FTC
being silenced and your other Commissioners being shut out of the
process. We must take these allegations extremely seriously. It is
concerning, the recent changes in FTC processes took place without
acknowledging the consideration of all Commissioners and of FTC
experts, some of whom have lifetimes of experience within the sub-
ject matter.
To those staff, I hope you are watching today so you may know
this Commission cares—again, this committee definitely cares
about the FTC process remaining open and transparent, and that
your voice and expertise play an important role. We will begin a
process to review these allegations. And with that, I would like to
announce for the FTC staff listening that, if you have any issues,
we have created a whistleblower email. It is
ecgop.whistleblower@mail.house.gov. Again:
ecgop.whistleblower@mail.house.gov.
As you are aware, with other bills on the docket, Republican
members of this committee introduced legislation to ensure guard-
rails are included in any FTC decision-making process. I am glad
to see these bills are on the docket, and I appreciate it, Madam
Chair, that you placed them on the docket. Thanks for following
through. They will bring much-needed transparency, in my opinion,
require proper notice and input from key experts at the FTC, like
from the Bureau of Economics, something I wish was included in
H.R. 2668, the legislation that expands section 13(b).
As I have said before, Republicans support providing the FTC
with the tools they need to pursue bad actors and to sufficiently en-
force privacy standards. So I ask that the Democrat—Democratic
proposals in front of us be considered in that context. I hope my
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Democratic colleagues’ engagement on these issues will also mean
seriously engaging on putting in place a national privacy standard.
Madam Chair, thank you again for holding this hearing. We have
a lot to get through today, so I wanted to be as brief as I could.
I am eager to learn how we, as the committee of jurisdiction, can
bring much-needed transparency to the FTC and how the legisla-
tion before us may do just that. And I thank you very much, and
I yield back.
[The prepared statement of Mr. Bilirakis follows:]
PREPARED STATEMENT OF HON. GUS M. BILIRAKIS
Good morning Chair Schakowsky, thank you for holding this important hearing,
and to both panels appearing today. I’d like to welcome all five of our FTC Commis-
sioners in front of our Subcommittee where we can not only examine the legislation
before us, but also conduct overdue oversight of the Commission.
Chair Khan, congratulations on your recent confirmation as Commissioner, and
Chair of the FTC. This is a very important agency, and I am eager to learn how
you will continue leading on its important work—especially in the protection of our
constituents from fraud and scams, and how you can enforce a national privacy
standard we want to enact. It is critical we get the ball rolling on that effort.
I am also interested in learning how the FTC can assist with protecting Ameri-
cans from ransomware and other cyber-attacks. I recently introduced H.R. 4551, the
RANSOMWARE Act which would amend the SAFE Web Act to focus on such at-
tacks. The FTC can play an important role in securing our nation from ransomware,
so I hope today’s conversation may assist in fine tuning my legislation to best ac-
complish this goal.
Given the majority scheduled this as an oversight hearing as well, I would be re-
miss if I did not inquire about recent changes at the FTC. Chair Khan, I understand
that change comes when a new team is in charge, and we all have our policy dif-
ferences here in DC, but that should not stop you from working with your fellow
Commissioners in a collegial manner. So you must understand why I am concerned
when we hear reports of individuals inside the FTC being silenced and your other
Commissioners being shut out of the process. We must take these allegations very
seriously.
It’s concerning the recent changes in FTC processes took place without acknowl-
edging the consideration of all Commissioners and of FTC experts, some of whom
have lifetimes of experience within the subject matter. To those staff, I hope you
are watching today so you may know this Committee cares about the FTC process
remaining open and transparent, and that your voice and expertise play an impor-
tant role. We will begin a process to review these allegations, and with that I would
like to announce for the FTC staff listening that if you have issues, we have created
a whistleblower email ECGOP.whistleblower@mail.house.gov.
As you aware with the other bills on the hearing, Republican members of this
Committee introduced legislation to ensure guardrails are included in any FTC deci-
sion making process. I am glad to see these bills on the docket today. They will
bring much needed transparency, require proper notice, and input from key experts
at the FTC, like from the Bureau of Economics—something I wish was included in
H.R. 2668, the legislation that expands Section 13(b).
As I have said before, Republicans support providing the FTC with the tools they
need to pursue bad actors and to sufficiently enforce privacy standards, so I ask that
the Democratic proposals in front of us be considered in that context. I hope my
Democratic colleagues’ engagement on these issues will also mean seriously engag-
ing on putting in place a national privacy standard.
Madam Chair, thank you again for holding this hearing, we have a lot to get
through today. I am eager to learn how we as the Committee of jurisdiction can
bring much needed transparency to the FTC and how the legislation before us may
do just that.
Thank you, and I yield back.
Ms. SCHAKOWSKY. The gentleman yields back, and the chairman
now recognizes Mr. Pallone, chairman of the full committee, for 5
minutes.
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OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REP-
RESENTATIVE IN CONGRESS FROM THE STATE OF NEW JER-
SEY
Mr. PALLONE. Thank you, Chairwoman Schakowsky. Today we
are continuing this committee’s important work on putting con-
sumers first.
For the past few months, this subcommittee, and then the full
committee, pushed forward the Consumer Protection and Recovery
Act to restore the FTC’s basic authority to get stolen money back
to consumers. That urgently needed legislation passed the House
last week, and I urge the Senate to take up the bill without delay.
With House passage of the Consumer Protection and Recovery
Act, we must take the next step, not just fixing what was broken
but improving the Nation’s foremost consumer protection agency
and putting consumers first. The FTC initially addressed only un-
fair competition, which led to unjust results for consumers. But
then, in 1938, Congress met the moment, enacting the FTC’s now
core section 5 authority to enforce against unfair or deceptive acts
or practices. By granting the power to stop consumer harms, the
FTC’s consumer protection mission was born at that time.
And over time, the FTC needed more authority to execute its
mission. In 1973 Congress met that moment by granting the FTC
the authority to go into Federal court and seek relief for con-
sumers, including under Section 13(b) of the FTC Act. And these
changes led to billions in relief for consumers and a more efficient
way to deter illegal conduct. And the legislation that passed the
House last week would restore this critical authority after it had
been seriously undermined earlier this year by the Supreme Court.
We are now facing another seminal moment for consumer protec-
tion. The digital age has fundamentally changed the consumer ex-
perience, but the FTC’s mission to protect consumers and honest
businesses remains the same. Congress must meet the moment
again. It is time to bring the FTC into the modern era, to give it
the tools and resources to keep up with changes in the market. And
much of the legislation before us today would do just that.
The legislation that would improve general rulemaking authority
under the Administrative Procedures Act would remove uniquely
onerous burdens so the FTC can more efficiently provide clear rules
of the road to businesses and consumers. Legislative proposals
would also give the FTC civil penalty authority, which is critical to
impose meaningful consequences on wrongdoers and deter other
bad actors. Those reforms help industry and individuals, and are
essential to maximize the FTC’s limited resources.
There is also legislation that ends exemptions on nonprofits and
telecommunications common carriers from FTC jurisdiction that
also helps consumers and businesses.
Consumer protection enforcement should be based on the activ-
ity, not the entity.
Unfortunately, on the other hand, some proposals before us today
would hinder the FTC and ultimately harm consumers. I am con-
cerned by the proposals that would burden staff and drain re-
sources with needless processing reports that effectively obstruct
information exchanges between the FTC and other regulators and
lawmakers. The bills that I am talking about would undermine the
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FTC’s ability to prevent potential harms or react to unusual, un-
fair, and deceptive practices.
Some of these bills would hurt companies by potentially forcing
the FTC to reveal confidential investigations before the FTC has
determined whether illegal acts have taken place or whether it will
take action against the subjects of the investigations. And I believe
these proposals would put the FTC on the wrong track.
Now, my Republican committee colleagues have routinely empha-
sized the need for comprehensive consumer privacy legislation, and
I agree, and that is why the committee remains hard at work on
privacy. But at the same time, the legislation would effectively gut
the FTC’s ability to protect consumer privacy. And I believe that,
across the board, deregulation and a strong Federal privacy regime
cannot coexist.
[The prepared statement of Mr. Pallone follows:]
PREPARED STATEMENT OF HON. FRANK PALLONE, JR.
Today, we are continuing this Committee’s important work on putting consumers
first. For the past few months, this Subcommittee and then the full Committee
pushed forward the Consumer Protection and Recovery Act to restore the Federal
Trade Commission’s (FTC) basic authority to get stolen money back to consumers.
That urgently needed legislation passed the House last week, and I urge the Senate
to take up the bill without delay.
With House passage of the Consumer Protection and Recovery Act, we must take
the next step—not just fixing what was broken but improving the nation’s foremost
consumer protection agency and putting consumers first.
Congress established the FTC in 1914 in response to rapid industrial change. As
Teddy Roosevelt said in support of the new agency, a consensus had emerged that
federal law was ‘‘not adequate to meet the situation’’ created by ‘‘modern business
conditions.’’
The FTC initially addressed only unfair competition, which led to unjust results
for consumers. In 1938, Congress met the moment, enacting the FTC’s now-core sec-
tion 5 authority to enforce against ‘‘unfair or deceptive acts or practices.’’ By grant-
ing the power to stop consumer harms, the FTC’s consumer protection mission was
born.
Over time, the FTC needed more authority to execute its mission. In 1973, Con-
gress met that moment by granting the FTC the authority to go into federal court
and seek relief for consumers, including under section 13(b) of the FTC Act. These
changes led to billions in relief for consumers and a more efficient way to deter ille-
gal conduct. And the legislation passed in the House last week would restore this
critical authority after it had been seriously undermined earlier this year by the Su-
preme Court.
We are now facing another seminal moment for consumer protection. The digital
age has fundamentally changed the consumer experience, but the FTC’s mission to
protect consumers and honest businesses remains the same.
Congress must meet the moment again. It’s time to bring the FTC into the mod-
ern era, to give it the tools and resources to keep up with changes in the market.
Much of the legislation before us today would do just that.
Legislation that would provide general rulemaking authority under the Adminis-
trative Procedure Act would remove uniquely onerous burdens so the FTC can more
efficiently provide clear rules of the road to businesses and consumers. Legislative
proposals would also give the FTC civil penalty authority, which is critical to impose
meaningful consequences on wrongdoers and deter other bad actors. These reforms
help industry and individuals and are essential to maximize the FTC’s limited re-
sources.
Legislation that ends exemptions on nonprofits and telecommunications common
carriers from FTC jurisdiction also helps consumers and businesses. Consumer pro-
tection enforcement should be based on the activity, not the entity. As former FTC
Chairman William Kovacic told this Subcommittee in February, these ‘‘embar-
rassing anachronisms’’ no longer make sense, and only diminish the FTC’s ability
to do its job.
Unfortunately, on the other hand, some proposals before us today would hinder
the FTC and ultimately harm consumers. I am concerned by the proposals that
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would burden staff and drain resources with needless process and reports and effec-
tively obstruct information exchanges between the FTC and other regulators and
lawmakers. The bills would undermine the FTC’s ability to prevent potential harms
or react to unusual, unfair, and deceptive practices. Some of these bills would hurt
companies by potentially forcing the FTC to reveal confidential investigations before
the FTC has determined whether illegal acts have taken place or whether it will
take action against the subjects of the investigations. I believe these proposals
would put the FTC on the wrong track.
My Republican Committee colleagues routinely emphasize the need for com-
prehensive consumer privacy legislation. I agree, and that is why the Committee re-
mains hard at work on privacy. At the same time, however, their legislation would
effectively gut the FTC’s ability to protect consumers’ privacy. Across the board de-
regulation and a strong federal privacy regime cannot coexist. I can only hope that
despite their legislation put forth today, my Republican colleagues share my com-
mitment to a federal privacy law that would actually protect Americans’ privacy.
I thank all five Commissioners for appearing before us to help us determine the
right path forward for the FTC and for consumers. I also look forward to hearing
from our expert witnesses on how to modernize the FTC to best protect consumers
and honest businesses.
Mr. PALLONE. So I thank all five Commissioners for appearing
before us. I also look forward to hearing from our expert witnesses,
and I yield the balance of my time to the gentlewoman from Flor-
ida, Ms. Castor.
Ms. CASTOR. Well, thank you, Chair Pallone. This is a critical
hearing because the Federal Trade Commission is absolutely vital
to protecting our neighbors back home, protecting consumers, and
then fostering competition across the economy. We have got to give
the FTC all of the tools it needs to help protect consumers from
fraudsters and scam artists, predatory companies.
My neighbors back home in Florida, which just is rife with, un-
fortunately, with scam artists, they really need the FTC at work,
at full force. They have got—the FTC—a lot of folks don’t really un-
derstand. You all help recoup money. You help hold these fly-by-
night operations accountable. You, in essence, restore the dignity
to folks who have been scammed and you penalize these bad actors.
So welcome, Chair Khan, welcome, Commissioners. We look for-
ward to working with you and look forward to hearing you today,
along with our expert panel.
And I really appreciate, Chair Schakowsky, you including my
21st Century FTC Act in this hearing today.
So thank you, I yield back my time.
Ms. SCHAKOWSKY. The gentleman has yielded back his time. And
now let me recognize Mrs. Rodgers, the ranking member of the full
committee, for her 5 minutes for an opening statement.
OPENING STATEMENT OF HON. CATHY MCMORRIS RODGERS,
A REPRESENTATIVE IN CONGRESS FROM THE STATE OF
WASHINGTON
Mrs. RODGERS. Thank you, Madam Chair. Welcome, Chair Khan,
our distinguished members of the Federal Trade Commission, as
well as our second panel of experts.
This past year has been difficult. COVID–19 has not only altered
our daily lives, it has refocused the way we conduct our business
in Congress. Over the past year it has been essential that we work
together in a bipartisan way to protect seniors and other vulner-
able populations. Thanks to our work with Chair Schakowsky, we
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10
have been able to expand the FTC’s authority to go after COVID–
19 fraudsters and scammers.
Yet I am concerned today that we are now prioritizing politics
over protecting Americans. Just last week we saw a very partisan
13(b) legislation narrowly pass the House floor. What makes this
worse is that, just a couple of weeks prior, during a committee
markup, Representative Bilirakis introduced an amendment to this
bill that received bipartisan support. But it was shut out by the
majority once the bill moved to the floor. A colloquy on the House
floor between committee Democrats tried to clarify the intent of the
underlying bill. The concerns raised during the colloquy would have
been clearly addressed by Bilirakis’s compromise.
This begs the question: If our compromise amendment was con-
sidered on the floor, would it have passed? I believe that the an-
swer is yes.
Sadly, the partisan process for 13(b) was also a missed oppor-
tunity to enact a national Federal privacy standard, something we
desperately need to ensure that people’s personal information is
protected online. America’s data and personal information does not
end with State lines. Neither should privacy protections, consid-
ering proposals on the agenda today were part of the bipartisan
privacy negotiations last Congress.
I will be listening for ways that these bills being considered can
be adapted into a national privacy standard, which would be a
landmark achievement for this committee and for the protection of
America’s data. I certainly hope they don’t move alone—stand
alone.
In the past, even when we disagreed on certain approaches to
policymaking, we were able to come together and work in a bipar-
tisan manner. This was the case when Chairman Pallone led on at-
tacking robocalls and enacted the landmark TRACED Act. That
was Congress at its best, and I hope that we return to that, be-
cause what we have now is a set of really bad examples for agen-
cies and departments under our oversight.
We have heard reports on shifts at the FTC to shorten notice of
actions, limit consultation, and reduced economic analysis. This
trend is crippling the thoughtful process at the FTC and jeopard-
izing fraud protections for Americans who need them. It is a dis-
service to Americans.
Your mission is to protect. By neglecting your duty to follow a
process that allows for proper deliberation and import—input from
experts is a disservice. I implore you to resist the urge to take your
focus off of consumer protections. Engage with the public to find
out what alarms them most. Listen to people at regional workshops
about their top concerns. I would be surprised if you didn’t hear
stories about unwanted calls for scam real estate leads, car warran-
ties, even fake IRS bills. These are the kinds of things that should
guide your efforts. The FTC is an independent agency that should
not have your agenda dictated by the White House.
The time to establish a strong and uniform data protection for
all Americans is now, and I look forward to hearing from you.
[The prepared statement of Mrs. Rodgers follows:]
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PREPARED STATEMENT OF HON. CATHY MCMORRIS RODGERS
Thank you, Madam Chair. Welcome Chair Khan, our distinguished members of
the Federal Trade Commission (FTC), as well as our second panel of experts.
The past year has been tumultuous. COVID–19 has not only altered our daily
lives, it has refocused the way we conduct our business in Congress. Over the past
year, it has been essential that we worked together in a bipartisan way to protect
seniors and other vulnerable populations. Thanks to our work with Chair Scha-
kowsky, we have been able to expand the FTC’s authority to go after COVID–19
fraudsters and scammers.
Yet I’m concerned we’re now prioritizing politics over protecting Americans. Just
last week we saw partisan 13(b) legislation narrowly pass the House floor. What
makes this worse is that—just a couple of weeks prior during a committee markup
Rep. Bilirakis introduced an amendment to this bill that received bipartisan sup-
port, but it was shut out by the Democrats once the bill moved to the floor.
A colloquy on the House floor between Committee Democrats tried to clarify the
intent of the underlying bill. The concerns raised during that colloquy would have
been clearly addressed by the Bilirakis compromise. This begs the question—if our
compromise amendment was considered on the floor, would it have passed? I believe
the answer is yes.
Sadly, the partisan process on 13(b) was also a missed opportunity to enact a na-
tional privacy standard—something we desperately need to ensure people’s personal
information is protected online. Americans’ data and personal information does not
end with state lines, why should their privacy protections?
Considering proposals on the agenda today were part of our bipartisan privacy ne-
gotiations last Congress, I’ll be listening for ways the bills being considered can be
adapted into a national privacy standard which would be a landmark accomplish-
ment for this committee and for the protection of Americans’ data. They certainly
shouldn’t move as stand-alones. In the past, even when we disagreed on certain ap-
proaches to policymaking, we’d still be able to come together and work in a bipar-
tisan manner. This was the case when Chairman Pallone led on attacking robocalls,
and enacted the landmark TRACED Act.
That was Congress at its best and I hope we return to that because what we have
now sets a bad example for the agencies and departments under our oversight. We
have heard reports on shifts at the FTC to shorten notice of actions, limit consulta-
tion, and reduce economic analysis.
This trend is crippling the thoughtful process at the FTC and jeopardizing fraud
protections for Americans who need them. It’s a disservice to Americans your mis-
sion is to protect by neglecting your duty to follow a process that allows for proper
deliberation and input from experts.
I implore you to resist the urge to take your focus off consumer protections. You
should instead engage with the public to find out what most alarms them. Listen
to people at your regional workshops about their top concerns.
I’d be surprised if you didn’t hear stories about unwanted calls for scam real es-
tate leads, car warranties, even fake IRS bills. These are the kinds of things that
should guide your efforts. You are an independent agency that should not have your
agenda dictated by the White House. The time to establish strong and uniform data
protections for Americans is now. I look forward to hearing from you. Thank you,
I yield back.
Mrs. RODGERS. I yield back, Madam Chair.
Ms. SCHAKOWSKY. The gentlelady yields back.
The Chair would like to remind Members that, pursuant to com-
mittee rules, all Members’ written opening statements shall be
made part of the record.
I now would like to introduce our witnesses for our first—from
our first panel at today’s hearing: the Honorable Lina Khan, Chair-
woman—Chairman of the Federal Trade Commission; the Honor-
able Noah—we have them on—OK—the Honorable Noah Joseph
Phillips, Commissioner with the Federal Trade Commission; the
Honorable Rohit Chopra, Commissioner, the FTC; the Honorable
Rebecca K. Slaughter, Commissioner at the FTC; and the Honor-
able Christina Wilson—I am sorry, it is Christine, excuse me—Wil-
son, the Commissioner at the FTC.
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At this time the Chair will recognize each witness for 5 minutes
to provide their opening statement.
Before I do, I think most of you are already familiar with the
lights, but let me explain that system. In front of our witnesses is
a series of lights. The lights will initially be green. The light will
turn yellow when there is 1 minute left. And please begin to wrap
up at that point. The light will turn red when the 5 minutes have
expired.
So Chair Khan, it is a pleasure to welcome you and to recognize
you for 5 minutes.
STATEMENTS OF LINA KHAN, CHAIR, AND NOAH JOSHUA
PHILLIPS, ROHIT CHOPRA, REBECCA KELLY SLAUGHTER,
AND CHRISTINE S. WILSON, COMMISSIONERS, FEDERAL
TRADE COMMISSION
STATEMENT OF LINA KHAN
Ms. KHAN. Thanks so much, Chair Schakowsky, Ranking Mem-
ber Bilirakis, and members of the subcommittee. I am pleased to
appear before you today to discuss the 16 bills under consideration
by the subcommittee. Thank you for this important work, and I
look forward to working with you all.
My testimony today will identify several key issues currently fac-
ing the Commission, and share initial views on some of the bills
currently being considered.
Congress created the Federal Trade Commission to serve as a
guardian for fair competition and to protect consumers, workers,
and honest businesses from unfair or deceptive trade practices.
This statutory charge has never been more important, yet the Com-
mission faces today notable challenges in carrying out its mission.
I will briefly describe three problems that are currently shaping
the agency’s work.
First, as this subcommittee is well aware, the Supreme Court’s
decision last year in AMG dealt a serious blow to the FTC’s ability
to seek refunds for defrauded victims and to discourage ill-gotten
gains. Across the Commission’s work, the loss of section 13(b) is
leading to windfalls for lawbreakers.
For example, after a major pharmaceutical company engaged in
a multiyear scheme to keep drug prices high by choking off
generics, a court ordered it to return $448 million to victims. The
Supreme Court’s interpretation of section 13(b) has meant that the
pharmaceutical company was later, instead, allowed to pocket
these illegal profits. All together, AMG has jeopardized over $2 bil-
lion in potential relief to victims in pending cases.
Beyond monetary relief, the FTC now also faces challenges in
seeking an injunction to halt wrongdoing, curtailing the Commis-
sion’s ability to challenge past abuses.
I am committed to using the full range of the FTC’s tools to crack
down on unlawful conduct. But restoring our full section 13(b) au-
thority is critical, and I am grateful that the full House has already
acted on Congressman Cárdenas’s bill to re-arm the Commission
against these growing threats.
Second, Americans have been subjected to a massive increase in
fraud over the last year, with the number of complaints up more
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than 20 percent. While the FTC has focused on shutting down
COVID-related schemes, from bogus treatments to government im-
postors, fraud has continued to surge. One reason is that fraud
today is supercharged by digital platforms, where this conduct is
tolerated and even promoted, by some of the world’s largest compa-
nies. Business models singularly focused on skill and engagement,
coupled with microtargeting, have allowed these platforms to be-
come finely tuned instruments for bad actors, who often target the
most vulnerable.
Although digital platforms profit off of the tools that are being
weaponized against Americans, these companies often claim special
immunity under the law. The Commission will continue to aggres-
sively pursue those that exploit this crisis to target American fami-
lies. But, ultimately, systematically rooting out fraudulent schemes
will require focusing on the warped incentives and legal privileges
that allow major firms to profit from predation.
Third, even as the agency tackles the proliferation of unfair or
deceptive practices, the current merger boom threatens to make
them worse. Significant market consolidation deprives consumers,
workers, and independent businesses of choice, further enabling
dominant firms to engage in unfair practices. As the wave of pri-
vacy abuses in recent years has shown, market dominance often al-
lows companies to renege on commitments, evade the law, and re-
peatedly violate Commission orders. We are seeing rapid consolida-
tion across industries. Through the first three-quarters of this fis-
cal year, antitrust agencies have processed over 2,400 merger fil-
ings, a level of activity that is already the highest in 2 decades.
Although the FTC is working to review many of these deals, the
sheer volume of transactions is significantly straining Commission
resources. I am deeply concerned that the current merger boom will
further exacerbate deep asymmetries of power across our economy,
further enabling abuses.
This subcommittee is considering several bills that would boost
the Commission’s ability to confront these challenges. Both the
FTC Autonomy Act and the 21st Century FTC Act would help the
Commission seek civil penalties against lawbreakers. This would
mark an important change, guaranteeing the public greater protec-
tions.
Those that would end special protections for select industries
would also strengthen our law enforcement. For example, the on-
line Consumer Protection Act would clarify that platforms cannot
claim special privileges when facing an FTC enforcement action.
Meanwhile, the Protecting Consumers and Commerce Act and Re-
moving Nonprofit Exemption Act would allow the FTC to challenge
abuses by common carriers and nonprofit entities.
Finally, several bills focus efforts on communities that are offer-
ing particular targets of predation, including older Americans, serv-
ice members, and consumers. These bills are a critical reminder of
the importance of the FTC’s work in ensuring that our government
works for all Americans.
I look forward to working with the subcommittee to meet the
challenges that we face, and I welcome the opportunity to answer
any questions.
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[The joint prepared statement of Ms. Khan and the FTC Com-
missioners follows:]
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Ms. SCHAKOWSKY. Thank you very much.
And now, Commissioner Phillips, you are recognized for 5 min-
utes.
STATEMENT OF NOAH JOSHUA PHILLIPS
Mr. PHILLIPS. Thank you, Madam Chair. Chair Schakowsky,
Ranking Member Bilirakis, members of the subcommittee, thank
you for the opportunity to appear before you. I am honored to tes-
tify with my fellow Commissioners about the important work we do
at the FTC. I am glad the subcommittee has decided to solicit a
range of views on agency reform.
I would also like to take a moment to thank the staff at the
Edgartown Public Library for providing me with a private, quiet
place to testify. I will be masked, in adherence to library policy.
The thoughtful proposals Members have made on agency reform
deserve attention—in particular, those designed to increase trans-
parency into the Commission, like the FTC Reports Act, sponsored
by Congressman Bilirakis, and Mr. Guthrie’s FTC Transparency
Act.
In the last few weeks, the Commission has repeatedly changed
policy directions without giving the public any real notice or right
to be heard and, without serious consideration, removed guidance
from the public and business community alike. And by removing
Commission oversight from antitrust and other investigations, as
we recently did, we have reduced transparency within the agency.
We must do better.
As you consider agency reforms, I urge you to think about the
other ways in which the agency is changing course.
The first change is the Commission pivoting, without Congress,
to regulate a great deal of the economy. Over the last few years,
my colleagues have called for a bevy of new rules, mostly under au-
thorities that we have. The President’s recent Executive order con-
templates our issuing major regulations concerning, among other
things, pharmaceuticals, technology, labor, retail, and devices. Not
all of the proposals in the Executive order are bad, to be clear. But
much of it would replace consumer-driven market forces with gov-
ernment-supervised regulation, the opposite of competition. And
much of that appears to be based on authority we simply do not
possess.
The Commission, however, is in a hurry to regulate. For exam-
ple, on July 1st, without input from the public, we adopted rules
to enable us to promulgate regulations with less objectivity, less
oversight, and less public input. The Commission majority is reduc-
ing what it calls red tape on the Commission, to impose more real
red tape on American businesses, large and small.
Well-crafted regulations can help consumers and businesses, but
poor regulatory design can raise prices, stifle innovation, and re-
duce consumer choice. This was a lesson America learned the hard
way decades ago.
And when it comes to policy questions of great economic and po-
litical importance, my basic philosophy is that Congress, not the
FTC, is the place to answer them. I believe the law reflects that
fact. Privacy is a good example, and I commend Committee Rank-
ing Member Rodgers and subcommittee member—Ranking Member
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Bilirakis on their recent letter calling for privacy legislation and for
the administration to make it a priority.
In adopting regulations, I hope we address clearly defined prob-
lems, fashion rules designed to address them, and minimize unin-
tended consequences. I hope we base our decisions on empirical evi-
dence and input from all stakeholders, which is why I also support
the goals of the RECS Act, introduced by Congressman Bucshon,
to ensure that we approach Congress with analytical rigor.
Another change, I fear, is moving away from the Commission’s
historical commitment to combating fraud. Just a few weeks ago,
this subcommittee considered amendments to section 13(b), fol-
lowing the Supreme Court’s AMG decision. As we detailed in testi-
mony, a fraud program has, for decades, done essential work to re-
turn money to victims of fraud. Companies large and small that en-
gage in fraud can cost consumers their life savings. In the past 5
years we have returned $11.2 billion in refunds to consumers who
are victims of fraud. I am heartened that Congress has appro-
priated funds and passed laws to strengthen the fraud program,
and count me among those who believe that a well-crafted amend-
ment to 13(b), with guardrails, will help serve consumers.
Of late, some of my colleagues have made comments to suggest
that we should focus only on large companies. The fact is that
many of the frauds we see are not perpetrated by those kinds of
companies, and I hope these comments do not indicate a desire to
turn away from the fraud program. Where big corporations violate
the law, we absolutely should hold them to account. But some of
the wrongdoers that hurt Americans the most happen not to be
large corporations. We should focus on harm to consumers, not the
identities of defendants.
While enforcement against robocallers, COVID–19 scammers,
and others may not generate as many headlines, it generates re-
sults for consumers. While section 19 is not a perfect tool, it en-
ables us to turn—return money to them. We should continue to
commit resources to combating practices like fraud that cause the
most harm, and I welcome legislation like updating 13(b) that will
help with that.
Thank you, and I look forward to your questions.
[Mr. Phillips submitted a joint prepared statement with the other
FTC witnesses.]
Ms. SCHAKOWSKY. Thank you.
And now, Commissioner Chopra, you are recognized for 5 min-
utes.
STATEMENT OF ROHIT CHOPRA
Mr. CHOPRA. Chair Schakowsky, Ranking Member Bilirakis, and
members of the subcommittee, thank you for holding this hearing
today. My name is Rohit Chopra, and it is an honor to be here with
you and my fellow Commissioners.
The pandemic created the conditions for a wide range of market
abuses that harmed so many Americans, including millions of
small businesses. Many small businesses in America didn’t just
find their financial futures in peril; they also found themselves
completely under siege against—by unfair, deceptive, and anti-
competitive practices by—firms.
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Local restaurant owners were worried about food delivery apps
that coerced them into paying extraordinary fees. Local franchisees
faced new onerous requirements that franchisors were imposing on
them, even as they struggled to stay afloat. Independent phar-
macists, who played a critical role in the response to the pandemic,
found themselves at the mercy of middlemen using tactics that are
driving many of these independent clinics out of business. And the
same goes with small retailers and small banks, and the list goes
on and on and on. It was crystal clear that small businesses across
the country needed the FTC’s help, but many felt completely ig-
nored.
I appreciate your work to increase the effectiveness of the Fed-
eral Trade Commission. And as you pursue these efforts, I would
also encourage you to consider other reforms to ensure that the
FTC is more responsive to small businesses and less slanted in the
favor of larger ones. We need to look at laws related to ethics and
financial conflicts of interest and more. Small businesses have ex-
pressed concern that the FTC routinely gives favorable treatment
to large, powerful firms, such as Big Tech and Big Pharma giants,
while ignoring pleas for action to address practices harming small
players.
When Big Tech companies egregiously violate privacy and the
law, the FTC has shown across multiple administrations that it is
more than willing to be lax and forgiving. But when small busi-
nesses violate these laws, the FTC brings down the hammer on
them, wiping out revenues and often shutting them down. This
two-tier approach does not make sense.
Congress should explore whether our laws need to be amended
to reduce favoritism toward these dominant players, crack down on
financial conflicts of interest, and increase responsiveness to local
businesses and upstarts.
First, Congress should examine whether to revisit laws regarding
postemployment restrictions for senior FTC officials. While senior
officials cannot immediately represent clients in front of the agen-
cy, many are able to work quietly behind the scenes, leveraging
their intimate knowledge of nonpublic agency deliberations on law
and policy. This gives them an enormous advantage on how to help
large firms escape meaningful accountability when they break the
law and how to advise them on how to get the FTC to take specific
actions. Small businesses don’t have the resources or the ability to
hire former FTC Commissioners and bureau directors who regu-
larly appear before the agency on behalf of dominant firms. This
creates an unlevel playing field for small businesses engaging with
the FTC, seeking action or a fair resolution.
Congress should also assess whether existing postemployment re-
strictions and other standards regarding financial conflicts of inter-
est in our laws are adequate. While some argue that tougher re-
strictions will deter some from considering government service, our
experience at the FTC reveals a different story, with many of our
most talented officials devoting the vast majority of their career to
working in public service.
In addition, Congress should also determine whether existing law
regarding so-called sponsored travel needs to be updated. Under
existing law, senior government officials can be sponsored by non-
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Federal sources to travel to conferences and retreats, largely at-
tended by and indirectly paid for by those representing dominant
firms, especially Big Tech. These events sometimes include closed-
door panel discussions that are not open to the media or the public,
giving conference organizers and their patrons a chance to gather
intelligence about emerging policies and priorities.
This nonpublic information can be exploited by investment funds
that trade on this information. Small businesses and the general
public can’t easily access these private panel junkets and don’t
have the resources to organize them on their own. To ensure equal
access and fairness, it will be important to examine whether laws
and regulations need to be amended to guard against real or per-
ceived conflicts of interest when it comes to sponsored travel by
non-Federal sources.
In closing, it is clear that honest businesses need the FTC more
than ever. I am confident that we can work together to fairly ad-
minister the law and promote a marketplace free of fraud and anti-
competitive abuses.
Thank you, and I look forward to your questions.
[Mr. Chopra submitted a joint prepared statement with the other
FTC witnesses.]
Ms. SCHAKOWSKY. Thank you, Commissioner.
And now I recognize Commissioner Slaughter for 5 minutes for
an opening statement.
STATEMENT OF REBECCA KELLY SLAUGHTER
Ms. SLAUGHTER. Thank you, Chair Schakowsky, Ranking Mem-
ber Bilirakis, and members of this subcommittee. I am pleased to
appear before you today, and I appreciate the opportunity to ap-
pear remotely. With four children too young to be vaccinated at
home, I am being extra cautious about COVID exposure.
I want to start by thanking this committee for its incredibly hard
work to pass the Consumer Protection Recovery Act, what we refer
to as the 13(b) fix, through the House earlier this month. I am
grateful for your appreciation of the challenges the recent Supreme
Court decision posed for the Commission, for your hard work to
arm us with the tools we need to protect your constituents. I am
eager for us to continue to partner with Congress and this com-
mittee.
While I am happy to discuss the bills before the committee today,
I also want to encourage you to continue work on a meaningful,
comprehensive, legislative approach to data abuses. Yesterday the
FTC held its sixth annual PrivacyCon conference, with presenters
covering topics including algorithmic bias, issues around consent,
misinformation during the pandemic, and special concerns related
to kids and teens. That broad agenda reflected our understanding
that data issues have moved past the narrow framework of who
has access to your personal data.
This understanding is why I prefer the term ‘‘data abuses’’ to the
narrower language of ‘‘privacy.’’ Thinking in terms of abuses re-
flects the fact that rampant data collection, sharing, and exploi-
tation harms consumers and competition in ways that affect nearly
every aspect of our lives.
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I know this topic is front of mind for members of this committee
and that you are actively considering how best to craft legislation
to address—to directly address the harms faced by consumers,
workers, and small businesses in our data-driven economy.
I also understand that doing this well takes time and thought,
and I encourage you to focus on approaches that not only address
the full panoply of harms that stem from indiscriminate data col-
lection, including civil rights violations, abuse of market power,
economic exclusion, and exploitation of children, but also provide
meaningful solutions that root out damaging and dangerous busi-
ness models and market practices.
When it comes to questions about personal data, I respectfully
suggest we move past outdated notice and content models that put
untenable burdens on users. Instead, we should turn our focus to
changing the underlying incentives that fuel data-driven business
models, such as behavioral advertising.
One approach to consider is data minimization, a principle that
would ensure companies can collect only the information necessary
to provide consumers with the service on offer and use the data
they collect only to provide that service. That minimization could
be coupled with further use, purpose, sharing, and security require-
ments to ensure that the information companies collect isn’t used
to build tools or services that imperil people’s civil rights, economic
opportunities, and personal autonomy, or facilitate corporate self-
dealing. We have to recognize that, as long as key digital markets
are controlled by just a few large, data-hungry, online platforms,
both consumers and prospective entrants are at their mercy.
As Congress continues to debate these issues, I believe it is in-
cumbent upon the Commission to act within the full scope of our
existing authority to target pernicious data practices with both ag-
gressive enforcement and rulemaking.
A quick note about rulemaking, which I know can generate big
reactions. Congress specifically delegated to the FTC the authority,
albeit with a burdensome process, to write rules that prohibit or
regulate any unfair or deceptive act or practice that is prevalent in
interstate commerce. In other words, if we can already sue someone
for committing an unfair or deceptive practice in violation of sec-
tion 5 of the FTC Act and that practice is prevalent, then we can
also write a rule that clarifies for the markets that the conduct is
prohibited.
That means rulemaking can only target conduct that is already
illegal. Rules are developed using a participatory process with sub-
stantial stakeholder engagement and, when finalized, provide no-
tice and certainty to the market about what conduct is outside the
scope of our 100-year-old statute.
As I said before, I believe it is past time for the FTC to begin
a rulemaking process on data abuses. Among other benefits, this
process can have a clarifying effect for the congressional debate, as
well. Participating in the rulemaking process means businesses,
advocates, consumers, workers, researchers, and other interested
parties all have the opportunity to make their opinions known, out
in the open, and with specificity in the public record. An open
record can provide substantiation of the types of consumer protec-
tion and competition harms people are experiencing in digital mar-
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kets and illuminate how we can act decisively to stamp out these
abuses.
I look forward to working with my fellow Commissioners and
with Congress to advance these efforts, and I welcome your ques-
tions.
[Ms. Slaughter submitted a joint prepared statement with the
other FTC witnesses.]
Ms. SCHAKOWSKY. Thank you.
And Commissioner Wilson, you are now recognized.
STATEMENT OF CHRISTINE S. WILSON
Ms. WILSON. Thank you. Chairman Pallone, Ranking Member
McMorris Rodgers, Chair Schakowsky, Ranking Member Bilirakis,
and distinguished members of the subcommittee, thank you for the
opportunity to testify. In my remarks I will address section 13(b),
Federal privacy legislation, and process issues that have arisen re-
cently at the Commission because those process issues impact my
view of the 16 bills we will discuss today.
I am blessed to be serving my third stint at the Federal Trade
Commission. I have great respect for the agency’s devoted per-
sonnel, and I remain amazed at how much we accomplish in so
many different industry sectors despite our small budget. And I am
proud of our agency’s history of collegiality and bipartisanship.
I understand that elections have consequences. The Biden ad-
ministration may choose to pursue different policies than its prede-
cessors, but the process used to implement those changes matters.
Congressman Pallone stated in 2016 during a hearing on FTC leg-
islation, ‘‘I am a big proponent of regular order. That means engag-
ing in real deliberation, not just checking the boxes.’’ I agree with
that sentiment, and I believe it applies equally to the Federal
Trade Commission.
As a political appointee nominated by the White House and con-
firmed by the Senate, I am obligated to exercise due oversight of
Commission business. FTC actions traditionally have been the
product of robust dialogue and analysis, supported by briefings and
staff memoranda. These procedures facilitate a healthy flow of in-
formation among Commissioners and staff and enable us to arrive
at reasoned conclusions. When we adhere to these traditions, I am
able to fulfill my oversight function.
But in recent weeks, longstanding norms and procedures have
been jettisoned. Practitioners, academics, and former enforcers
across the political spectrum have expressed concern about the
agency’s abrupt departure from regular order. I share these con-
cerns, and they impact my view of the bills we will discuss today.
Some bills establish additional procedural safeguards and aug-
mented oversight. Given the shift away from regular order, those
bills are more important now than ever. Other bills give the FTC
additional authority. Given the FTC’s conduct in the 1970s, I have
long been concerned about the possibility of agency overreach, and
recent actions by Commission leadership have deepened those con-
cerns. I am wary of more power without appropriate guardrails.
Turning to section 13(b), I appreciate this committee’s attention
to this issue. I support Commission authority to seek equitable
monetary relief in appropriate cases and to challenge conduct that
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wrongdoers have halted. But I understand the concerns that have
been raised.
Some are concerned about disgorgement in antitrust cases. Guid-
ing principles on when the FTC will seek disgorgement, like those
in the FTC’s 2003 disgorgement policy statement, would provide
appropriate guardrails.
Others are concerned about using 13(b) in consumer protection
cases that involve not fraud but legitimate companies selling legiti-
mate products, albeit with deceptive claims. Congress can include
a framework in 13(b) under which courts must evaluate the value
consumers have retained from the product or service despite the
deception.
The bottom line: With proper guardrails, legitimate concerns can
be addressed while also enabling the FTC to pursue wrongdoers in
appropriate cases.
And finally, I would like to address Federal privacy legislation.
Businesses need clarity regarding the rules of the road in this im-
portant area. But, more importantly, consumers need clarity re-
garding how their data is collected, shared, and monetized. Without
this information, consumers cannot make informed choices about
the costs and benefits of using various websites, apps, and devices.
The events of the last 18 months have exacerbated privacy con-
cerns, but they have also underscored that our civil liberties, in-
cluding Fourth Amendment protections, are at stake and the FTC’s
existing jurisdiction and tools are limited. I thank the members of
this committee, in particular Ranking Member McMorris Rodgers
and Ranking Member Bilirakis, for their recognition of this impor-
tant issue. And I encourage the committee to continue working on
privacy legislation. As the elected representatives of the American
people, you are best situated to make the important value judg-
ments inherent in privacy legislation.
President Biden’s recent EO asked the FTC to consider a privacy
rulemaking. I recently have become more receptive to a privacy
rulemaking as a stopgap measure until Congress could act. But the
Commission recently voted along party lines to erase procedural
safeguards and limit opportunities for public input during our
rulemakings. Consequently, I am now much less receptive to an
FTC rulemaking. Federal privacy legislation remains the optimal
solution, so I encourage you to act.
In closing, I thank this committee for your time and support of
the FTC’s mission. I am happy to answer any questions you may
have.
[Ms. Wilson submitted a joint prepared statement with the other
FTC witnesses.]
Ms. SCHAKOWSKY. Thank you. We have concluded witnesses’
opening statements, and at this time we will move to—I am sorry?
Oh, I am sorry, there is a vote on the floor, so we are going to re-
cess.
How many votes are there? Just one. Can we have people just
vote? Do we have to recess? We have to recess?
OK, yes, since the time of voting actually has gotten pretty strict,
we are going to recess. But come back as soon as you can so that
we can get to our question period. And I—not exactly apologize to
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the witnesses, this is our life here, but we will be back as soon as
we can to get to questions. Thank you.
[Recess.]
Ms. SCHAKOWSKY. OK, we are going to come back to order.
Thank you. And once again, these are situations beyond our con-
trol, and I appreciate your patience.
So we are going to begin with the questions from our Members,
and I want to begin with 5 minutes of questioning.
I want to talk about holding Big Tech accountability online, con-
sumer protection, et cetera, and there is no doubt that, especially
during this pandemic, that more and more Americans are increas-
ingly online, and the importance of holding the technology compa-
nies accountable is more and more important, I believe.
And there is absolutely no reason for internet platforms to not
hold to the same accountability standards as—for harming con-
sumers as offline businesses. And so, you know, what is illegal off-
line ought to be, in my view, illegal online, as well.
So let me start with you, Chairman, Chair Khan. I am going to
assume that the—you believe that the FTC can do more to protect
consumers from online harms, right?
Ms. KHAN. Yes, Congresswoman.
Ms. SCHAKOWSKY. Thank you. In your view, is it unfair or decep-
tive when social media platforms or online platforms fail to follow
their own terms of service?
Ms. KHAN. Chairwoman, I would say, as a general matter, there
is a lot of concern around the opacity of their policies and proce-
dures. And so sometimes it can be difficult to know when they are
or are not following their own policies because of that opacity. And
so I think those information asymmetries create—can create a lot
of problems.
Ms. SCHAKOWSKY. So are the—just say are—do you think that
the FTC existing authority is sufficient to enforce against violations
that we see to absolutely deter further violations?
Ms. KHAN. Congresswoman, I think there is certainly more we
could be doing under our existing authority. I do think that there
are areas where the courts have scaled back our authority. There
are cases where the platforms are able to claim particular privi-
leges under the law that can create defenses that we have to then
argue against. So I think there is room for more work, but there
are certainly challenges, as well.
Ms. SCHAKOWSKY. Well, if you could talk a little bit about that,
and I want to ask Commissioner Chopra the same thing. What are
the kinds of things that you envision?
And the other Commissioners would be welcome after those two.
Go ahead.
Ms. KHAN. So I think some of the types of provisions that you
have proposed, including, you know, civil penalty authority, specifi-
cally for some of these types of—being able to go after some of
these types of practices, enabling other enforcers to also be enforc-
ing some of these provisions, like the State AGs, I think that could
also help with deterrence.
But overall, I think figuring out how we create some of that par-
ity between online and offline is going to be very important.
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Ms. SCHAKOWSKY. Now, also, Commissioner Chopra, if you could
also talk about resources, whether or not, even if you want to, what
capabilities do the—does the Commission have, not having enough
resources?
Mr. CHOPRA. Yes, I think this is a huge issue right now. Right
now we are facing a massive merger surge. It is stretching capacity
to the limit, and the rubber band is snapping.
And at the same time, in order to prosecute certain cases, we
have to go up against well-financed defendants who can claim sec-
tion 230 immunity with impunity. They use it for almost every sin-
gle thing when it comes to platform-related conduct. This immunity
is abused, and Congress absolutely needs to fix it because it is an
impediment to protecting consumers and small businesses online.
Ms. SCHAKOWSKY. So, you know, we have had bipartisan discus-
sions about 230, and one of the bills that has been introduced also
would begin to address the 230. I am just wondering if any of the
other Commissioners—are you still here, by the way—would want
to comment on—what can the and should the Commission be doing
to protect consumers and—more efficiently?
Ms. SLAUGHTER. I am happy to jump in, Madam Chair, and
thank you for the question. I want to echo the comments that my
colleagues have offered, in thanking you for your leadership in call-
ing attention to some of the problems that 230, in particular, has
posed for enforcement. I am especially worried about the areas
where 230 provides protection for platforms for illegal conduct, and
the way that they [audio malfunction] or facilitate illegal conduct
on their platforms.
I also think the resource question can’t be overstated. Not only
do we have to go into litigation, we have to go into litigation with
companies that are not willing to make meaningful changes that
will actually get to the root of the problems in the settlement. So
we are forced to sue, and that is expensive and it is time con-
suming. So figuring out how to fix those asymmetries, as the Chair
said, would be very helpful.
Ms. SCHAKOWSKY. Thank you so much. My time is expired. And
now I call on the ranking member for 5 minutes of questions.
Mr. BILIRAKIS. Thank you, Madam Chair, I appreciate it very
much.
During Joseph Simons’ confirmation hearing to be FTC Chair,
Senators had the opportunity to ask him whether he would commit
to running the FTC in a bipartisan manner. He, of course, agreed.
Considering one of your colleagues is expected to be confirmed to
another position, the FTC may soon be in a two-two split. And so
it would be even more imperative that the FTC proceeds on a con-
sensus bipartisan approach.
So Chair Khan, since the Senate did not have the opportunity to
ask you will you run the FTC—again, will you commit to doing it
in a bipartisan fashion, where you will consult and coordinate with
all Commissioners and ensure they have the resources of the Com-
mission available to them on all pending business? Please answer
yes or no.
Ms. KHAN. Certainly, Congressman, I think this is a really fas-
cinating moment for a new emerging bipartisan consensus, espe-
cially around some of the concerns relating to concentration of eco-
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nomic power in the digital markets. And I am always keen to find
areas of shared agreement with my colleagues.
Mr. BILIRAKIS. Thank you. Our committee has worked exten-
sively in a bipartisan manner to protect consumers from fraud and
scams. Mr. Carter’s Combating Pandemic Scams Act was enacted
at the beginning of the year, thanks to all of our leadership here.
Representative Blunt Rochester’s Fraud and Scam Reduction Act
as well as Representative Kelly’s Protecting Seniors from Emer-
gency Scams Act both cleared our Chamber with bipartisan support
this year. My bill, H.R. 2672, the FTC Reports Act, would require
the FTC to report on fraud against our seniors.
Commissioner Phillips, how important is the work the FTC staff
does to protect Americans from scams?
Mr. PHILLIPS. Congressman, thank you for your question. The
work we do to protect American consumers against frauds and
scams is our bread and butter as an agency. There is no work that
makes me feel better as a Commissioner than we watch our ability
to find bad guys who are taking money from American consumers,
dipping into their life savings, and get that money back to them.
So the work that you have done on the committee to provide
funding and to provide tools for us to go after scam artists is crit-
ical, and I think that needs to continue at the agency.
Mr. BILIRAKIS. Thank you.
And Chair Khan, again, as you pursue other initiatives, will any
staff and resources be shifted away from the fraud program, which
is so essential in preventing bad actors from harming our constitu-
ents? That is the question, please.
Ms. KHAN. Sorry, could you repeat the question? Using—when
should resources——
Mr. BILIRAKIS. Yes, of course. As you pursue other initiatives,
will any staff and resources be shifted away from your fraud pro-
gram, which is so essential in preventing bad actors from harming
our constituents?
Ms. KHAN. Well, of course, we are always limited by the appro-
priations bills when it comes to thinking through how we are dele-
gating resources across the agency. In certain instances I think
there are exigent needs that can arise in certain aspects——
Mr. BILIRAKIS. But you don’t anticipate moving money from the
fraud program, is that correct?
Ms. KHAN. Not especially. I mean, I think overall we are trying
to look through the prism of managerial efficiency and trying to un-
derstand how we can best use our resources, especially given some
of the exigent circumstances. And so we will be continuing to make
those determinations.
Mr. BILIRAKIS. I suggest that you not, because this is such a very
important program.
Commissioner Wilson, can you elaborate on why the FTC Reports
Act would also prove beneficial to increasing much-needed trans-
parency and the flow of information within the Commission?
Ms. WILSON. Thank you very much for the question——
Mr. BILIRAKIS. Thank you.
Ms. WILSON [continuing]. Ranking Member Bilirakis. As I ex-
plained in my opening remarks, there have been significant con-
cerns regarding procedural irregularities and abnormalities in re-
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cent weeks. These are abnormalities that we did not experience
under Republican Chair Joe Simons or under Democrat Acting
Chair Rebecca Slaughter. We can agree to disagree. We can dis-
agree without being disagreeable. But process matters.
And so, to the extent there are ongoing procedural irregularities
at the Federal Trade Commission, I think that even more trans-
parency will enable Congress to exercise its even more important
oversight now, regarding the actions of the agency.
Ms. SCHAKOWSKY. Guess what? There is a vote, another motion
to adjourn. I don’t know what to say. I know that Commissioner
Slaughter has a hard stop, and I don’t know about the rest of you.
I think we need to vote, and then come back as quickly as we
can. If you are here, we will appreciate it. This is very frustrating.
Did you want to say something?
Ms. KHAN. We are happy to stay.
Ms. SCHAKOWSKY. All right, we are going to go vote.
[Recess.]
Ms. SCHAKOWSKY. OK. Next for questions is Congresswoman
Castor.
You are recognized for 5 minutes of questions.
Ms. CASTOR. Well, thank you, Chair Schakowsky, for calling this
hearing and for following through on working with me on a bill to
give FTC APA rulemaking authority and first-offense civil penalty
authority in our—in my 21st Century FTC Act. It is H.R. 4447.
But before I ask questions—a question on that bill, I would like
to first discuss a top priority for me, and that is children’s online
privacy. On July 9th President Biden issued an Executive order
that directed the FTC to use its statutory rulemaking authority to
address unfair data collection and surveillance practices that may
damage competition, consumer autonomy, and consumer privacy.
The FTC should follow through. They should follow through on
President Biden’s direction to use its powers to protect consumers’
privacy. But while doing so, it should make protecting children’s
privacy a priority. And it is not just me that believes this should
be a priority. I helped secure language in the financial services ap-
propriations bill we are voting on this week that urges the FTC to
prioritize investigations into potential violations of the COPPA
Rule as well as requiring the FTC to submit a report on its enforce-
ment of the COPPA Rule.
So, Chair Khan, will you commit to prioritizing enforcement of
the COPPA Rule and submitting this report in a timely fashion?
Ms. KHAN. Thank you, Congresswoman. I think ensuring robust
privacy protections for children, in particular, is paramount, and I
certainly hope the agency will be able to commit its resources to
focus on this important issue, especially during the pandemic,
when so many children have become even more reliant on EdTech
services.
Ms. CASTOR. So can you give us an update on the status of the
COPPA Rule?
Ms. KHAN. Of the COPPA Rule?
Ms. CASTOR. Yes.
Ms. KHAN. I understand a review has been initiated. I am not
precisely sure where we are, exactly, in that process. I know there
have been concerns relating to whether any revision would be
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stronger than what we already have in place, as opposed to weak-
ening it.
From my perspective, I think COPPA needs to be the floor, not
the ceiling, and we need to question whether the type of notice and
consent framework that informs them of the prior privacy rules are
still adequate, especially when parents don’t really have a choice
as to whether their children are even using some of these tech-
nologies.
But I am happy to follow up with your office on the specific—
where we are in the process.
Ms. CASTOR. Thank you very much. And Commissioner Chopra,
you have been a leader here on—when it comes to children’s online
privacy. What is your view for the agency, going forward?
Mr. CHOPRA. Yes, it is very clear that many of these firms,
whether it be TikTok or YouTube, are wanting the data of teen-
agers and children desperately, so that they can monetize them
and target them for the rest of their lives.
I think the Commission learned a hard lesson in its YouTube set-
tlement, which essentially allowed YouTube to pay a fine but to
keep the algorithms that were illegally enhanced by their spying on
children and, essentially, did nothing to fix the underlying business
model that YouTube relies on to, essentially, target children.
So we need to look, as Chair Khan said, at the underlying busi-
ness model that is promoting so much of these privacy abuses. And
I really agree with what you said, it has to be a priority. And we
also need our State attorneys general joining with us to prosecute
more of these cases.
Ms. CASTOR. And stay tuned. I think the Congress is poised to
have more legislation to consider very soon.
So switching to my 21st Century FTC Act, which gives the FTC
APA rulemaking authority and first-offense civil penalty authority,
I would like to ask two quick yes-or-no questions to each of you.
One, should the FTC have more statutory authority to pursue
civil penalties, yes or no?
Ms. KHAN. Yes, Congresswoman. I think it can help with deter-
rence, significantly.
Mr. CHOPRA. Yes.
Ms. CASTOR. And number two, should the FTC have more—a
more streamlined and less cumbersome rulemaking process?
Ms. KHAN. Yes.
Mr. CHOPRA. Yes, that would be more equivalent to almost every
other agency that polices against these abuses.
Ms. CASTOR. I think that is important for my colleagues to un-
derstand, that the FTC is different.
Who—I am going to ask one other followup question, Chair
Khan. Who wouldn’t want the FTC to have this kind of first-offense
civil penalty authority?
Ms. KHAN. Frankly, it would be the lawbreakers who would not
be disincentivized to not pursue these actions in the first place.
Ms. CASTOR. Do you agree, Commissioner Chopra?
Mr. CHOPRA. Yes. I think a big problem with the FTC, as it cur-
rently is composed, is that we cannot penalize some of this egre-
gious conduct. We just, hopefully, can get money back. But there
has to be a disincentive to do that misconduct in the first——
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Ms. CASTOR. In the first place.
Mr. PHILLIPS. Congresswoman, could I add something?
Ms. CASTOR. Thank you very much. I have run out of time, so
I yield back. Thank you.
Ms. SCHAKOWSKY. I just want to remind Members that there are
other Commissioners, I think, that are still on, virtually, with us,
I hope.
And now let me call on Representative Latta for his 5 minutes
of questioning.
Mr. LATTA. Well, thank you very much, Madam Chair, and
thanks to the Commissioners for being with us today.
You know, in recent weeks the FTC has held two open meetings.
While I am glad to see that the FTC intends to increase trans-
parency, the reality has fallen short. Any change in policy should
not be rushed. It should be well communicated in advance to the
public and ensure input is sought and considered ahead of any
Commission votes. Most importantly, having open, transparent
meetings will allow the FTC to better serve the public interest.
Similarly, in 2017, Chairman Pai increased the transparency of
the FCC by publicly releasing documents weeks in advance of the
open meetings, and Acting Chair Rosenworcel has continued this
practice.
Chairwoman Khan, will you agree to conduct future meetings
and policy deliberations in a truly transparent manner?
Ms. KHAN. Thanks for the question, Congressman. Let me just
say up front I am so thrilled that we have been able to really start
opening up our Commission meetings. I think it can really help
with democratizing the agency and enhancing public participation.
And I am so grateful both to the agency staff that have enabled us
to do this in quick order and my fellow Commissioners.
Of course, you know, we are still very early in the process, and
so are always thinking about ways that we can improve our proc-
esses going forward.
Mr. LATTA. So you—but you will make sure that they are open
process, and there is transparency.
Ms. KHAN. Certainly, I think——
Mr. LATTA. I am going to take that as a yes.
Ms. KHAN. Certainly, yes. We——
Mr. LATTA. Thank you, thank you.
Ms. KHAN [continuing]. Want to focus on clear notice for all mar-
ket participants and the public.
Mr. LATTA. Thank you.
Commissioner Phillips, the FTC recently voted along party lines
to rescind two policy statements that have been relied on under
previous administrations of both parties. Were you consulted by the
Chair prior to the notice of the open meetings on this, or what
could go into their place?
Mr. PHILLIPS. Thank you for the question, Congressman. I would
say the level of consultation was as low as I have seen at the agen-
cy, and it is important to note that, in terms of transparency, we
didn’t make transparent what our policies would be.
I think Congressman Guthrie’s act, putting out the policies 30
days in advance, giving the public a real opportunity for input, is
a very important thing that could—you know, to follow on the
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words of the Chair—really democratize the process. Let the public
know what we are going to do, allow for consultation with the pub-
lic, allow for consultation within the Commission. That is how you
have a thoughtful process.
Mr. LATTA. Thank you.
Chairman Wilson, same question.
Ms. WILSON. I completely agree with the comments of my col-
league, Commissioner Phillips, and I would note that, in terms of
transparency and democratization, we actually—the Republicans
on the Commission offered motions that would require the recision
of these important policy statements to be put out for notice and
comment so that we could receive the input of all stakeholders be-
fore these important policy statements were rescinded. And in fact,
the three Democrats voted against the—against receiving input
from the public on these important issues.
Moreover, I would note that, while it is wonderful to hear from
the public in these new open Commission meetings, we are hearing
from them after votes are taken. And so they are not actually hav-
ing an opportunity to weigh in on the proposals that we are consid-
ering.
Mr. LATTA. Well, thank you.
Madam Chair, I would like to enter into the record the July 9
dissenting statement from Commissioners Phillips and Wilson re-
garding unfair methods of competition.
Ms. SCHAKOWSKY. Without objection.
[The information appears at the conclusion of the hearing.]
Mr. LATTA. Thank you, Madam Chair.
Commissioner Wilson, it goes without saying that our Nation
needs a privacy law. The longer Congress waits to enact bipartisan
legislation, the more States decide to create their own laws. I am
concerned about this patchwork of State laws that breeds confusion
and leaves gaps in consumer protection.
It is clear to me that we need a Federal privacy standard to bet-
ter protect consumers and streamline compliance. It is not realistic
for small and mid-sized companies to follow 50 different, obviously,
laws. It might also be unconstitutional.
Would you expound on why it is important for Congress to create
a national privacy standard?
Ms. WILSON. Absolutely. I think this is an incredibly important
issue and one that all of us at the Commission have spent a great
deal of time talking about it. And I know, in fact, this is an area
of bipartisan consensus at the Commission, and Commissioners
Slaughter and Chopra and I have had extensive discussions about
the need for Federal privacy legislation.
It is very difficult for businesses to understand the rules of the
road, operating in 50 different jurisdictions, with 50 different State
laws, not to mention all of the international regimes.
And with respect to citizens, privacy rights and transmission of
data doesn’t stop at State boundaries, let alone national bound-
aries. And so I would love to see the U.S. step up to the plate, take
a seat at the table internationally, by enacting Federal privacy leg-
islation that provides not just privacy for our consumers here at
home but also protection for important civil rights that are being
eroded as we speak.
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Mr. LATTA. Well, thank you very much.
And Madam Chair, my time has expired, and I yield back.
Ms. SCHAKOWSKY. I now recognize the chairman of the full com-
mittee, Mr. Pallone.
Mr. PALLONE. I thank the chairwoman. I wanted to ask Chair-
woman Khan about enforcement.
Why is it so essential that Congress update the FTC’s enforce-
ment tools to maximize the Commission’s limited resources?
Ms. KHAN. Thank you. Thank you, Chairman Pallone. The agen-
cy is severely underresourced. There—we have less staff than we
did back in 1980. Of course, the size of the economy has dramati-
cally expanded since then, and we simply have not been able to
keep pace.
As I mentioned in my opening remarks, we are currently living
through a huge wave of mergers and acquisitions. And I think
there is a particular concern that, unless we are able to closely
scrutinized these deals, that our economy could end up becoming
even more concentrated than it currently has, and—harming con-
sumers, workers, honest businesses.
Mr. PALLONE. And then we have heard concerns from some on
the other side of the aisle that providing the FTC with new au-
thorities and tools, such as civil penalty authority, APA rulemaking
might result in overreach that would put well-intended businesses
at risk of unfair enforcement actions.
But I wanted to you—to give you a chance to respond to that con-
cern. And particularly, do you believe that a more flexible and dy-
namic FTC actually benefits honest businesses, and how so?
Ms. KHAN. Absolutely. You know, there are ways in which rules
can provide additional clarity for businesses. The Commission re-
cently voted out Made in USA rules that would enable the FTC to
penalize companies that are lying about their products being made
in the USA. That is an example of a rule that is not imposing any
new burdens but is simply creating clarity and ensuring that the
FTC can deter this type of conduct.
Mr. PALLONE. All right, thank you. And then let me ask Commis-
sioner Slaughter—I think you said everybody is still here, right?
OK.
Commissioner Slaughter, we have heard many times from the
minority—I should say from the Republicans—that we need to
move quickly to enact a Federal consumer privacy standard with
the FTC in charge of enforcement. That—in my view, some of the
bills that Republican Members are proposing today would actually
hinder the FTC’s privacy enforcement.
So my two questions: Do you believe that any of the bills under
consideration today, like the TIME Act or the SURE Act, would
hinder the Commission’s efforts on privacy and data security? And
if so, how?
And then, secondly, what changes to the FTC authority do you
believe are critical to ensure consumer privacy is effectively pro-
tected, if you will?
Ms. SLAUGHTER. Thank you, Mr. Chairman. Yes, I agree with the
principle that we need to be on top of this important area of the
economy, and I really appreciate this committee’s attention to mak-
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ing sure we are adequately resourced, both funding and authority
to do that work.
I also share the view that some of the bills before consideration,
while well-intentioned—before this committee for consideration,
while well-intentioned, may have some problematic, unintended
consequences, in terms of ensuring our enforcement can be effec-
tive.
So, for example, I was concerned about limitations on the dura-
tion of our consent decrees. I think we need to make sure that we
are tailoring case-specific resolutions that really ensure violations
do not recur and that we are doing that with the flexibility so that
we can revisit those orders as circumstances require.
I am also concerned, for example, about the SURE Act that
might embolden large companies engaged in abuses to argue that
any perceived injury from, for example, a free service cannot be un-
fair, or that it might encourage judges to take an overly narrow
view of unfairness. Our enforcement burden to demonstrate unfair-
ness is already extraordinarily high, and the cost to consumers
and—from that is felt every day.
And then the last point I will make is that I am very sympa-
thetic to the calls for transparency, for example, with reports. But
I actually very much worry that any reporting requirement that
isn’t coupled with additional resourcing means that we are taking
energy away from, and staff attention away from, protecting your
constituents, and putting it instead into paperwork.
And so, in terms of what tools we need, I absolutely agree with
my colleagues that APA rulemaking authority would be helpful,
civil penalty authority would be helpful. And I think fixing 13(b)
would be very important, and adequately resourcing the agency to
make sure that we can keep pace with the large companies across
the table from us is critically important.
Mr. PALLONE. Thank you so much.
I yield back, Madam Chair.
Ms. SCHAKOWSKY. I now recognize the ranking member of the
full committee, Mrs. Rodgers, for 5 minutes.
Mrs. RODGERS. Thank you, Madam Chair. I recognize it has been
a long day. I appreciate you all sticking with us and believe that
this is a very important hearing today, as we think through the
FTC and the many issues before the FTC.
Last month we saw that the FTC went through some dramatic
changes, including when it recently voted on a 3–2 party-line vote
for structural change in its compulsory process. And this will pro-
vide de facto control by one person to issue subpoenas in competi-
tion cases without consultation with other FTC Commissioners or
bureaus. I don’t believe that that is a new era to celebrate.
These changes seem to be a clear attempt by the new Chair in
the Biden-Harris administration to consolidate power in order to
pursue an agenda that will completely reshape our economy.
I continue to hear that the FTC needs additional funding, staff,
authorities. Some of the bills have been proposed today by the ma-
jority. But if decisions are being made behind the scenes unilater-
ally, it really makes it hard to justify such a request.
So I wanted to start with Commissioner Phillips. Should this
compulsory process be at the discretion of one person?
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And can you briefly explain why it is important to have collabo-
ration with experts and Commissioners when issuing a subpoena
under this authority?
Mr. PHILLIPS. Thank you, Congresswoman. So we do use single-
Commissioner-authorized compulsory process for a lot of the kind
of bread-and-butter scams and frauds. But for the larger investiga-
tions, the antitrust investigations, all Commissioners have—until
just weeks ago, had the opportunity to look at what was going on,
to ask staff questions, to try to make sure that the resources that
we ask for from Congress are being used in a sound way.
Mrs. RODGERS. Thank you.
Mr. PHILLIPS. These investigations are very costly.
Mrs. RODGERS. Thank you——
Mr. PHILLIPS. Yes.
Mrs. RODGERS. Thank you, Commissioner. I am trying to get
through a lot here.
Commissioner Wilson, would you briefly elaborate on it?
Ms. WILSON. I completely agree with Commissioner Phillips. The
issue here is that there is a consolidation of power that removes
authority from the other Commissioners to weigh in on important
investigations, including the theories of harm being pursued, and
the scope of those investigations.
At the same time, we have removed a lot of—we have lost a win-
dow into what staff is doing. And so, because we are no longer get-
ting compulsory process memos, we are unable to understand
the——
Mrs. RODGERS. OK.
Ms. WILSON [continuing]. Theories of harm being pursued in in-
vestigations.
Mrs. RODGERS. Great, OK, thank you.
So Chair Khan, I just would—I know you have expressed that
the change of policy was to increase efficiency, but it seems commu-
nication and collaboration are lost in this efficiency. And the great-
est effect is going to be the consolidation of power in your office.
Can you commit to sharing all information related to the FTC
compulsory process with your Republican Commissioners?
Ms. KHAN. Thank you for the question, Congresswoman. I should
note that these types of omnibus resolutions have been routinely
used on the consumer protection side for investigations into diet
pills or massive privacy violations. And so we really were creating
some symmetry between what is routinely done on the consumer
protection side with the competition side.
Mrs. RODGERS. Well, what about——
Ms. KHAN. And I think this type of empowering staff can really
make sure we are able to move forward on full gears and full
speed.
Mrs. RODGERS. What about communication with other Commis-
sioners?
Ms. KHAN. Oh, absolutely, Congresswoman. Staff is always avail-
able to Commissioners to provide analysis and assessment. And
Commissioners are routinely requesting that type of analysis and
assessment from staff, and staff is providing it.
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So from that perspective, I think we are, you know, doing the
best we can to make sure that information is available, while deal-
ing seriously with the severe——
Mrs. RODGERS. OK, thank you.
Ms. KHAN [continuing]. Resource limits we have.
Mrs. RODGERS. You are the Chair. You are the Chair. You set the
tone. And it appears that there is an effort to consolidate power
and decision making into your hands. That is not the way that it
has worked in the past, and I don’t believe that that is the way
that is going to lead to the best outcomes.
I do want to ask you on privacy, because I believe it is so impor-
tant that we move forward on a national privacy standard, and we
have seen how Big Tech can trample protections for all Americans.
So to the Chair, Chair Khan, would you be willing to support a pri-
vacy proposal from Congress that includes APA rulemaking author-
ity, sufficient enforcement, continued coordination with State AGs,
and additional staff and resources that is preemptive?
Ms. KHAN. Congresswoman, certainly, I think we need robust
privacy protections, and I think direction from Congress on this
front would be helpful.
I think, on the preemption question, there are always tradeoffs,
depending on the specific context. I know, in some cases, we want
to ensure that, insofar as States are providing additional protec-
tions, we always want to be wary of the Federal Government step-
ping in and overriding States’ efforts to protect their own constitu-
ency. So I think we want to keep some of those considerations in
mind, as well.
Mrs. RODGERS. I look forward to further conversations with you,
because I am concerned about rumors of the FTC acting outside of
Congress and issuing a rule on privacy.
And with that I will yield back.
Ms. SCHAKOWSKY. Did she say she yields back?
Oh, Congresswoman Trahan, it is your 5 minutes.
Mrs. TRAHAN. Thank you, Madam Chair, and Chair Khan, fellow
Commissioners, thank you for your patience, and for being here
today to discuss how an essential agency can better protect our
consumers.
President Biden’s most recent Executive order promoting com-
petition in the American economy encouraged the Commission to
exercise the FTC’s statutory rulemaking authority in regards to—
and I quote—‘‘unfair data collection and surveillance practices that
may damage competition, consumer autonomy, and consumer pri-
vacy.’’
Now, in October 2020, Google Ads updated its policy to restrict
the serving of high fat, sugar, salt food and/or nonalcoholic bev-
erages advertising for minors under 18 in the United Kingdom and
in the European Union but has refused to make similar changes
here in the United States. A recent policy change by Facebook is
a step in the right direction, but it is far from perfect when you
consider that a May 2021 study by the Tech Transparency Project
found that Facebook allows advertisers to target ads for electronic
cigarettes, pill parties, and extreme weight-loss products to chil-
dren as young as 13 across the U.S.
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Plainly, Facebook and Google are using troves of personal data
belonging to teens and adults to target harmful advertisements in
ways that are not transparent to users. So, Chair Khan, would you
consider these examples of the types of surveillance practices that
may damage consumer autonomy and consumer privacy?
Ms. KHAN. Absolutely, Congresswoman.
Mrs. TRAHAN. Thank you for that.
And Commissioner Slaughter, if the Commission were to begin
rulemaking today to protect consumers, including our children,
from surveillance advertising, what would be the process under the
Commission’s existing Mag-Moss authority?
And would the Commission face difficulties? If you could speak
to that, it would be great.
Ms. SLAUGHTER. Thank you, Congresswoman. It is a great ques-
tion. And I want to start by responding to suggestions from the
ranking member of the committee that the Commission might act
without Congress or outside of congressionally delegated authority.
I want to be very clear. The Commission cannot, should not, and
will not, with my support, act outside of congressionally delegated
authority.
But we absolutely should look at the authority Congress has del-
egated to us, and it has specifically delegated to us rulemaking au-
thority under section 18 of the FTC Act, which is referred to as
Mag-Moss, to promulgate rules to—unfair and deceptive acts or
practices that are prevalent in interstate commerce. And so data
abuses fall very much into that category.
To rulemaking under section 18, to answer your question briefly,
looks like APA rulemaking, but with much, much more process. So
we can’t begin with a notice of proposed rulemaking. We have to
begin with an advance notice of proposed rulemaking that asks
questions about the issues that we will consider. We have to notify
Congress before we do that. We have to then, in a notice of pro-
posed rulemaking, identify any issues of material fact that are dis-
puted and, again, notify Congress. And if there are issues of mate-
rial fact, the statute requires us to have an informal hearing to ad-
judicate them.
So it is a very process-intensive statute that requires lots of—and
provides opportunity for lots of participation. It is absolutely bur-
densome to the Commission to do it. I think it is worth it for us
to try, but we should make no mistake that it would not be a quick
or fast effort.
Mrs. TRAHAN. I appreciate that. And it is—you know, to note, it
is unique to the FTC.
If Congress were to provide the FTC with rulemaking authority
under Administrative Procedure Act, how would that change the
Commission’s ability to protect consumers from harms associated
with the surveillance advertising business model?
Ms. SLAUGHTER. Well, what it would not change is it would not
prevent participation in the rulemaking process. It would not allow
the Commission to act outside the scope of the law, as congression-
ally designated, any statute. So if it is just FTC Act law, we would
still have to be looking at rules that target practices that are unfair
or deceptive. We could not promulgate a rule that made illegal con-
duct that wasn’t otherwise illegal, but we could do it with much
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more efficiency and fewer burdens so that we can really get to ma-
terial harms that are affecting people throughout our economy.
Focused on children, that is an issue that is near and dear to my
heart, but it is not just kids, it is competition, it is small busi-
nesses, it is civil rights issues, which Commissioner Wilson men-
tioned. So I think it is a really, really important area for attention.
Mrs. TRAHAN. OK——
Ms. SLAUGHTER. And the last point that I will make is that rules
also provide clarity to businesses about what is prohibited. That al-
lows and facilitates compliance. It doesn’t prohibit it.
Mrs. TRAHAN. Thank you for that.
I yield back.
Ms. SCHAKOWSKY. Mr. Guthrie, you are recognized for 5 minutes.
Mr. GUTHRIE. Thank you, Madam Chair, and I thank Ranking
Member Bilirakis, for holding this meeting, and thanks to the
Chair and all the Commissioners for being with us today.
The Federal Trade Commission has a commitment to protect the
American public from unfair and deceptive practices and unfair
methods of competition. With that responsibility comes proper over-
sight and adequate transparency. However, recent activity by the
FTC did not permit for adequate time for vetting and input from
consumers.
Before us today are two bills that I introduced, H.R. 4564, the
FTC Transparency Act, and H.R. 2690, the CLEAR Act, both of
which would allow for more transparency and accountability at the
FTC.
Some of this was brought up by my colleague, Mr. Latta, and an-
swered by Commissioner Phillips, but Commissioner Phillips, I
want to talk specifically about my bill. My bill, the FTC Trans-
parency Act, would require the FTC to publicly publish documents
to be considered by the Commission on the Federal agencies
website at least 30 days before a vote.
In your experience, Commissioner Phillips, how would a 30-day
notice be helpful to your daily work and productivity amongst your
colleagues at monthly Commission meetings?
And in your experience, how would a 30-day notice increase ac-
countability and transparency at the FTC for American consumers?
Mr. PHILLIPS. Congressman, thank you for your question, and
thank you for your leadership on this issue.
A 30-day time period, where the public could see what we are
doing and we could hear from the public, from the consumers that
are affected by the harms from the businesses that have to work
under the potential regulation, we can hear about the impact of the
policies. It would inform what we are doing, and require us to take
into account what we are hearing from the public, both the busi-
ness community and consumers.
That will create accountability. We are forced to listen to what
people have to say, and take into account what they say. So I think
that would be an essential reform.
Mr. GUTHRIE. OK, thank you. And I would ask—like to ask
each—the Chair and each Commissioner, would you—do you sup-
port the language, my language in the bill, to bring transparency
to the FTC?
Ms. KHAN. Congressman——
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Mr. PHILLIPS. I do.
Ms. KHAN [continuing]. Certainly, we want to be thinking
through how we can increase transparency and public participa-
tion, and I am so glad we have been able to do that.
We will still—we are still early in our thinking of how to con-
tinue doing that, but always happy to take feedback and continue
improving our processes.
Mr. GUTHRIE. So you like—the bill, you are for the bill, or—the
language of the bill?
Ms. KHAN. Well, I want to make sure that it is not conflicting
with other statutory obligations. For example, some of those out-
lined in the Sunshine Act. And happy to follow up with you on——
Mr. GUTHRIE. But you don’t have a philosophical issue with the
30-day requirement, then.
Ms. KHAN. I think with the general idea of providing notice, that
is great, and we are happy to continue thinking about how to do
that.
Mr. GUTHRIE. Thanks. So then I guess I got another question. I
will just—oh, if the others would—the other Commissioners would
just state their support, or——
Mr. CHOPRA. Sure. I totally appreciate, you know, the philo-
sophical part of this, because the FTC, for too long, has been noto-
riously secretive. Most of what the Commission does is it votes in
secret by email, you know, not even consulting anybody. That has
been standard practice under Republicans and Democrats, and it
has to stop.
We need to actually be listening to people rather than just gath-
ering in private and making secret decisions. I am so glad we have
moved to an open meeting concept. I think it is an important re-
form. And I think other reforms, too, to make us more transparent
and accountable, are worthwhile. I am happy to look more at your
bill, and talk——
Mr. GUTHRIE. OK, thank you. I am going to have to move on so
I can get to the next question. Thank you for those comments.
And then, Chair Khan, in light of the FTC’s recent vote on the
revised section 18, which altered FTC’s approach to prescribing
new rules for unfair or deceptive business practices, how can you
ensure that increasing efficiency by streamlining the rulemaking
process will not result in a reduction of sharing information, trans-
parency, oversight, and input from pertinent experts?
Ms. KHAN. Congressman, the current procedures that govern
those rules go, as Commissioner Slaughter mentioned, far above
and beyond what is traditionally required under the Administrative
Procedure Act. So, even under the more streamlined procedures,
there would be ample opportunity for notice and comment and for
us to make sure we are really doing our homework before we issue
any rules.
Mr. CHOPRA. And Congressman, the proceedings are public.
Mr. GUTHRIE. So you are—you think these—the increasing effi-
ciencies is going—that you are looking for is going to ensure people
have access to the information——
Mr. CHOPRA. So the procedures that are currently in place con-
tinue to require extensive public input, and including public pro-
ceedings.
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Mr. GUTHRIE. OK, thank you. And I am running low on time, so
I will just leave it there.
So, Chair Schakowsky, I have a—I would like to submit for the
record Commissioners Phillips’s and Wilson’s dissenting statement
on the adoption of a revised section 18 rulemaking procedures.
Ms. SCHAKOWSKY. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Mr. GUTHRIE. Thank you, and I yield back. Thank you.
Ms. SCHAKOWSKY. I understand my colleague Mr. Rush is online.
And you are now recognized for 5 minutes.
Mr. RUSH. Thank you, Madam Chair, for convening this extraor-
dinary hearing. You——
Ms. SCHAKOWSKY. Bobby, if you could speak up, that would be
helpful.
Mr. RUSH. You, along with the ranking member, I want to thank
you for convening this extraordinary hearing.
Commissioner Chopra, as you know, earlier in this year the FTC,
along with 38 States and the District of Columbia, shut down a
massive fraudulent charity operation that bilked over $100 million
from the American consumer.
Under current law, the FTC must prove an organization is a
fraudulent entity before being able to engage in enforcement ac-
tions. My bill, H.R. 3918, will make it easier for the FTC to go after
these fake charities by finally giving you the authority over all
501(c)(3), tax-exempt organizations.
If my bill becomes law, how will this benefit consumers?
Mr. CHOPRA. So, Congressman, there is no question that we have
so many bad actors parading as nonprofits organized as 501(c)(3)s.
They take in money, and the principals of these nonprofits siphon
them away. But they can block FTC enforcement by saying that
they are organized as a 501(c)(3). For years and years, Commis-
sioners of both parties have supported a change to the FTC Act
that would eliminate the nonprofit exemption so that we can go
after this with more clarity, and also address other anticompetitive
practices by nonprofits.
Mr. RUSH. Do you foresee any—that may be a hindrance to those
not-for-profits who don’t have the sophistication and the finances to
negotiate your oversight authorities in the FTC? How would you
deal with that problem?
Mr. CHOPRA. Well, I think where the issue is, is when the non-
profit is engaged in egregious fraud.
Mr. RUSH. Right.
Mr. CHOPRA. It is pretty clear that they have engaged sometimes
in even criminal activities.
Mr. RUSH. Right.
Mr. CHOPRA. So, you know, with respect to those fraudsters, I
don’t think many nonprofits are going to have a tough time com-
plying with that, because most nonprofits are trying to do the right
thing.
So I am happy to have further discussions on this, but I do be-
lieve that, when we allow a nonprofit exemption, we create a loop-
hole for bad actors to be able to figure out a way around law en-
forcement. And it is something that is just not good for an honest
marketplace out there.
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Mr. RUSH. Yes, I am particularly interested in the—whether or
not this will have a chilling effect. I know it is needed. This is a
necessary action, and we need to give the FTC the power. But I am
also—understand that in the real world that we live in, that this
may have a chilling effect on faith-based not-for-profits and other
not-for-profits. So I want to work with you to make sure that we
send the right kind of signal, that this is not going to be onerous
to those not-for-profits who are doing good, honest, much-needed
work—well-being of our citizens.
Chair Khan, the FTC recently released a report and subsequent
policy statement supporting legislation that would enable con-
sumers to access—generated by their motor vehicles for repair and
maintenance purposes. Restriction on this access places a financial
burden on too many hard-working Americans. And as the FTC re-
port notes, this is particularly true for communities of color, such
as in my district. I am [audio malfunction].
Mr. CHOPRA. Congressman, we lost your audio.
[Pause.]
Ms. SCHAKOWSKY. We can’t hear you now, right this second,
Bobby.
Mr. RUSH. All right. I am—can you hear me now?
Ms. SCHAKOWSKY. Yes.
Mr. RUSH. I am pleased to report that I am currently drafting
legislation to address this very problem, by requiring that vehicle
owners have access to their repair and maintenance—allowing
them to choose how and where they want to repair their cars.
Can you discuss why legislation like this is needed, and what
limitations does the FTC currently place under section 5 authority
under the FTC Act?
Ms. KHAN. Thanks so much for the question, Congressman.
Certainly, undue restrictions on repair have a very harmful effect
on communities of color and marginalized communities, in par-
ticular. And I think the type of legislation that you are talking
about could go a long way in ensuring that manufacturers are not
able to unduly control the data in ways that limit our ability to re-
pair our own cars. And I would be happy and eager to work with
your office in thinking through what that type of legislation could
look like.
Ms. SCHAKOWSKY. The gentleman’s time has expired. And now I
call on Congressman Bucshon for his 5 minutes.
Mr. BUCSHON. Thank you, Madam Chairwoman.
Commissioners, thank you for taking the time to be here before
the committee today.
Commissioner Chopra, you have been appointed as the head of
the Consumer Financial Protection Bureau, or CFPB. Senator
Toomey and the ranking member of the Senate Finance Committee
has sent you a letter, which I don’t think you have answered to
this point, asking for details on the recent personnel changes at the
organization.
And so I am going to take the opportunity to ask you some of
those questions. And now that you are in front of the committee,
would you want to have the opportunity to answer these?
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Maybe—are you aware of whether the CFPB has taken any steps
between January 20th, 2021, and the present to push out, replace,
or encourage any career CFPB employees to leave their positions?
Mr. CHOPRA. Senator, I—or Congressman, I have absolutely no
involvement. I am not aware, did not direct, and have no participa-
tion with respect to activities related to the CFPB. I am currently
an FTC Commissioner with a busy docket.
As I understand, the CFPB has replied to those letters to explain
that I have not been involved. Those are decisions that involve
human resources issues subject to very significant Privacy Act and
other requirements. But I am currently full time at the FTC until,
if I am so fortunate, to be confirmed as Director of the CFPB.
Mr. BUCSHON. Fair enough. I won’t ask you the remaining ques-
tions, then. I will just point out—I will just say that there are reli-
able information that people have been offered substantial separa-
tion packages. People have been put under investigation to try to
force them out. And also that people have been put on administra-
tive leave if they are not in the correct political party. And, you
know, at Federal agencies these are people who are career people.
All our Federal agency people work very hard, regardless of their
political leanings. And I would hope that the things that Senator
Toomey is concerned about are not true.
So I am going to ask you this, then. While still—while you are
at the FTC, you have raised concerns about rebate walls and other
conduct acting as barriers to effective competition, stunting the cost
savings and innovation expected in an unconstrained marketplace.
In a statement you warned that rebate bundling is, undoubtedly,
a fixture of the competitive environment in immunology, that such
practices are suspicious and might act as a barrier to entry and ex-
pansion for drug makers with less bargaining leverage. Could you
comment on that?
Mr. CHOPRA. Yes. I am very concerned that drug makers often
engage in complex rebating strategies in ways that prevent new
drug makers from entering and challenging their dominance. The
net effect of this is that we could have less innovation and less
competition for lifesaving drugs.
I am worried that these rebate walls may also constitute viola-
tions of the law in certain circumstances, and I think it is impor-
tant not just for the FTC but also State attorneys general and oth-
ers to really look at this.
The Trump administration also sought certain policies to crack
down on this, and it is one we have to really take seriously if we
want there to be affordable drugs.
Mr. BUCSHON. Sure. As the—and again, sorry to focus just on
you—as the FTC continues to monitor for anticompetitive practices
that make lifesaving biosimilars more expensive for people from In-
diana, Hoosiers, it would make sense to perform a cost benefit
analysis on FTC recommendations to project impacts on markets.
Would you support performing a cost-benefit analysis of meas-
ures to address this important issue, to ensure that policy changes
will accomplish what they are designed to do?
Mr. CHOPRA. So during the past 3 years at the FTC, I have been
a strong advocate for more analytical rigor. I am very concerned
that the quality of rigor that is used to make decisions across the
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government is far too low. We should be incorporating information
from the life sciences industry, quantitative information and quali-
tative information from our pharmacists and others in the medical
supply chain.
So being—having that full range of evidence and being rig-
orous—of course, economics is one part of that, but we can’t—we
need a full range of data and evidence to make sure that anything
we do actually benefits competition and doesn’t make things worse
off for patients.
Mr. BUCSHON. Fair enough. Thank you.
So I have introduced H.R. 2676, which would require FTC’s Bu-
reau of Economics to conduct a cost-benefit analysis for any legisla-
tive, regulatory, or enforcement recommendations, including a ra-
tionale for the FTC’s determination that private markets or public
institutions could not adequately address the issue that is the sub-
ject of the recommendation.
So my feeling is, if we let the market work, most of the time it
does. But occasionally, we do need the Federal Government, like
the FTC, to make sure that that is happening.
So thank you for your answers, and I yield back.
Ms. SCHAKOWSKY. Mr. McNerney?
Mr. BUCSHON. Madam Chairman, can I—I forgot to—can I ask
unanimous consent to introduce Senator Toomey’s letter into the
record?
Ms. SCHAKOWSKY. Without objection.
[The information appears at the conclusion of the hearing.]
Mr. BUCSHON. Sorry about that. Thank you very much.
Ms. SCHAKOWSKY. Mr. McNerney, you are recognized for 5 min-
utes.
Mr. MCNERNEY. Well, I thank the Chair for recognizing me, and
I thank the Commission for testifying today. And congratulations,
Chair Khan.
One of the bills——
Ms. SCHAKOWSKY. If I could just interrupt for a second, I just
want to inform everyone that Commissioner Slaughter did have to
leave. The others are here.
Ms. SLAUGHTER. I was just—yes, I was just going to say I really
am so sorry, and I thank you for your time and would be happy
to answer any questions the committee has, promptly, in writing.
So I appreciate your indulgence.
Ms. SCHAKOWSKY. Thank you.
Excuse me, Mr. McNerney. Go ahead.
Mr. MCNERNEY. Thank you. One of the bills we are considering
today is H.R. 4530, legislation that I authored, which would estab-
lish an office of technologists at the FTC. As an engineer, I think
it is critically important that the agency has that sort of expertise.
Chair Khan, can you discuss the importance of having tech-
nologists at the agency and how having more technology on staff
can help you carry out your mission?
I know you are going to follow up on what Commissioner Chopra
just said, but thank you.
Ms. KHAN. Thanks so much for raising this, Congressman. It is
imperative that the agency be fully equipped with a whole range
of skill sets. I think ensuring that we have technologists on board
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is paramount, especially as we confront all types of new business
practices and digital markets.
I am so thrilled that I was recently able to announce a chief tech-
nologist at the agency, and she is helping oversee our expansion on
this front. So I definitely plan to bring on more technologists.
Mr. MCNERNEY. Very good.
Commissioner Chopra, following up on that question, how would
this legislation be helpful for the agency in carrying out its work,
as it relates to artificial intelligence and how that is impacting con-
sumers?
Mr. CHOPRA. Yes, so artificial intelligence is really changing the
way so many different types of businesses operate, in terms of
making decisions when it comes to offering products or services.
And one of the things we have to worry about is who is account-
able when those AI machines break the law. How do we audit
them? How do we know what is actually behind that?
And without technologists and people with real skills related to
data, data aggregation and analysis, we won’t be able to do it. And
I think this is critical that we muscle up when it comes to tech tal-
ent.
Mr. MCNERNEY. Very good. What about privacy and data secu-
rity?
Mr. CHOPRA. Yes, I mean, the recent breaches that we have been
seeing, as well as ransomware attacks, are really a reminder that
the FTC is behind the eight ball when it comes to catching up and
making sure that we are securing the infrastructure of our country.
This is not just about protecting consumers, it is about protecting
our national security, as well. And we need engineers and experts
who can help us inform the right types of interventions and poli-
cies.
Mr. MCNERNEY. Thank you. And lastly, what about protecting
consumers against the new kinds of scams that are happening on-
line?
Mr. CHOPRA. Yes, you know, Chair Khan mentioned that a lot of
the scams and frauds are being amplified by Big Tech platforms,
algorithmically targeting individuals who are likely to be suscep-
tible. If we are not able to dig in and understand how that tar-
geting works, how those algorithms work, we will not be able to
hold them accountable when they are amplifying fraud. We must—
we can’t just go after fraudsters one by one, we need to look at the
gatekeepers and those who profit from amplifying them, as well.
Mr. MCNERNEY. Thank you. I also authored H.R. 4475, Pro-
tecting Consumers in Commerce Act. This bill would give the FTC
authority over certain common carriers.
Commissioner Chopra, if enacted, would this legislation—what
would this mean for consumers, especially in a district like mine,
which is an economically hard-hit district?
Mr. CHOPRA. Yes, you know, when it comes to telecommuni-
cations common carriers, they are completely exempt, in many
ways, from the FTC’s jurisdiction. That makes it harder to go after
robocallers. That makes it harder to go after some of the ways in
which companies target the elderly.
We have tried to do our best when it comes to going after voice-
over IP providers and others, but the big carriers have a big role
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in all of these issues, and there is an uneven playing field when
they are completely exempt.
Mr. MCNERNEY. Thank you.
Chair Khan, do you have anything to add to that?
Ms. KHAN. I would echo that and note that I think that type of
exemption would really ensure that we can robustly enforce in a
more symmetrical way across industries.
Mr. MCNERNEY. Thank you. Chair Khan, I also am cochair of the
House Artificial Intelligence Caucus. And a key priority for me is
to develop policies that help promote opportunities in artificial in-
telligence while tamping down the—whatever problems might arise
as a result of artificial intelligence.
What potential risks are you concerned about with respect to ar-
tificial intelligence, and what steps do you think the FTC should
be taking?
Ms. KHAN. Well, I think there are a whole range of opportunities
but also potential risks as this technology becomes more widely
adopted. I know there have been a whole set of civil rights groups
that have raised concerns about how this technology could exacer-
bate discrimination.
For the FTC, I think, foremost, the FTC needs to be making sure
that we are fully understanding this technology. Congress really
designed the agency to be a watchdog across the economy and
closely study new business practices, new technologies to make
sure we can keep pace. And I very much hope that we will be doing
that in this area.
Mr. MCNERNEY. And that goes back to my H.R. 4530, to create
an office of technologists. Thank you.
I yield back.
Ms. SCHAKOWSKY. Now I am happy to call on and recognize the
always-here congressman, Congresswoman Lesko.
Mrs. LESKO. Thank you, Madam Chairman, and thank you to all
of the witnesses, whether here in person or virtually.
I am going to read a couple statements from the dissenting state-
ment of Commissioner Christine Wilson on the open Commission
meeting on July 1st and then just ask a couple of questions related
to it. So it is just excerpts from that. She said, ‘‘I only learned last
Thursday of the Chair’s intention to hold this meeting. At the same
time, I was informed of her intention to hold votes to rescind the
section 5 policy statement and to pass several omnibus resolutions
that would remove from Commission oversight large swaths of
Commission business.’’
Chairman Khan, the decision to hold open meetings can only be
applauded if people know about it in advance, so it gives them
enough time to prepare and actually show up to the meetings. So
it was concerning to me that it seemed like there was not a lot of
advance notice on the July 1st meeting, and that people couldn’t
prepare that—why did you do that?
And what do you plan on doing in the future so that the public
has sufficient time to prepare for the FTC open meetings and can
have public input, because don’t we want public input?
Ms. KHAN. Absolutely, Congresswoman, and I am so thrilled that
we have been able to switch to this open Commission format to pro-
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vide more accountability and insight into the Commission’s work.
This is new for the agency.
As my colleague mentioned, we have a history of doing all of this
behind closed doors. And so, as we adapt to this new format, we
will be thinking through how we can continuously improve our
processes and always appreciate feedback on that front, as well.
Mrs. LESKO. Well, and thank you for that answer, although it
seems in contrast to what one of your other Commissioners is say-
ing. Again, I am going to read excerpts from Commissioner Wilson
and then, if I have time, give her an opportunity to speak. It says,
‘‘Unfortunately, the format the Chair has chosen for this meeting
omits our knowledgeable staff and precludes a dialogue among the
Commissioners.’’
And then, in another portion, in another page, it says, ‘‘Following
our rulemaking spree in the 1970s, the FTC was stripped of fund-
ing, stripped of legal authorities, and required to institute new and
substantial rulemaking steps to foster public trust on our trade
rules. Recognizing that this agency was on the brink of being shut-
tered, our rules of practice adopted a number of rulemaking proce-
dures that provided for additional public comment periods, publica-
tion of a staff report, and multiple opportunities for the public to
weigh in on disputed issues of material fact.’’
And she goes on to say that, ‘‘The FTC has built transparency
into our rules of practice by requiring that rulemaking staff publish
a staff report containing that—their analysis of the rulemaking
record, and recommendations as to the form of the final rule. But
the new rules eliminate the staff report requirement.’’
So my second question to you, Chairwoman Khan, is actually a
question she put in here, and it says, ‘‘In what ways will the
public’s understanding of any final rules suffer because the Com-
mission will no longer publish a report from an expert FTC staff
highlighting key issues and formulating recommendations based on
the record?’’
Why would you change this longstanding—staff being able to do
this staff report?
Ms. KHAN. Well, Congresswoman, staff analyses and input is em-
bedded throughout our various processes. There have been in-
stances, frankly, when the Commission has handicapped itself by
imposing on itself procedures and processes that Congress did not
require.
And so, frankly, some of our initial efforts have been to ensure
that the FTC is abiding by instructions received from Congress and
make sure we are in close alignment with the instructions that we
are receiving——
Mrs. LESKO. And with the last 31 seconds left, Commissioner
Wilson, would you like to respond?
Ms. WILSON. Thank you very much, Congresswoman, yes. I think
it is important to recognize that the FTC is set apart from other
Federal agencies with respect to the Magnuson-Moss Act and these
special rulemaking requirements, but it is set apart precisely be-
cause of the breadth of our jurisdiction and the discretion that we
have.
We have authority to regulate across the entire economy. We are
a generalist agency. We are not like the EPA or the Department
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of Transportation that has relatively narrow authority for a single
sector. And with that broad power and that broad discretion, we
need to have sufficient guardrails to ensure that we are receiving
input, that we understand what the evidence is with respect to im-
pacts and possible unintended consequences of our actions.
And so the safeguards in rulemaking that were abolished by the
majority at the Commission, unfortunately, are going to diminish
the quality of that decision making and, I am afraid, stifle innova-
tion, harm competition, and hurt consumers.
Mrs. LESKO. Thank you, and I yield back.
Ms. SCHAKOWSKY. I recognize now Congresswoman Dingell for 5
minutes.
Mrs. DINGELL. Thank you, Madam Chair, for holding this hear-
ing, and to all of you who are testifying today. And I am sorry you
are all still having to be here in the craziness of our day on Capitol
Hill.
First off, there has been some discussion regarding process con-
cerns at the FTC. Commissioner Chopra, when Democrats were in
the minority, did you have access to all the information you wanted
access to?
Mr. CHOPRA. No. I was routinely denied the ability to participate
in major decisions around second requests on mergers, the scope of
subpoenas for major privacy investigations. This—these functions
are—were routinely denied to me.
Mrs. DINGELL. Thank you. Chairwoman Khan, in my view, a
number of bills we are discussing today could have detrimental ef-
fects on the FTC’s ability to carry out its essential consumer pro-
tection mission, which is what the job of the FTC is supposed to
be, to protect consumers.
H.R. 2702, the SURE Act, codifies select portions of the FTC’s
statement on unfairness. The bill focuses on portions of the state-
ment that discuss substantial injury but ignores other portions of
the statement, including a discussion of circumstances in which
public policy concerns will independently support action by the
FTC.
Chairman Khan, can you tell us about some cases in which the
Commission relied on the public policy standard?
Ms. KHAN. Congresswoman, thanks for the question. I think, as
a general matter, ensuring that we are able to take into account
some of those public policy considerations is always important, es-
pecially when we are encountering new contexts and new fact pat-
terns.
I think, with that bill in particular, there is some concern that
importing that substantial harm standard could make it more dif-
ficult for us to go after companies that are enabling data breaches,
that are engaging in privacy violations. In those types of cases it
can be many years, sometimes, before which that harm is
concretized. And so I think we want to be mindful about some of
those potential tradeoffs, as well.
Mrs. DINGELL. So I am going to ask you for a short answer, be-
cause I want to get to another bill. But if this bill becomes law,
could the Commission be able to bring those types of cases in the
future?
Ms. KHAN. I think it would make it significantly more difficult.
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Mrs. DINGELL. Thank you. Another bill I want to address is H.R.
2677, the TIME Act, which would limit consent orders to 8 years
and require review and termination of consent decrees after 5 years
in some circumstances. Instead of the company proving that a con-
sent decree is no longer necessary, the burden would be on the FTC
to prove that it is still necessary.
Chairman Khan, how long are consent orders usually in place
for, and why is that the case?
Ms. KHAN. There is a range, depending on the consent decree. In
some cases it has been, you know, somewhere between a decade to
two decades. I will say, overall, you know, there have been cases
where firms have violated consent decrees well over a decade after
we entered into them. And so I think, from that perspective, there
would be serious concerns about reducing the default length of
some of these decrees.
Mrs. DINGELL. I have heard concerns that the 5-year require-
ment in this bill would effectively limit consent decrees to 5 years.
Is it possible that this bill would force inappropriately short con-
sent orders?
Ms. KHAN. I think that is certainly a significant concern.
Mrs. DINGELL. In most cases the FTC can only collect civil pen-
alties and entities that are under order. Can you talk about how
this bill could insulate repeat offenders from having to pay fines for
wrongdoing?
Ms. KHAN. Certainly, the agency has, in several cases, encoun-
tered recidivism and has had a difficult time ensuring that actors
that are violating the law are deterred from doing so again. And
so I think, with any type of reform, we want to be mindful about
that dynamic.
Mrs. DINGELL. OK, I am going to go to another bill. H.R. 261, the
SHIELD Act, prohibits the FTC from taking enforcement action
based on noncompliance with agency-issued guidance. Chairwoman
Khan, does the FTC do that now?
Are enforcement actions brought based on a company’s failure to
follow guidance?
Ms. KHAN. No, Congresswoman, guidance does not carry the
force of law. And so we are not permitted to do that.
Mrs. DINGELL. But, in contrast, under the SHIELD Act, compa-
nies can use adherence to agency guidance to prove that they did
not commit an unfair or deceptive act or practice.
Chairman Khan, what if the guidance was outdated?
How could this bill make it harder for the Commission to bring
cases against bad actors?
And would this add another burden on the FTC by requiring it
to prove why the guidance isn’t relevant?
Ms. KHAN. Certainly, I think there would be some concerns
around that, especially if we are in a world where guidance cannot
be used as a basis for finding legal violations.
But then, if it is instead being used as a way to shield companies
from legal violations, I do think that there would be an asymmetry
there that would be a little bit difficult to make sense of. So I think
we would want to be consistent across the board there.
Mrs. DINGELL. Thank you, Chairman Khan. I am out of time, so
I yield back.
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Ms. SCHAKOWSKY. I now recognize Mr. Pence for 5 minutes.
Mr. PENCE. Well, thank you, Chairman Schakowsky and Rank-
ing Member Bilirakis, for holding this hearing. Thank you to the
Commissioners for being here today.
My question is going to focus on the ownership of telematic, or
equipment-produced information—that is my word, not a technical
word. I will use one example to define my concern. While this is
a specific example, I believe that it represents an enormous and
growing IP ownership issue. And let me begin.
As the crossroads of America, Indiana plays an important role in
the transportation industry. Our interstate highways connect re-
gional hubs that are critical to the delivery of goods across the Mid-
west and the rest of the country. Leading the—transportation com-
panies such as Honda, Toyota, and Cummins Engine Company
have footprints in my district to take advantage of local manufac-
turing expertise.
Considering the president—the presence of the auto industry, I
have a particular interest in the Commission’s recent actions on
the alleged repair restrictions—and I say alleged—that may be im-
posed by original equipment manufacturers, or OEMs. I have heard
from several Hoosiers, both repair shops and OEMs, regarding ac-
cess to repairs for telematic data and software on next-generation
vehicles, and I think this may apply to any type of relationship be-
tween the owner of a piece of equipment and the manufacturer.
I understand the concerns of manufacturers, the need to protect
the privacy of drivers, and mitigate cybersecurity vulnerabilities of
the vehicle. I also understand the concerns of auto repair shops
that provide a valuable service to an industry out in the local econ-
omy. The auto repair industry itself supports over 17 jobs in my
district, and 7.5 billion in economic activity every year.
Our rural Hoosiers that live prohibitively far from dealerships
have to use third-party repair shops. That may be their only op-
tion, especially if the vehicle breaks down and they can’t get to,
say, the dealership, if you will.
Chairman Khan, I understand that your Commission recently
issued a policy statement that seeks to address potential concerns
with limiting or restricting third-party access to telematic informa-
tion. Can you walk us through the process that you use, that the
Commission uses, to determine that this policy statement was nec-
essary?
And where are you really kind of going with this, as it would
apply to much more than dealerships and auto repair shops?
Ms. KHAN. Certainly, Congressman. So this policy statement fol-
lowed a whole range of work that the Commission had been pur-
suing in this area. The Commission held a workshop on some of
these repair restrictions and, under my predecessor, Acting Chair-
woman Slaughter, issued a report identifying its findings and, as
a general matter, noting that, in many cases, some of these repair
restrictions are overbroad and are being used in ways that harm
individuals who are owning products, harming independent busi-
nesses that might otherwise have opportunity in these repair mar-
kets, and that the FTC really needs to scrutinize some of these
practices more closely.
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I was pleased that we were able to adopt a policy statement
unanimously at our last open Commission meeting with an eye to
addressing some of these restrictions using a whole range of tools,
including our Mag-Moss authority, looking at them under the un-
fair and deceptive acts or practices provision, as well as scruti-
nizing these for potential antitrust violations.
So that is the path forward that we have laid out, with a commit-
ment to really devoting more enforcement in this area.
Mr. CHOPRA. If I can just add, Congressman, the——
Mr. PENCE. Sure.
Mr. CHOPRA [continuing]. The existing law that has been on the
books for about 40 years restricts the ability for manufacturers and
sellers to condition a warranty based on using certain types of re-
pair services, or there is an antitying provision.
Mr. PENCE. Right.
Mr. CHOPRA. So I think there is a perception that maybe we have
not allocated enough enforcement resources to address those. It is
becoming very difficult for many people to repair phones, tractors,
so many other things which may be covered by that warranty. That
is existing law that Congress passed. It is one of many laws that
the FTC just hasn’t really enforced that Congress has told us to.
And I think it is appropriate that, if Congress has told us to en-
force a law, that we do it.
Mr. PENCE. So—and I will kind of get a lot more into this as time
goes by. But, you know, when I—let’s say when I buy a car—and
my time is running short—I sign away that information back to the
manufacturer. And there’s many things that we click on, and we
give somebody else our information. And then, when we need it—
repair or whatever—we don’t have that information.
So, if you would kind of keep looking at that and find an equi-
table way to protect the customer in that area, thank you.
Madam Chair, I yield back.
Ms. SCHAKOWSKY. Congresswoman Kelly, you are recognized for
5 minutes.
Ms. KELLY. Thank you to Chair Khan and all of the Commis-
sioners for testifying today before the committee. I know that this
past year has been particularly trying for the Federal Trade Com-
mission.
I also want to thank Chair Schakowsky and Ranking Member
Bilirakis for holding this legislative hearing and for including my
bill, H.R. 4460, the Consumer Equity Protection Act.
This bill would establish a task force within the Federal Trade
Commission to advise on issues in the protection of consumers and
to prevent unfair and deceptive practices targeted—targeting con-
sumers on the basis of race, color, religion, and other protected
characteristics.
This legislation is urgently needed, since minority communities
are disproportionately found to be victims of fraud. For example,
African Americans are three times more likely to experience debt-
related fraud than non-Hispanic White. Often this is the result of
information not reaching vulnerable communities, or victims not
knowing how to prevent being victims of fraud or abuse.
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Chair Khan, how would forming a task force within the FTC as-
sist you with protecting minorities in America from fraud and
abuse?
Ms. KHAN. Congresswoman, let me say up front I am just so glad
and grateful to you for drawing attention to this issue. The FTC
has confronted numerous instances in which companies have been
violating civil right protections like ECOA. And I worry that the
methods of discrimination are becoming even more sophisticated
and subtle, as some of these technological tools are enabling dis-
crimination and targeting. So I think this type of focus, and bring-
ing this lens to our work, is going to be imperative.
Ms. KELLY. Thank you. Commissioner Chopra, do you have any-
thing else to add?
Mr. CHOPRA. No. I would just add, Congresswoman Kelly, that,
you know, we had a previous question from Mr. McNerney about
artificial intelligence and algorithms. You know, the more and
more that large firms, especially the tech platforms, can systemati-
cally engage in, essentially, biased practices—Secretary Carson,
when he was HUD Secretary, issued a complaint against Facebook
regarding its practices on discriminating in housing. And I think
we have to really wake up to the fact that a lot of these subtle
forms of discrimination are done algorithmically, and they must be
held accountable, particularly when it comes to the largest and
most powerful tech firms.
Ms. KELLY. Yes, my former colleague, Will Hurd, and I did a
year’s study on artificial intelligence, and that was one of the
things that we looked at.
In 2016 the FTC released the ‘‘Combating Fraud in African
American and Latino Communities: The FTC’s Comprehensive
Strategic Plan.’’ In the report it highlighted that the FTC would
work to build networks with community organizations and visit
areas with low rates of consumer fraud reporting.
Chair Khan, how do you plan to improve communicating con-
sumer protection issues to hard-to-reach communities?
Ms. KHAN. Congresswoman, this is such an essential issue, and
I think we need to think hard about how we can improve on this
front.
One priority for me is really focusing on building out our regional
presence. We already have a whole set of regional offices, and I
think they can provide a really great way to directly connect with
communities that might otherwise not be directly hearing the work
and listening to the work that we are doing. And so I think it is
incumbent on us to make sure we are directly reaching out to those
communities and making sure that we are helping all Americans.
Ms. KELLY. Thank you. I think that all of us here would agree
that the FTC is underresourced, and the role of the FTC is only
likely to increase in coming years. So Chair Khan, do you think
more resources are needed for the technology enforcement division,
given the public’s attention on competition, generally?
How would you utilize additional resources for addressing pri-
vacy and data security?
Ms. KHAN. Certainly, I think more resources would be important
for our ability to be able to do this work in a more comprehensive
and effective way.
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In terms of where the specific needs are, I think hiring more
technologists, hiring more data analysts, hiring more financial ana-
lysts, really making sure that we are equipped with the skill sets
and tools that are allowing us to, at the very least, understand
these business practices is going to be imperative.
And so I think that will be an important step forward as we fig-
ure out how we can make our enforcement in these markets more
effective.
Ms. KELLY. Thank you much.
And Madam Chair, I will yield back 10 seconds.
Ms. SCHAKOWSKY. Mr. Armstrong, I recognize you for 5 minutes.
Mr. ARMSTRONG. Thank you, Madam Chair.
Commissioner Phillips, you and I have previously discussed your
hesitation in using data privacy indicators during an antitrust
analysis. Yet, as we know, the consumer welfare standard—and
that might be a little up in the air right now, which, if I get time
at the end, I would like to ask a question—is not solely about price.
In fact, we—I mean, oftentimes when you see some of the large
tech companies’ attorneys testify, they dance around this question
pretty well. We were lucky enough to have the CEOs in this com-
mittee testifying, and they were a little more brutally honest,
which I appreciated. But it is not solely about price. It can be ap-
plied to nonprice determinants like quality, variety, and innova-
tion, although it is more difficult to assign any kind of quantitative
value to those indicators.
That is a challenging aspect of the current antitrust scrutiny on
large technology firms, many of which provide services free to their
users. And this is assuming we apply the consumer welfare stand-
ard to the user of the tech service. It is even more complex when
we understand that the user is almost always not the customer.
The user is the product, or alternatively, their data is the product.
So ultimately, Mr. Phillips, who—I mean, who is the consumer
in this analysis, or is it both, and you have price and nonprice price
competition coexist?
[Pause.]
Mr. ARMSTRONG. Did we lose him?
VOICE. Noah, are you on mute?
Mr. PHILLIPS. Forgive me, Congressman. Sorry about that. I was
saying——
Mr. ARMSTRONG. No problem.
Mr. PHILLIPS. I appreciate it.
Mr. ARMSTRONG. I am sure it was really, really smart.
Mr. PHILLIPS. I don’t know about that. I think you hit on two
really important areas of complexity.
So one area has to do with what consumer we are looking out
for. And where you have two-sided markets—let’s say I provide you
a free, online product, and I make my money on the other side,
selling ads to companies that want to sell ads. We, under certain
circumstances, are compelled to take into account both—just in the
initial part of the case that is under prevailing law today. But at
the end of the day, we absolutely do need to think about the costs
and the benefits of the conduct in question.
With respect to privacy and consumer welfare, privacy can be an
aspect of competition, and the consumer welfare standard abso-
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lutely can reach it. But privacy is a little more complicated for two
reasons, in particular.
The first is that people have different tastes for privacy. If you
walk by a Starbucks and get an ad—because you are physically
close to Starbucks—for a latte, you might respond and say, ‘‘Wow,
that is creepy. They knew I was here.’’ Or you might say, ‘‘Hey,
great, I got this ad.’’ And because different people assimilate that
experience differently, we have to look with more of a fine-tooth
comb to understand how the consumer is being affected.
The second thing has to do with the fact that there are things
that consumers absolutely do prefer. They do prefer a lower price,
for example. They do prefer more choice. I mean, I just think we
have to look with a great deal of care.
Mr. ARMSTRONG. I think there is a couple other issues with pri-
vacy, maybe a little more fundamental, which in my experience is,
every time one of these companies increases your privacy, which I
think we all appreciate, it often has the benefit of increasing their
market share, as well. And those—and, listen, we have had these
conversations a lot. That is the difference between Energy and
Commerce sometimes, and antitrust. Sometimes what we are try-
ing to do on one level is not always going to be consistent with the
other level.
So—and I think that is particularly true with the consumer wel-
fare standard. I have concerns about the 2015 removal—policy
statement that articulated antitrust principles that guided the
Commission’s authority, which included the 2015—which included
the consumer welfare standard, which has been established as ju-
risprudence for decades, and the rule of reason, which has been es-
tablished for over a century.
And I will admit, and I think I—I am guessing you will all agree
with me, that some of the tech platform issues that we face in
these areas are very, very unique. And part of the reason is who
is the consumer, who is the customer.
But are—I am concerned by the fact that the Commission did not
replace the 2015 statement with a new policy that would at least
provide notice on the Commission’s plan and antitrust enforcement
action. And without such a replacement policy, what restrictions, if
any, are placed on the consumers antitrust enforcement practice
right now?
But my question for Mr. Phillips, and then, if we have time for
one more—and this will probably be my last one, because I am
rambling—do we have concerns about antitrust legislation that
looks different for certain economic sectors?
Mr. PHILLIPS. Thank you, Congressman.
Mr. ARMSTRONG. Do you think there is challenges to platforms
that are different than other areas of antitrust?
Mr. PHILLIPS. There sometimes are. Some of the platforms have
network effects that are a kind of efficiency, if you will. But basi-
cally, the more people use it, the more popular it is for the users.
And they can have indirect network effects. The more popular it is
for me as the user, the better it is for you as an advertiser.
And there are some aspects of these markets that are a little bit
different. On the other hand, they are hardly the first markets like
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these. So telephone networks, railroads, these are just a couple of
examples in American history where we have seen these effects.
But I think your point, that sometimes when people do things in
the name of privacy it can hurt competition, underscores the point
that it is not as simple as saying, ‘‘This conduct increases privacy,
ergo it is good.’’ When we are doing competition law, what we need
to look at is, what is the effect on competition?
Mr. CHOPRA. Congressman, could I just add? I think the—you
raised concerns—yes, the Commission did rescind the Obama
FTC’s policy. The Obama FTC policy statement was unmoored from
what Congress specified in the law and has essentially rendered it
dead letter. I think the Obama FTC policy statement has under-
mined our ability to scrutinize some of these tech platform issues.
And you are right, we need to be able to communicate how that
will be applied. And I know, as the Chair has said in the past, we
will be doing so in the future. But we cannot just relegate that pol-
icy statement to, essentially, veto the law. It is not the Federal
Trade Commission’s ability—we are not supposed to veto or repeal
laws. That is what you guys do.
Mr. ARMSTRONG. The order in which you communicate and regu-
late gets important. Thank you both.
I am sorry for going over.
Ms. SCHAKOWSKY. Congresswoman Rice, I am recognizing you for
5 minutes.
Miss RICE. Thank you, Madam Chair. The FTC has a long his-
tory of protecting our military veterans and service members from
fraud. That is partly because protecting vulnerable consumers is
the FTC’s main mission, but also because military veterans and
service members, despite making the biggest sacrifice for our coun-
try, also have a long history of being targets of fraud and scams.
To assist the FTC with its mission and to protect our military
veterans and service members, I introduced the Veterans and Serv-
ice Member Consumer Protection Act of 2021 with my friend, Con-
gressman Fred Upton. The bill would establish a coordinator with-
in the FTC to educate military veterans and service members on
schemes particularly targeted at them, and teach them how to
react to and report these schemes to the FTC.
It would also require the coordinator to maintain a public-facing
website with resources for military veterans and service members,
and establish a procedure for receiving complaints made by mili-
tary veterans and service members at the FTC.
So I would ask all three of the witnesses who are left, if you
could talk about the importance of having a coordinator for military
veterans and service members, and why would centralizing this po-
sition be helpful?
Mr. CHOPRA. So, Congresswoman, you are totally right. Service
members and veterans actually report, for example, identity theft
at a much higher rate than the general public. There is a whole
host of schemes that target the military community.
You know, I have been disappointed. I think the Commission—
Congress gave us jurisdiction to enforce the Military Lending Act
of 2013. We have not brought a single action. I think that needs
to change, and we need to sharpen our focus on how we work with,
for example, the Undersecretary for Personnel and Readiness at
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the Pentagon, who helps, you know, broadcast where people should
be on alert.
So just as we have an elder justice coordinator, I think you are
right, that we need to really make sure we are focusing and cen-
tralizing some of our work when it comes to policing against abuses
targeting service members and veterans.
Miss RICE. Chair Khan?
Ms. KHAN. I would echo that and note that, you know, as you
stated up front, we have seen in our work that military members
and service members are particularly targeted, including by for-
profit schools and payday lenders. And so making sure that we are
squarely focused on these harms to some of the most vulnerable
members in society is imperative.
Miss RICE. And is Mr. Phillips, who is——
Mr. PHILLIPS. Congresswoman, yes, it is.
Miss RICE. Thanks.
Mr. PHILLIPS. And thank you for your leadership on this issue.
I think it is really important.
I think having a coordinator not only helps to focus us, but it
puts a lot of emphasis on something that you mentioned, and that
is the consumer education that we—teaching service members and
their families how to deal with some of the scams that they see.
There is a lot of important work that we do enforcing the law
and in penalizing those who violate it. But teaching people how to
fend for themselves is a very important complement to that. So I
really appreciate your leadership on this and your focus on that
critical area.
Miss RICE. Great. I was glad to see that President Biden’s recent
Executive order on economic competition urged the FTC to ban or
limit noncompete agreements. This action will go a long way to
help workers. Today it is estimated that 1 in 5 workers without a
college degree are subject to noncompete agreements, and 30 to 40
percent are not asked to sign these agreements until after they
have accepted the position.
But we have seen that competition and labor markets actually
empowers workers to demand higher wages and can increase inno-
vation, as well. So I am very supportive of my colleague from San
Diego and a member of this committee, Congressman Scott Peters’
bill, the Workforce Mobility Act, which would place strong limits on
noncompete agreements.
So I would put this to Chair Khan: To what extent would a clear
expression of congressional intent, such as the passage of the
Workforce Mobility Act, help to shape the FTC’s policy and enforce-
ment agenda with regard to noncompete reform?
Ms. KHAN. Congresswoman, I think clarifications from Congress
are always helpful, especially in cases where we would be using,
say, certain types of rulemaking authorities that the agency has
neglected over recent decades. And so those types of express au-
thority are always a helpful way to boost our work.
Miss RICE. Would you agree, Mr. Chopra?
Mr. CHOPRA. Yes. I think these noncompete agreements, it is not
just low-wage workers, it is even doctors and medical providers
who are trapped and are being essentially forced to move to en-
tirely different metropolitan area to continue their profession. This
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is bad for economic growth. It is bad for our society. And we need
to take a close look. And I am glad Congress is looking too.
Miss RICE. Thank you, and I am out of time, so I don’t think I
am going to get to Mr. Phillips, unless the Chair will let him re-
spond. Thank you.
Mr. PHILLIPS. Thank you, Congresswoman. Two points. The first
is I do think, when it comes to rulemaking, it is very important
that we have a congressional directive. I think that the focus on
labor mobility in the EO, the Executive order, from the President
on noncompetes, on occupational licensing is a great focus.
Allowing people to move around gives them bargaining leverage
in their job and helps allocate labor resources in a way that also
helps businesses.
Ms. WILSON. And this is Commissioner Wilson. I am still on, as
well. And for the sake of time, I will just echo the remarks that
Commissioner Phillips made.
Ms. SCHAKOWSKY. Now I recognize Congressman Soto for 5 min-
utes.
Mr. SOTO. Thank you so much, Madam Chair. And to our FTC
Commissioners, thank you for your patience. We have been
through a bunch of unnecessary motions to adjourn today, and we
respect your time, so I wish things were a little smoother. Thank
you for sticking with us.
We know we just passed a key bill to help out with restoring
your restitution authority, the Consumer Protection and Recovery
Act, and allowing the FTC to get fraudsters—allowing you to get
ill-gotten gains from con artists and—even though a recent Su-
preme Court case sadly took it away.
We know COVID has only increased the scams throughout this
pandemic. I mean, everything from stimulus check scams, to pay-
check protection loan scams, to vaccine scams. In Florida we even
had a miracle mineral solution scam to sell a solution primarily
made up of bleach out of Miami, Florida. They sold tens of thou-
sands of bottles and made over a million dollars.
It is critical that we give you all the tools you can use to handle
this. And the 10-year statute of limitations is an important clari-
fication, with the compromise. And we applaud you on some major
victories, including the Volkswagen and DeVry cases that would
have exceeded the 5-year statute of limitations, if that was what
we ended up getting.
So to our Commissioners—and it would be great to hear from
each of you—does the current budget give you enough resources to
be able to enforce the Consumer Protection Recovery Act when it
becomes law?
Ms. KHAN. Thanks——
Mr. SOTO. We will start with—yes, please continue.
Ms. KHAN. Thanks, Congressman. As a general matter, the agen-
cy is significantly underresourced, and additional resources to be
able to boost our enforcement across these areas is essential.
I think there are questions about how we can be more effective
in our enforcement, especially when it comes to the types of frauds
and scams that you mentioned. So this is certainly something that
we will be thinking about.
Mr. SOTO. And Commissioner Phillips?
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Mr. PHILLIPS. Thank you, Congressman. I would just start with
the fact that, when I began, our budget was about 309 million, I
think something like that, and the latest congressional budget jus-
tification has us at 389. So there has been a substantial increase
in the ask, including some funding from Congress. So I think it is
important to track how those resources are used, but I do think we
can do more with more. That is certainly a true thing. But I think
it is important to take care on how we spend what we have.
Mr. SOTO. Thank you.
Commissioner Chopra?
Mr. CHOPRA. Sir, I think I know every agency says that they
need more resources, but just looking at the data, we are stretched
completely to capacity, and the rubber band is snapping. And if we
need to effectively enforce the law, we need the resources.
There are so many laws that Congress has recently passed,
whether it relates to opioids or so many other topics, that the FTC
has not brought a single law enforcement action on. That is not
just resources, that is also Commissioner accountability. But re-
sources will certainly help.
Mr. SOTO. Commissioner Slaughter?
Ms. WILSON. So Commissioner Slaughter had to leave, but Com-
missioner Wilson is here.
Mr. SOTO. OK, Commissioner Wilson.
Ms. WILSON. And I would say that our hard-working staff have
been even harder-working during the last 18 months. They are
teleworking, but they are working incredibly hard to stay on top of
the increase in mergers as well as the increase in COVID scams.
And I agree with Commissioner Phillips, it is important to un-
derstand how we are spending additional appropriations, but I also
know that there are many different areas of the economy where
Congress has expressed interest in our being very active and ag-
gressive, and it is difficult to do that unless we have the appro-
priate resources to do that.
Mr. SOTO. Thank you, Commissioner. And as a practicing civil
law attorney for many years, I know how important restitution can
be to make victims whole. So this is a fundamental function that
we need to restore and make sure there is ample statutory author-
ity.
I want to end with a question to Chair Khan. We have the
Blockchain Innovation Act that recently passed the House, going to
the Senate, that would have you all do reports on cryptocurrency
and the importance of consumer protections. Is that something that
you all are prepared to be able to report on?
Ms. KHAN. Thanks, Congressman. I think any time we are, you
know, given another slice of the economy to be looking at and
studying, we want to make sure that we have the resources to be
able to do that faithfully and discharge our statutory obligations.
But certainly, the Commission was designed by Congress to be a
watchdog across the economy and stay up to date on different eco-
nomic trends and business practices.
So, you know, I think there is always a question about which
regulator or which enforcement body is best positioned to oversee
particular areas, so those types of considerations always need to be
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top of mind. But of course, if Congress asks us to do something, we
are obliged to do so.
Mr. SOTO. Sure. Thank you so much, and my time has expired.
Ms. SCHAKOWSKY. Congresswoman Fletcher, you are recognized
for 5 minutes, and I believe that is the last questioner.
Mrs. FLETCHER. Terrific. Well, thank you so much, Chairwoman
Schakowsky, and thanks to you and Ranking Member Bilirakis for
today’s hearing. Thank you so much to our FTC Commissioners
here and virtually, and Chair Khan, for the time that you have
spent with us today. It has been a long day. I join my colleagues
in apologizing for the interruptions, but this has been really impor-
tant and useful information for us. So I appreciate you sticking
with us, and your insights on the issues facing the agency and the
country at this time.
There has been a lot of useful discussion about how to modernize
the consumer protection capabilities, how to address funding and
resources and tools to protect consumers in what is, clearly, a com-
plex and ever-changing marketplace. Mr. Soto was just talking
about blockchain, and his legislation related to that. There is so
much coming at us so quickly right now. And I think, you know,
what is clear from this hearing is that you all need the resources,
and more resources to accomplish the many, many tasks we have
put before you.
In my district we talk all the time about wanting government to
be efficient, effective, and ethical. And certainly, we know how ef-
fective the FTC can be and has been. But we need to make sure
that we are giving you the resources and the tools that you need
to be able to do that absolutely vital and effective work. And that
was one of the reasons I was really glad to cosponsor the legislation
to restore the FTC’s 13(b) authority, and to see it pass the House.
Like Mr. Soto, I was also a lawyer in private practice, and know
how important it is to have those remedies available to you. And
so we are working very hard to continue to respond and move that
forward as quickly as possible.
I do want to take the—about 3 minutes I have left to put—follow
up on one issue, and then maybe, since I am the last person, put
it out for any other questions that—or any other things that you
didn’t get to share.
But Mr. McNerney was talking earlier about ransomware and
other cyber-related attacks. And, you know, in my home State of
Texas, we saw, just in 2019 alone, there were 22 different munici-
palities that were hit with ransomware attacks, and really crippled
core government services for days. Certainly, the entire country
was following, as—the Colonial Pipeline incident a couple of
months ago. And we have really seen the challenges that these
ransomware attacks present to people across every sector, whether
it is, you know, companies, schools, and local governments, hos-
pitals, critical infrastructure. It really needs to be a concern to all
of us.
So, Chair Khan, can you explain the FTC’s role in protecting con-
sumers and small businesses—and really, all businesses—against
ransomware attacks?
And then, rather than taking a break to answer the question, I
will also ask you to tell us whether the FTC has sufficient re-
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sources to follow up on all the ransomware complaints it receives.
How more resources can be helpful?
And any thoughts you may have on H.R. 4551 requiring report-
ing to Congress, with kind of the time we have left.
Ms. KHAN. Thanks so much, Congresswoman. I think it is dif-
ficult to overstate the importance of addressing, head on, some of
these really predatory practices and the kind of ransomware at-
tacks that we have seen that have really crippled our critical infra-
structure, as well as targeting businesses both big and small.
With regards to the FTC, we, of course, do use our unfair or de-
ceptive acts or practices authority to scrutinize data security prac-
tices. And I think it is incumbent on us to make sure that compa-
nies are not being reckless and are really doing their due diligence
when it comes to protecting consumers and protecting businesses
from these types of attacks.
I think there are also really interesting questions to be asked
about the ways in which consolidation and concentration of data
also render certain companies more susceptible to these types of at-
tacks. It means that these types of attacks have cascading effects,
in terms of exposing millions and millions of consumers, millions
and millions of businesses to these types of breaches.
So I think, both on the consumer protection side and also, frank-
ly, on the competition side, we need to be thinking about how some
of these incentives are working.
Mrs. FLETCHER. That is really helpful. If I can just follow up on
that with a question, and then I have a couple more questions I
will for the record at the conclusion of the hearing.
But you know, there is a bill—I think it is part of this hearing—
requiring the FTC to report to Congress on a recurring basis about
cross-border incidents that involve ransomware and other cyber at-
tacks, to make recommendations both for legislation to us, and also
best practices.
Does the FTC have the resources to do this, and does it have the
information or have the ability to get the information that we are
asking for?
Ms. KHAN. Certainly, these types of information asymmetries are
vast, and sometimes it is hugely burdensome on the agency to be
able to do these types of regular followups. So I think additional
resources on that front are always very helpful.
Mr. CHOPRA. Congresswoman, if I could just add with respect to
ransomware attacks, and—you know, you mentioned being in
Houston, an energy area. There is—energy infrastructure is—obvi-
ously, Colonial Pipeline was a reminder of this, about how these
are just unbelievable targets by state and nonstate actors.
In 2005 George W. Bush signed into law, with a bipartisan ma-
jority in Congress, the ability for the FTC to put in some data safe-
guards when it comes to energy and utilities. You know, Commis-
sioners of both parties declined to actually implement what Con-
gress asked.
So part of what we also have to do is look at all the authorities
you have previously given us, see where they might solve some of
the problems, and ask for resources to actually do them. But we
have to just stop ignoring these authorities that you are giving us.
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Mrs. FLETCHER. Terrific. Thank you so much, Commissioner
Chopra.
I see I went over my time. I appreciate the Chairwoman permit-
ting me to get those complete answers. And again, I thank you all
for your time today, and for all the work you are doing on behalf
of people across the country. Thank you so much.
And I will yield back.
Ms. SCHAKOWSKY. Well, that does conclude our first panel. I
know that you had planned to be here until 20 to 4 in the after-
noon, anyway, but I really want to thank you for your patience. It
was—this conclusion is a long time in coming, but thank you so
much for those of you who are here, our Members that are here,
as well, online or in person, but especially the Commissioners for
being here.
And we look forward—the subcommittee looks forward to work-
ing with you on many issues in a bipartisan way, as time goes on.
So thank you very, very much. I appreciate you.
Mr. PHILLIPS. Thank you, Madam Chair.
Ms. SCHAKOWSKY. I am going to——
Mr. BILIRAKIS. Thank you so much.
Ms. SCHAKOWSKY. OK.
VOICE. We need a couple of minutes.
Ms. SCHAKOWSKY. Yes, we are going to need just about 2 minutes
or so to set up for our next panel. And I will then introduce them.
Thank you.
Ms. WILSON. Thank you, Madam Chair.
[Pause.]
Ms. SCHAKOWSKY. Before I introduce the panelists for panel 2, I
just want to thank you so much. I know this has been such a long
day, and you are still here, and I appreciate it.
And you know, we may not have too many Members, but I want
you to know—and you, I think, all do know—that everything is on
the record, and we will be here forever, and so we just appreciate
that. And I am sure others will show up online, as well.
So I am happy to introduce the witnesses today. We have David
Vladeck, professor of law at Georgetown University Law Center.
We have—Graham Dufault—am I saying it correctly? Yes? Oh,
good—who is the senior director for public policy at the App Asso-
ciation. And Sally Greenberg, who is the executive director of the
National Consumers League.
And at this time, the Chair will recognize each of the witnesses
for 5 minutes.
I know that you are probably pretty familiar with this, but I will
just say it, because it is in my notes to say. Make sure that you
remember that you have got the series of lights. Green will remain
until—for 4 minutes, and then yellow will show up for the 1-minute
sign. And red means that we hope you will be able to conclude.
So, Mr. Vladeck, you are now recognized for 5 minutes.
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STATEMENT OF DAVID C. VLADECK, PROFESSOR OF LAW,
GEORGETOWN UNIVERSITY LAW CENTER; GRAHAM
DUFAULT, SENIOR DIRECTOR FOR PUBLIC POLICY, ACT,
THE APP ASSOCIATION; AND SALLY GREENBERG, EXECU-
TIVE DIRECTOR, NATIONAL CONSUMERS LEAGUE
STATEMENT OF DAVID C. VLADECK
Mr. VLADECK. Well, thank you, Chair Schakowsky, Ranking
Member Bilirakis, and members of the subcommittee. Thank you
for your invitation to come before you today to give you my views
on the 16 FTC bills pending before the subcommittee. What I
would like to do is highlight two proposals that I think are of para-
mount importance to the FTC.
First, I think it is imperative that Congress enact H.R. 4447, the
21st Century Act, and restore to the FTC the standard rulemaking
authority that it had prior to [inaudible]. This should not be a
heavy lift. Virtually every other agency has this power.
Now, restoration of FTC rulemaking would authorize the Com-
mission to set clear and specific rules on what acts and practices
are deceptive and unfair. Doing so would provide the certainty the
business community claims it wants and enable the FTC to develop
binding, enforceable norms that will both deter violations and per-
mit efficient and effective enforcement.
And with rulemaking, the FTC would no longer have to rely on
the archaic and resource-wasting enforcement regime that exists
today. We bring cookie-cutter cases, one by one, shutting down one
scam and then moving on to the next essentially identical scam.
That is what the FTC had to do during the tsunami of debt relief
scams at the beginning of 2019. We brought a lot of cases, but we
didn’t make much headway. Once the FTC promulgated a regula-
tion using its authority under the Telemarketing and Consumer
Fraud and Abuse Act, we were able to chase out all of the bad ac-
tors. Why? Because they were all in violation of the new rule, and
they were worried about redress and civil penalties. With rule-
making, the FTC could replicate this success many times over, and
make enforcement so much more efficient.
Now, the only argument against restoring rulemaking authority
is the old canard that the FTC might abuse it. Of course, that could
be said of every agency. And here there are strong safeguards in
place to guard against that.
First, the bipartisan nature of the Commission is a real bulwark
against overreaching. Why? Because if the agency—if the Commis-
sion breaks 3 to 2, a reviewing court is going to be skeptical that
this is a really good rule.
There is also some judicial review. And if there is a real—you
know, if the FTC does overreach, then there is the Congressional
Review Act. So there are lots of guardrails that already exist.
In addition, the FTC should ensure that the—Congress should
ensure that the FTC has jurisdiction over the telecommunication
common carriers and nonprofit entities. The rationale for the com-
mon carrier exemption—namely, that the FCC comprehensively
regulates all activities of monopolist carriers—no longer exists. The
line between common carriers and the other telecommunications
services has been obliterated, and consumers face real risks of
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things like bill cramming, throttling of service, false claims about
internet speed, and other unfair, deceptive acts by the carriers.
There is nothing that the Federal—communications can do to keep
consumers safe in this space.
And Congress ought to repeal the carve-out for nonprofit entities.
Too often fraudulent charities, bogus insurers, and fake healthcare
providers hide behind the veil of nonprofit status. Piercing that veil
is always difficult, and at times impossible, leaving consumers un-
protected.
So those are the things that I would urge this subcommittee to
take on, along with the point that everyone has made all day,
which is the FTC is resource scarce. The SEC has four times the
number of employees and a $2 billion budget. The CFPB has 500
more employees than the FTC does and a substantially greater
budget. It is time that the FTC got its reasonable share. Thanks
so much.
[The prepared statement of Mr. Vladeck follows:]
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Ms. SCHAKOWSKY. Thank you so much.
And now, Mr. Dufault, you are recognized for 5 minutes.
STATEMENT OF GRAHAM DUFAULT
Mr. DUFAULT. Thank you, Chairwoman Schakowsky, Ranking
Member Bilirakis, and members of the subcommittee. My name is
Graham Default, and I am senior director for public policy at the
App Association. The App Association is the leading trade group
representing small, connected device and mobile software compa-
nies in the app economy. It is a $1.7 trillion sector that is global
and that supports 5.9 million jobs in the U.S. I am here to share
the perspectives of App Association members, many of which are
in your districts, on the several measures you consider today to
modernize the FTC.
In the Chicago area Tom Gorczynski cofounded Devscale, a cus-
tom app development company focused on a transparent develop-
ment cycle. In the Tampa area Ann and Jon Adair founded
Thinkamingo, an app that helps students develop writing skills. A
narrow focus on how many billions of dollars a fine needs to be to
deter social media giants from privacy violations ignores the im-
pacts of FTC reform on our member companies. Our hope is that
the subcommittee just carefully considers any proposal’s impact on
companies like Thinkamingo and Devscale, even though the pri-
mary impetus might involve much larger companies.
The last time Congress reauthorized the FTC was in 1996, so the
subcommittee is right to consider updating the statute. Some argue
that the FTC must be more transparent in its processes and ac-
countable to Congress and constituents. Others point to the inad-
equacy of FTC authority to pursue consumer protection harms.
There is merit to both views, and we applaud the subcommittee for
its review of legislation to better equip the FTC and to improve
clarity around its authority.
The proposals you consider today fall into three related cat-
egories.
Number one, expanding the FTC’s enforcement and regulatory
capabilities. We agree with the intent behind these measures to en-
hance the FTC’s ability to punish and deter consumer protection
harms. However, we recommend that rulemaking authority and
civil penalties be tied to clearly defined privacy and data security
requirements. Congress needs to set guardrails in order to avoid
180-degree shifts from administration to administration and to en-
sure the agency carries out Congress’s intent.
Number two, clarifying the contours of FTC authority. The SURE
Act, for example, would codify more of the FTC’s own unfairness
statement and require the Bureau of Economics to be consulted in
cases brought under the FTC’s unfairness prong, although eco-
nomic considerations are never the only relevant ones that are im-
portant, especially for small companies with small compliance and
legal budgets.
The CLEAR act would also help covered entities better under-
stand what the FTC views as legal conduct under an otherwise in-
tentionally vague statute.
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Bills like these should be coupled with more authority to better—
and better enforcement tools for the FTC to pursue privacy and
data security harms, with direction from Congress.
Number three, reporting and transparency requirements. Many
of these are welcome measures to enhance the subcommittee’s over-
sight efforts and the FTC’s own enforcement planning. The Con-
sumer Equity Protection Act would help ensure the Commission de-
velops a meaningful record on harmful activities targeting pro-
tected characteristics like sexual orientation, race, disability, and
others. FTC reports would also give the subcommittee a better
sense of the Commission’s plans and would help the Commission
make informed decisions on how to prioritize enforcement acts
against schemes targeting older Americans.
The subcommittee should provide more resources for the FTC to
fund these reporting and transparency requirements.
On the competition side of the FTC, withdrawal of the unfair
methods of competition statement has sparked understandable con-
cerns. There is an opportunity for the Commission to clarify the ap-
plicability of its UMC authority to standard essential patents, or
SEPs. Anticompetitive SEP abuse harms consumers and competi-
tion alike. This is an example of where FTC guidance can help.
On the consumer protection side of the FTC, establishing strong
national privacy rules is especially important to App Association
members. We want to help Congress work toward a bipartisan
agreement. In February we sent a letter to this committee urging
action on privacy in the wake of the FTC settlement with Flo, a
fertility and period tracking app. The settlement highlighted the
lack of available tools at the FTC’s disposal to stop and prevent pri-
vacy harms.
As the creation and transfer of health data outside the HIPAA
umbrella proliferates, the FTC needs better privacy tools based on
the risks data processing activities pose to consumers. In doing so,
Congress should set forth the overarching purposes and specify the
limits of FTC rules.
We hope the discussion today helps carve a path toward a mod-
ernized FTC that can better meet the challenges of the 21st cen-
tury. Thank you for the opportunity to share our views, and I look
forward to your questions.
[The prepared statement of Mr. Dufault follows:]
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Ms. SCHAKOWSKY. Thank you, Mr. Dufault, and now I welcome
Ms. Greenberg for 5 minutes.
[Pause.]
Ms. SCHAKOWSKY. Your microphone.
Ms. GREENBERG. Oh, sorry.
STATEMENT OF SALLY GREENBERG
Ms. GREENBERG. Good afternoon, Chairwoman Schakowsky,
Ranking Member Bilirakis, and members of the subcommittee. My
name is Sally Greenberg. I am executive director of the National
Consumers League, which was founded in 1899 and is America’s
pioneering consumer and worker advocacy organization.
Today NCL works, via our fraud.org campaign, to educate con-
sumers about scams and rip-offs. For more than a century, the FTC
has enforced laws that protect competition and prohibit unfair or
deceptive practices.
The Commission is responsible for enforcing or administering
more than 70 laws, ranging from labeling of wool products to pro-
tecting online privacy and data security. It is with this unique con-
sumer protection charge in mind that I am pleased to offer NCL’s
support for many of the FTC reform bills currently before the sub-
committee. While my remarks won’t cover all of the proposed bills,
I would like to discuss why we are supporting the proposals that
would give the FTC what it needs most: more authority and more
capacity to execute on its broad mandate to protect consumers.
First, authority. Faced with an onslaught of fraud and misin-
formation threats, consumers need a nimble FTC that can address
new industry uses and hold wrongdoers accountable. If we want
the threat of enforcement to truly deter criminals in the market-
place, we need an FTC that can do more than simply try to recover
ill-gotten gains, as important as that authority is. Even this central
function of the agency was significantly hamstrung by the Supreme
Court’s recent decision in AMG Capital Management.
It is for these reasons that NCL strongly supports Congress-
woman Castor’s 21st Century FTC Act, which would give the Com-
mission Administrative Procedure Act rulemaking authority and
first-offense civil penalty authority.
We are also pleased to support Chairwoman Schakowsky’s FTC
Autonomy Act, which would allow the Commission more freedom to
seek civil penalties by eliminating burdensome regulations that can
delay enforcement activity.
I would like to turn now to the reforms needed to expand the
Commission’s capacity. Expecting the FTC to adequately police the
technology industry with its current staff resources is akin to
bringing a water gun to a thermonuclear war. The Commission is
being asked to consider extremely detailed regulation and enforce-
ment in the ad tech, privacy, application store, and data security
spaces with what can only be described as a skeleton crew.
To oversee and rein in the tech sector’s refusal to police its own
platforms, the FTC must have highly qualified expertise on staff to
do the detailed analysis necessary to produce effective enforcement
and regulatory policies.
That is why we are pleased to support Congressman McNerney’s
Federal Trade Commission Technologists Act. This much-needed
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bill would authorize the FTC to establish an office of technologists
staffed with more than two dozen experts on information tech-
nology, cybersecurity, computer science, and related fields.
I also want to address the need for more FTC action to combat
disinformation. The deluge of misinformation and disinformation
online, particularly on social media platforms, is a constant threat
to consumers. While most platforms prohibit such disinformation in
their terms of service, their willingness to enforce their terms has
often been far too lax. This allows fraudulent schemes that cost
consumers billions of dollars to proliferate. It fuels vaccine hesi-
tancy that is costing lives every day. And perhaps most troubling,
it enables some of the vilest elements of our society—Holocaust
deniers, White supremacists, extremists, and other online trolls
who threatened our very democracy on January 6th—to proliferate.
Reducing the ability of purveyors of disinformation, falsehoods,
and conspiracy theories to abuse social media tools must be a
pressing national priority. To the extent that current laws make it
hard to protect consumers for disinformation online, Congress
should consider reforming those laws. The Online Consumer Pro-
tection Act should serve as a catalyst for Congress to engage in
more robust debate.
In conclusion, my remarks have focused on specific proposals
that would help the Commission better protect consumers. Con-
sumers do not need new laws that burden the Commission with
needless red tape. What consumers need today is, instead, a robust
Commission, empowered to go after truly bad actors in the market-
place.
Chairwoman Schakowsky, Ranking Member Bilirakis, and mem-
bers of the subcommittee, thank you for including the consumer
perspective in today’s hearing.
[The prepared statement of Ms. Greenberg follows:]
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Ms. SCHAKOWSKY. I thank our witnesses so much, and we have
concluded with the witness opening statements now.
And at this time we will move to Member questions. Each Mem-
ber will have 5 minutes to ask questions of our witnesses, and I
will recognize myself at this time.
So we have heard a lot about ways that the FTC can update the
authorities that it has, the resources that it has, in order to do the
job to protect consumers that we expect. And that is why I intro-
duced the FTC Autonomy Act. And that bill would allow the FTC
to bring enforcement actions seeking civil penalties without having
to first consult with the Department of Justice.
Professor Vladeck, how would independent litigation authorities
for the FTC benefit consumers?
Mr. VLADECK. Well, you know, it would shorten the time that the
FTC has in order to get a civil penalty from a defendant that has
already been found to be a violator, has violated a rule.
And so the current practice is that the FTC has to make a refer-
ral to the Department of Justice. The Department of Justice must
agree to take the referral. The FTC does most of the drafting of the
legal documents that need to be filed in court. But ultimately, the
Justice Department will do that. And so in cases, for example, that
need to go to trial, there is an enormous duplication of work. Law-
yers do the first cut, then the Justice Department lawyers review
it. It is just an incredible waste of resources on both the FTC’s part
and the Department of Justice’s part.
But there is another concern, which is the FTC was designed to
be an independent agency, bipartisan, not beholden to the Presi-
dent through the executive branch. But if the FTC has to rely on
the Justice Department to enforce its own orders, well, that inde-
pendence sometimes can be compromised. And so I think this is an
important step forward. The FTC has long asked Congress to give
us that kind of independent litigation authority. And I would urge
that the subcommittee focus this bill——
Ms. SCHAKOWSKY. Thank you so much. I wanted to ask the
same—around the same question, so we know—to Ms. Greenberg.
And we know that some stakeholders are critical of the idea that
we are talking about now, of giving the FTC this authority—you
said you support the legislation—arguing that it could lead to the
FTC—the FTC to overreach and unfairly harm businesses. And I
am wondering how you would respond to those concerns that have
been raised, because it seems to me that we want to empower the
FTC in the ways that we just heard the professor mention.
Ms. GREENBERG. Yes, and the FTC is a critically important con-
sumer protection agency. I think it punches above its weight. We
need to give it the power and the authority it needs to hold bad
actors accountable, and the authority that it would provide the
FTC in your legislation, I think, will be ultimately more protective
of consumers.
And the FTC, unfortunately, is hamstrung by the processes and
procedures which other agencies do not have to confront.
Ms. SCHAKOWSKY. How would you respond to the critics, Pro-
fessor Vladeck?
Mr. VLADECK. I—the criticism doesn’t make any sense. The court
is going to do the right thing, and it is going to base its decision
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on the facts and on the law. The fact that the Department of Jus-
tice lawyer is standing before the court or an FTC lawyer is stand-
ing before the court doesn’t really matter.
And to be clear, it is rare that the Department of Justice dis-
agrees with the FTC. It is not a question that there is a clash be-
tween the two enforcement agencies. It is just an incredible dupli-
cation of effort by underresourced organizations. It just doesn’t
make any sense.
Ms. SCHAKOWSKY. Thank you. I am going to state my last ques-
tion, but I think I am going to have to get it for the record.
The theme of today’s hearing is ensuring that the FTC has the
tools that it needs to protect consumers in the modern marketplace
and into the future and practice. This often means adapting our on-
line, interconnected world.
What I am going to ask—and put—submit for the record—is how
has this shift to online commerce, the proliferation of social media,
and the general dependence on the Internet changed consumers’
expectations?
I think this is a really important area for us to explore.
But I will yield back and recognize Mr. Bilirakis, the ranking
member of the subcommittee.
Mr. BILIRAKIS. Thank you, Madam Chair. Madam Chair, I don’t
mind if the witnesses want to answer that question. I know how
important it is, but I know we are running a little late today. So
whatever you feel, but——
Ms. SCHAKOWSKY. Well, if—you know, brief answers, or at least
outlines, and then we can get more in writing, as well.
Ms. GREENBERG. Well, I think we have seen an uptick in our
fraud center over the last several years, about—with cases of fraud
through social media platforms and internet fraud. And it has re-
sulted in, at the FTC, needing more resources to go after these
fraudsters. And we really need to properly resource this agency, be-
cause consumers rely on it.
And we have heard several witnesses say it is underresourced,
is underresourced now. And we—they are—far fewer employees
than they need to address the, really, explosion of consumer fraud
and bad actors out there.
Ms. SCHAKOWSKY. And I think the technologists will also be very
helpful among the things that we need to add.
Ms. GREENBERG. Yes, we really need to ramp up the technology
side, because, certainly, the industry is very well equipped to, on
their end, to defend against concerns about fraud and
disinformation and misinformation on the—on platforms.
Ms. SCHAKOWSKY. Thank you. And thank you, Mr. Ranking
Member.
Mr. BILIRAKIS. I appreciate it. Very good, thank you.
Well, first of all, thank you. I want to thank the witnesses for
their testimony today. And I want to thank you for your patience.
So according to a paper published by the Regulatory Trans-
parency Project, State and local data privacy laws run into con-
stitutional problems in at least three ways: first, the dormant com-
merce clause; second, the First Amendment; and third, conflicts
with existing Federal law. The article goes on to say that policy-
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makers should carefully consider consequences of a patchwork of
State laws.
So the first question for Mr. Dufault: Can you speak to this grow-
ing patchwork of State laws and how they may be impacting the
dormant commerce clause?
Mr. DUFAULT. Thank you, Congressman Bilirakis. That is right.
I think that the dormant commerce clause really just upholds that,
even where Congress has not legislated, that there is an area of
regulation or an area of government activity that is sort of reserved
for the Federal Government rather than for the States. And what
the courts usually look at is whether or not a State law unduly
burdens interstate commerce or whether it discriminates against a
business or commercial activity that occurs in other States.
And so, in this context, what you would look at is whether or not
the law enacted in California—or let’s say there was a privacy law
enacted in Florida—unreasonably discriminates against commerce
that is occurring in other States. And so that is an open question,
and I think it is going to be a question of growing importance as
more and more States jump in.
You have got a law in California that has been already amended.
You have got—you have also got a law, general applicability, gen-
eral privacy law now in Colorado and in Virginia. It was a close
call also in Florida and Connecticut. And so more and more States
are going to be legislating in the coming years.
And so, unless we have a single set of Federal privacy require-
ments that preempt State laws while avoiding preempting, nec-
essarily, laws that just deal with consumer protection generally,
like many FTC Acts—I don’t think necessarily that is what we are
looking for.
But just to your point, you know, that is going to be a question
going forward, and it does leave open the question whether or not
some of those State laws could run into that constitutional ques-
tion.
Mr. BILIRAKIS. Thank you very much. I know it is a real concern.
Mr. Vladeck, do you believe multiple State laws are at risk of the
dormant commerce clause?
Mr. VLADECK. I do. I think it is a fair concern. I don’t think we
are quite there yet, given the absence of a Federal law. The dor-
mant commerce clause really looks not just to the factors Mr.
Dufault mentioned but to the question about whether these acts
are so different that compliance with multiple laws would be pos-
sible. I don’t think we are there yet.
And I think Mr. Dufault made the point that, as new States
enact new laws that may be very different from the California law,
yes, I think the possibility of a Federal court invalidating State pri-
vacy laws will grow. And I think that is one of many good reasons
Congress ought to finally enact a comprehensive privacy and data
security——
Mr. BILIRAKIS. Agreed. Mr. Dufault, the next question, in your
testimony you referred to H.R. 4447, the 21st Century FTC Act,
which would authorize the FTC to issue APA rulings and enable
the Commission to seek civil penalties for first-time offenses of any
provision of the FTC Act. I have very serious concerns about grant-
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ing unchecked powers to the FTC, something my colleagues—some
of my colleagues—seem to agree with.
What are the consequences that may arise as a result of passing
this legislation? Specifically, I am concerned about our honest
small businesses. If you could elaborate on that, I would appreciate
it.
Mr. DUFAULT. Congressman Bilirakis, the problem that we see
with general APA rulemaking authority and the general ability to
seek civil penalties for first-time offenses of unfair or deceptive acts
or practices is just that the law is intentionally very broad, and it
is an intentional—intentionally fairly ambiguous. What is an un-
fair or deceptive act or practice in X, Y, or Z case?
Because the FTC has such broad jurisdiction, I think that is
probably why the Congress initially made the decision not to give
the Commission first-time civil penalty offense authority. And you
don’t—what we don’t want to see is a situation that invites innova-
tions on new theories of liability along with civil penalty, which can
have the effect of having a, I think, a chilling effect on innovation
in the market, because now small businesses are wondering wheth-
er or not and to what extent they are going to be liable for up to
$44,000 per violation, per-person civil penalties, when they are con-
sidering going into something that is somewhat novel, because now
they are sort of building that into their budgets, and that causes—
whether they have investors, or just the company leadership, as
they are looking at their 18-month plan, setting aside a lot more
money for compliance and legal liability, and probably paying more
in business insurance rather than looking at going into new mar-
kets or expanding and hiring new people.
Mr. BILIRAKIS. Thank you very much.
Madam Chair, I have introduced H.R. 2672, the FTC Reports
Act. I am going to submit my questions for the record, but I would
like to hear from the—not right now, but if you could answer my
questions to elaborate, and give me your opinion on this particular
bill.
Again, FTC Reports Act, H.R. 2672, has to do with protecting our
elders.
And I will yield back, Madam Chair, thank you.
Ms. SCHAKOWSKY. Congresswoman Castor, you are recognized for
5 minutes.
Ms. CASTOR. Well, thank you, Madam Chair, and thanks to our
witnesses for lending your opinions and expertise on these legisla-
tive proposals.
Professor Vladeck and Ms. Greenberg, you have examined and
testified in support of my bill, H.R. 4447, the 21st Century FTC
Act. You say that it will benefit consumers by giving the FTC APA
rulemaking authority and first-offense civil penalty authority, real-
ly help the FTC hold back—bad actors accountable.
And Professor, you have—in your testimony today you said this
bill is imperative. I just heard my good friend from Florida say that
this would allow—that APA rulemaking would promote unchecked
powers. Do you agree with that?
Everything I know about the very detailed APA rulemaking, that
doesn’t jibe with me. What about you?
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Mr. VLADECK. That is just not correct. APA rulemaking is a very
deliberative process. The agency has to promulgate a proposed reg-
ulation, it has to have notice and comment.
In response to Mr. Dufault’s point, there are—small businesses
may be affected. SBREFA, the Federal Small Business Act, re-
quires all sorts of additional protections before an agency can final-
ize a rule. Once a rule is adopted by an agency, it is often subject
to intense judicial review. If a Commission were divided on the—
of a regulation, that would be a signal to a court to look at the reg-
ulation very carefully.
So, you know, the business community has long argued that the
FTC fails to give it adequate guidance so they have clear and spe-
cific standards. Well, that is what rulemaking does. But it is a
transparent, open process. Every record that is used by the agency
in formulating the rule has to be available. And so there is no more
clear and transparent process in formulating policy that is binding
than our APA rulemaking.
Ms. CASTOR. And Professor, you cited an example today when
you went through the bill. Can you provide a little more detail on
that case, or maybe some other examples to really help us under-
stand what this would mean for the consumer and carrying out the
FTC’s mission?
Mr. VLADECK. Sure. So take robocalls. I mean, it is a violation
of an FTC rule for a telemarketer to call someone whose phone
number is listed on the national registry. That person risks a civil
penalty. Why? Because the rulemaking is public, the rule is crystal
clear, and violators are subject to a very substantial civil penalty.
The fact of the matter is all FTC rules are enforceable by civil
penalties. So there is nothing new about that aspect of your pro-
posal. That is just the way things work. The rulemaking is that,
if you care about transparency, public participation, judicial review,
scrutiny, and real attention to the needs of small business, rule-
making is your best option.
Ms. CASTOR. Ms. Greenberg, who would oppose this? Who would
oppose the FTC—21st Century FTC Act to give them the APA rule-
making authority and first-offense civil penalty authority?
Ms. GREENBERG. The example of legislation last year, the
COVID–19 Consumer Protection Act, really laid the groundwork, I
think, very nicely for APA rulemaking authority and first-offense
civil penalty authority for the—and it worked beautifully, and it
wasn’t abused, I think, or wasn’t an overreach by Commission.
Who would oppose? I suppose those who don’t want to see the
Commission be a strong consumer protection agency.
Ms. CASTOR. So the scam artists of the world?
Ms. GREENBERG. I am sure the scam artists of the world would
be right up there——
Ms. CASTOR. The fraudsters of the world?
Ms. GREENBERG [continuing]. As opposing——
Ms. CASTOR. Those telemarketers that the professor referenced?
Ms. GREENBERG. Yes. And, you know, the vast majority of busi-
nesses are honest, but there are those who are not, and they do not
want to get in the crosshairs of the FTC.
Ms. CASTOR. Thank you very much.
Madam Chair, I yield back.
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Ms. SCHAKOWSKY. We have the vice chair of the full committee,
and I recognize—I mean the—not vice chair, the ranking member
of full committee, and now I recognize the ranking member for 5
minutes, Mrs. Rodgers.
Mrs. RODGERS. Thank you, Madam Chair.
Mr. Vladeck, you have significant historic knowledge on the Com-
mission. How important is it for the FTC Commissioners to engage
with staff and seek their input, especially from the Commission bu-
reaus?
Mr. VLADECK. When I was a bureau director, there was a robust
discussion within the Commission, including staff of BE, the Bu-
reau of Economics, on any policy issue. And the discussion was ro-
bust. And a lot of it bubbled up from the staff, not top down but
bottom up.
Mrs. RODGERS. Thank you. Ms. Greenberg, have you been able
to work with all the Commissioner offices, and do you believe it is
important for the FTC to work in a bipartisan manner?
Ms. GREENBERG. Yes, I think one of the hallmarks of the FTC
has been its bipartisan working relationships among Commis-
sioners. And yes, we do go talk with all the Commissioners over
time about consumer protection issues.
Mrs. RODGERS. Great. Mr. Dufault, as you know, Republicans are
very committed to enacting a Federal privacy framework this Con-
gress. Would you speak to how important, and just explain what
a national framework would mean for small businesses?
Mr. DUFAULT. Absolutely, Congresswoman. A national frame-
work should be very strong, and should have—it should contain
consumer rights, so the rights to access correction and deletion of
information about themselves. There should be data minimization
provisions, and it should be a single set of strong national rules.
And that is really important for our member companies, because
they are trying to figure out how to comply with privacy require-
ments simultaneously across several different States, and a grow-
ing number of States.
The State of Washington considered privacy legislation in the
last couple of legislative sessions in the State, in the State of Flor-
ida, as well, and now multiple other States are really considering
jumping in and regulating privacy, generally.
And so, for our member companies, what they want to be able
to do is comply with a strong set of requirements. And I always
think of the one example one of our member companies described
coming into compliance with GDPR. It cost them about $100,000 to
come into compliance. They were able to compete in Europe. What
sets GDPR apart from the situation in the United States is that
GDPR applies across the continent. Here in the United States, it
is unclear what the new privacy requirements are going to be with
each year that passes right now in the current environment.
And so compliance is not necessarily just a matter of paying
$100,000 to come up into compliance. It is just unclear how much
it will cost in the coming years.
Mrs. RODGERS. If—thank you.
Mr. DUFAULT. Yes.
Mrs. RODGERS. If Congress fails to pass a privacy law, would you
elaborate on what impact data privacy rules solely offered by the
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FTC would mean for small businesses and their ability to comply
with such rules
Mr. DUFAULT. Yes, Congresswoman. So if the FTC went ahead
and conducted a rulemaking on privacy on its own, I think the con-
cern for us would just be that, with each administration, you might
see a completely different approach. So you might see all of the
rules sort of scrapped.
I know that there is judicial review for changes that the new ad-
ministration would make to those rules. But we would feel a little
bit better if there were guardrails from Congress that the—would
make those rules that come from the FTC, frankly, stronger be-
cause they have the statutory backing, and they would have—they
would be less mutable, from—depending on who inhabits the FTC.
Mrs. RODGERS. One of the reasons I think a national privacy
standard is so important is because it would—otherwise, there is
confusion by a patchwork of laws that are being developed at the
State level. There is confusion for consumers and for businesses.
Obviously, they need the certainty across State lines.
If—would you speak to the potential of FTC writing a rule, and
how much they would be able to address?
How much—do you—how much would they be able to accom-
plish, versus what Congress would be able to do?
Mr. DUFAULT. Yes, Congresswoman, there would be a number of
things that the FTC could try to accomplish on its own. Using Mag-
nuson-Moss rulemaking authority, it would take a little bit longer.
I think it would take longer than if they had APA rulemaking au-
thority granted by Congress. And that is why we were supportive
of measures that would also authorize the FTC to make use of APA
rulemaking procedures in narrow circumstances.
You know, to the extent that Congress can set guardrails and
specify exactly what they want the Commission to accomplish, the
better off we are going to be. And it leaves less of the question to
the courts. As we saw with the AMG decision, there is some risk
that the courts will go a little bit too far in removing the authority
of the FTC, and we would rather have Congress imbue the FTC
with that authority.
Mrs. RODGERS. Thank you all. I yield back.
Ms. SCHAKOWSKY. The gentlewoman yields back. And now I rec-
ognize Mr. McNerney for 5 minutes.
Mr. MCNERNEY. I thank the chairwoman, and I thank the panel-
ists for being here today and being patient.
As I noted in the last panel, one of the bills we are considering
today is H.R. 4530, legislation that I authored, which would estab-
lish an office of technologists at the Commission. As an engineer,
I think this is critically important. Ms. Greenberg already voiced
support of that bill.
Professor Vladeck, would you agree that empowering the agency
with the necessary technical expertise and having more tech-
nologists on staff would help the agency carry out its mission?
Mr. VLADECK. Well, it is essential. And, you know, I hired the
first technologists in the FTC in 2009. We did not have a single one
on staff.
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And, you know, there—let me just make two quick points: one is
we need more technologists, the other is we need to be able to re-
tain them.
And one of the problems is there is just enormous competition
for, you know, top-of-the-line technologists. And one of the things
I would urge this committee to think about is whether there should
be different GS scales for paying technologists. Attracting, you
know, top-tier technologists to the FTC would be a challenge. And
so I applaud your bill. I hope it is enacted, and I hope it is author-
ized, the money is appropriated for it.
But there is a broader problem in government in terms of at-
tracting and keeping top-line technologists, and I think that is an
issue that needs to be really addressed.
Mr. MCNERNEY. Well, thank you, Professor.
Ms. Greenberg, in your testimony you discuss why this legisla-
tion is important with respect to our role, as a nation, in driving
the global regulatory agenda. Could you explain that a little?
Ms. GREENBERG. I am sorry, your question was about the——
Mr. MCNERNEY. The——
Ms. GREENBERG. Would you mind repeating the question?
Mr. MCNERNEY. The office of technologists at the Commis-
sion——
Ms. GREENBERG. In terms of—yes, well, we made the observation
that we need to compete globally as well as with companies that
are based here in the United States. And we need to really ramp
up our level of expertise in the technology area.
And as Professor Vladeck pointed out, we need to figure out how
to not just hire technologists but retain them, as well. Though I do
think there is a certain personality type that likes public service,
and we can probably never compete with some of the salaries that
we are going to see at the big tech companies, but I think a com-
petitive salary and an opportunity to do—to go toe-to-toe with some
of these companies is a very attractive job possibility for people
with expertise.
But we just can’t—now we cannot compete. So I think your bill
is essential, and it is essential for our ability to compete globally
as well as across the United States.
Mr. MCNERNEY. Thank you. Again, Professor Vladeck, what po-
tential risks do you see with respect to artificial intelligence, and
what can be—what steps can be taken at the agency to help ad-
dress these risks?
Mr. VLADECK. Oh, the risks are enormous. You know, there are
risks of algorithmic bias. There are pricing decisions that may be
based on personal characteristics. And, you know, the FTC has
been looking at this issue since 2010.
But it is—you know, there are challenges. And part of the chal-
lenges are that the FTC does not have the—technology. And so,
you know, unless your legislation gets through, we may be behind
the curve in trying to figure out how to harness all the good things
that algorithms and AI bring us but not really understand some of
the risks that are attached to it.
And there are just enormous strides being made at MIT and
Caltech about the use of algorithms in government regulation, not
just outside the government. And so we really need to get the re-
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sources to understand the benefits and the risks of AI, and I am
not sure we are anywhere near there.
Mr. MCNERNEY. Well, thank you, I am going to yield back at this
point.
Ms. SCHAKOWSKY. The gentleman yields back. And Mr. Arm-
strong, your staying power pays off, and I recognize you for 5 min-
utes.
Mr. ARMSTRONG. Thank you, Chair Schakowsky.
I recently introduced H.R. 2671, the SHIELD Act. And the bill
essentially contains two provisions. The first provision prohibits
the FTC from relying on guidelines for similar documents to prove
a violation of law. This is simple. The Commission should only
bring enforcement actions for violations of law.
Now, Mr. Vladeck, I know you have some concerns with the sec-
ond portion of this bill, but your testimony generally agrees with
the first provision, which, essentially, reaffirms that the FTC guid-
ance on provisions of law do not carry the force of law, correct?
Mr. VLADECK. That is correct.
Mr. ARMSTRONG. Now, the second——
Mr. VLADECK. Sorry, I didn’t——
Mr. ARMSTRONG. OK, thank you, thank you. The second provi-
sion clarifies that a defendant may offer, as evidence of compliance
with a provision of law, any guidelines, general statements of pol-
icy, et cetera. And your objection to this—you do object to this pro-
vision in your testimony. You raise concerns that a guidance docu-
ment—offered as evidence of compliance with the law, even though
it is outdated or superseded.
If a guidance is outdated or superseded, it would no longer be
useful. And I would argue that the burden should be on the Com-
mission to remove outdated or superseded guidance to provide the
public with relevant information. Is there anything that prevents
the Commission from removing outdated or superseding—super-
seded guidance?
Mr. VLADECK. Yes, there is a tremendous amount. I mean, a
guidance document under the law is almost anything anyone at the
FTC says, assuming that they are a reasonably senior person. So
a tweet is a guidance document. A speech taking a position is a
guidance document. And in order to—for the Commission to sort of
pull back on guidance, they would have to really just sort of rewrite
its own history by deleting speeches, tweets, you know, other——
Mr. ARMSTRONG. Well, statements from a Commissioner and
guidance from the Commission aren’t the same thing. Like, the de-
fendant may offer as evidence of compliance these types of guid-
ance documents. The bill doesn’t provide that offering these guid-
ance documents is an affirmative defense, which would negate a
defendant’s liability. The defendant would have to demonstrate
that the guidance supports its compliance with the provision of
law.
Your concern that pointing to any guidance document is arguably
exculpatory might be sufficient as a defense. That is not how evi-
dence works, and it is not what the bill says. The defendants can’t
simply claim a document provides absolution. A guidance document
is only useful as evidence of compliance when it tends to prove that
there is a matter asserted.
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Mr. Dufault, is there any objection to allowing a defendant to
simply offer Commission guidance as evidence of compliance with
the provision of a law enforced by the Commission?
Mr. DUFAULT. No, it seems to us to be a reasonable provision,
that it simply completes the circle when it comes to—you know,
this is a statement as to the Commission’s understanding of its
own determination as to what is legal under its broad purview over
unfair or deceptive acts or practices. And so that interpretation is
meant to be relied upon.
So this is just a statement that says, if you are relying upon that
guidance, then it is evidence. And like you said, it is not definitive.
And there are different weights that you can assign to evidence,
right? And so that—merely having it be evidence does not negate
liability, as you said.
Mr. ARMSTRONG. And I think I can give a little real-world rel-
evant example of how outdated or superseded language isn’t always
very persuasive. There is a 2015 version of this bill that, while
similar, had some cumbersome and ambiguous language.
And Mr. Vladeck, you testified against that bill, and raised simi-
lar objections in 2016. The problem is, your testimony today quotes
the 2015 bill language that was amended prior to the introduction
of H.R. 2617.
And with that, I will yield back.
Ms. SCHAKOWSKY. The gentleman yields back, and now I yield 5
minutes to Mr. Soto.
Mr. SOTO. Thank you, Madam Chair. You know, last term we
had put forward a working draft for privacy, something that I ap-
plaud you, Madam Chairwoman, for starting the ball rolling on.
Sadly, here we are a year or two later because of partisan bickering
over this stuff. And we still see another year or two wasted, gone
by, where we could be protecting privacy.
And so I am committing to you, Madam Chair, that we will keep
up the fight together and try to bridge gaps with my—our col-
leagues across the aisle, including the great ranking member here,
my dear friend, Representative Bilirakis, my fellow Floridian, who
I get to work with all the time on a lot of these issues.
You know, the American people rely on the FTC to protect them
from fraud, scams, false advertising, and unfair and deceptive
trade practices, often without even knowing the agency exists. In
the first panel we heard from Commissioners about just some of
the things the FTC is doing on behalf of American consumers. But
we also heard about some of the constraints and need for resources
to improve the FTC’s ability to protect consumers.
Ms. Greenberg, would you agree that the FTC faces unique bur-
dens that other consumer protection agencies do not?
Ms. GREENBERG. Yes, Congressman. I—the FTC is hampered by
onerous obstacles that it must jump through to do its really impor-
tant work of protecting consumers.
Mr. SOTO. And for years we have advocated for giving the FTC
certain authorities, such as civil penalty authority and APA rule-
making. Ms. Greenberg, how would these tools improve the FTC’s
ability to fulfill its consumer protection mission?
Ms. GREENBERG. Well, APA rulemaking is a transparent process
that—it is a very democratic process, because it opens up the rule-
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making process to comment, notice and comment, and final rules,
and a final rules can be challenged judicially. But it is an open
process. It is a somewhat time-consuming process. But it does take
in all perspectives, and certainly civil penalties are really impor-
tant deterrents to the bad guys, the bad actors in the—in our mar-
ketplace. And I think you just improve the agency’s ability to pro-
tect consumers by providing both of those, so civil penalty and APA
rulemaking authority.
Mr. SOTO. Thank you, Ms. Greenberg.
Mr. Vladeck, we know technology has increased the ways for
scams to happen. Internet, cell phones, social media all provide
new opportunities for scammers. I know privacy is a key concern
for both you and I and others on the committee. What role can arti-
ficial intelligence assist in spotting scams and protecting privacy,
if used by the FTC?
Mr. VLADECK. So there is a lot of work being done by tech-
nologists, academic technologists, on exactly that question. And,
you know, my hope is that AI will help control the boundaries of
the internet, and alert agencies like the FTC, law enforcement
agencies, when there is something that looks like a scam that is
afoot so we can get—you know, we can sort of get an enforcement
case, move quickly, before too many people are injured. So I think
AI, as a tool, may, you know, be a great bolster for law enforcement
agencies for just detection. And that is an important aspect of this.
So I do have expectations that, within this Commission, you will
start seeing these kinds of tools, as there are tools for content mod-
eration.
Mr. SOTO. And when we are talking about all the commerce on
the Internet, all the information and different transactions con-
ducted, really, would you argue that artificial intelligence is essen-
tial, in order to accurately be able to identify scams on the inter-
net?
Mr. VLADECK. Yes. I mean, the internet is the crook’s best friend.
It is the best thing that ever happened to scam artists. And, you
know, the volume of—you know, simply the sheer volume of what
is going on on the internet makes it impossible for individuals to
control, which is why AI is going to be a key tool to law enforce-
ment, I hope, soon, because it is really needed.
Mr. SOTO. Well, thank you, Mr. Vladeck. With deep fakes, with
using code words, with going into the dark web, among so many
other abilities to push for scams, we are going to have to also use
technology to help out the good guys at the FTC.
And I yield back, Madam Chair.
Ms. SCHAKOWSKY. The gentleman yields back, and now I just
want to thank our witnesses. And I really, really appreciate all—
the three of you being here, but especially the two that were here
pretty much all day.
Professor, you, as well. I don’t know if you were waiting around
for us, but I just want to thank you so much for your participation.
And are there—there are? OK, so now I—well, let me first see
if you want to say anything.
Mr. BILIRAKIS. I don’t want to delay things. We got it done, and
I appreciate your patience, the witnesses’ patience and the Mem-
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bers’, and particularly our chair. So thank you very much for a
very informative hearing.
Ms. SCHAKOWSKY. I want to remind the witnesses—and we will
convey that also—oh, before we adjourn, I request unanimous con-
sent to enter the following documents into the record.
But I—actually, let me say to the witnesses that the Members
will have 10 business days to submit additional questions for the
record, and we are asking you to respond in a timely way to that.
I wanted to say that before I read all this—because I think it is
fair enough to say that you don’t have to stick around for this—
but I am going to read all the communications that we received.
So thank you so very much.
We have a letter from Senator Toomey to Commissioner Chopra
dated June 17, 2001, a letter from Senator Toomey to Commis-
sioner Chopra dated July 13th, 2021, a—I don’t know what
this——
VOICE. A dissenting statement.
Ms. SCHAKOWSKY. Oh, a dissenting statement from Commis-
sioner Phillips and Wilson regarding withdrawing of section 5, a
statement of enforcement principles; we have a dissenting state-
ment of Commissioner Phillips and Wilson regarding revision—no,
revised section 18; a letter from Secretary—no, I am sorry, from
Security Industry Association; a letter from the Committee for Jus-
tice; and a letter from the Chamber of Commerce.
That wraps it up.
[The information appears at the conclusion of the hearing.]
Ms. SCHAKOWSKY. So with that, the Subcommittee on Consumer
Protection is adjourned.
[Whereupon, at 4:50 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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File and source
- File
- CHRG-117hhrg52433.pdf
- Size
- 68,971,632 bytes
- SHA-256
- 6e7318c9c38c6edc47f1b7de675a4a421f4eafb8bc52204af5b6b3129c83afce
- Our copy
- CHRG-117hhrg52433.pdf
- Original
- www.govinfo.gov