Acting FTC Chairman Maureen Ohlhausen recently offered a degree of insight into the agency’s anticipated consumer protection priorities via a recent keynote address delivered at the American Bar Association’s Consumer Protection Conference.
Ohlhausen unequivocally conveyed that, at a fundamental level, a successful FTC action makes current and future consumers better off than they would be had the FTC not acted.
“To properly judge success, we must acknowledge that the overwhelming majority of consumer benefits emerge from a free and honest market,” said Ohlhausen. “Our job, then, is to address unfair and deceptive practices that harm the market process and harm consumers … in a way that avoids hindering market-generated consumer benefits.”
Ohlhausen further conveyed that she anticipates the Commission will diligently analyze the costs and benefits of using its enforcement and other tools, while carefully considering the potential unintended consequences of its regulatory actions. “In every case we litigate, settlement we enter, report we write, guidance we issue, blog entry we post, and tweet we… twitter, we need to answer two questions. How were consumers harmed? And how does this action address that harm? Asking and answering these two questions will focus our limited resources where they can do the most good,” Ohlhausen remarked.
As a strong advocate for less regulation and fewer restrictions around data collection, Ohlhausen believes that the appropriate depth of cost-benefit analysis might vary, depending upon the situation.
In cases of clear fraud by a single party, where there are no consumer benefits, the costs and benefits need not necessarily be detailed exhaustively. However, for practices that generate both costs and benefits, and where action could affect a wide range of parties, the FTC must be thorough. According to Ohlhausen, “[t]his means carefully evaluating the costs and benefits both of the practice at issue and of the contemplated regulatory action.”
Three reforms that Ohlhausen is expected to advance over the next few months:
- Re-focusing the agency on its bread-and-butter fraud enforcement mission.
Preventing fraudulent schemes is at the core of the FTC’s consumer protection mission and has enjoyed bipartisan support both at the FTC and in Congress. Ohlhausen stated that she is particularly interested in frauds targeting military personnel and veterans, and frauds targeting small businesses. The Commission is expected to strengthen its anti-fraud program and initiate appropriate enforcement actions.
- Ensuring that enforcement actions address clear and concrete consumer injury.
According to Ohlhausen, “[t]he FTC’s statutory authority, our longstanding policy statements, and Congressional guidance are all clear: The FTC should focus enforcement on matters where consumers are actually injured or likely to be injured, or where companies don’t keep their promises, to the consumer’s detriment.” She believes that the agency should focus on cases with objective, concrete harms such as monetary injury and unwarranted health and safety risks. “The agency should not focus on speculative injury, or on subjective types of harm.”
Injury can take the form of monetary harm, the exposure of sensitive information and the misuse of big data technologies. The Commission has “consistently raised concerns that a notice-and-choice approach to privacy may not adequately protect consumers from misuse by companies that assemble bits of non-sensitive consumer information into a potentially sensitive mosaic of a consumer.”
By focusing on practices that are actually harming or likely to harm consumers, Ohlhausen believes that the FTC can best use its limited resources. Such self-restraint will almost certainly benefit innovation.
It is anticipated that the Commission will endeavor to prioritize the deepening of its understanding of the economics of privacy, including consumer preferences and the relationship between access to consumer information and innovation.
Focusing on consumer injury should be a critical factor, moving forward, when the agency decides what cases to bring and what remedy to seek. “In every consumer protection case we bring, we must ensure that we seek and obtain for consumers relief that is tied to consumer injury,” said Ohlhausen.
Unfortunately, according to Ohlhausen, the FTC has deviated from this principle recently in matters that did not involve fraudulent behavior by pursuing disgorgement of a company’s total revenues, rather than seeking to remedy consumer injury. Doing so subjects parties to threats of large payments that may be disproportionate to actual consumer harm. Such policies also harm businesses without leaving consumers better off.
Ohlhausen is also a strong proponent of linking harm and remedy in the advertising substantiation context, where she believes that substantiation standards may sometimes be unreasonably stringent. She opposed settlements involving two skin-blemish tracking smartphone apps. The companies had made some unsubstantiated claims, but the settlements, in her view, went too far. The orders required the mobile app developers to demonstrate through expensive drug-trial-like studies that their apps perform certain functions as well as a dermatologist. In Ohlhausen’s view, the companies had never claimed such accuracy.
Ohlhausen similarly dissented in part from the FTC’s decision against POM Wonderful, arguing that “by requiring two randomized controlled trials where one would suffice, the FTC order would prohibit some truthful advertising.”
“Such hawkish FTC advertising substantiation enforcement actions ‘overprotect’ consumers by depriving them of useful information. By requiring appropriate levels of substantiation for advertising claims, the FTC can protect consumers from deceptive advertising, yet still ensure that consumers get the information they need to make purchasing decisions. Such an approach will maximize the free flow of truthful information vital to a free society and a free market,” she said.
- Reducing unnecessary regulatory burdens and providing additional transparency to businesses.
Ohlhausen is also expected to advance reform designed to ensure that consumers benefit from free and honest markets by reducing the burdens on legitimate business.
According to Ohlhausen, pursuing this remove reform will involve reviewing and streamlining the agency’s information requests. In fact, the ABA Antitrust Section’s Presidential Transition Report highlighted a recent trend towards generic and overbroad document and other information requests. Ohlhausen believes that “[s]uch requests impose large compliance costs on legitimate companies.”
“Under my leadership, the FTC will take these concerns seriously,” said Ohlhausen. “The FTC must remain able to collect the information we need to enforce the law, but I am certain that we can do this while reducing the burden on businesses, particularly third parties who are not under investigation.”
Contact an FTC defense attorney if you would like to discuss Federal Trade Commission regulatory policy, or if you are the subject of a local, state or federal investigation or enforcement action.
Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state attorneys general, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.
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