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Facebook fine reveals Congress has set up FTC to fail

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“The Federal Trade Commission is failing American consumers.” — This is the common refrain from critics in the wake of the FTC’s record-breaking settlement with Facebook. A $5 billion fine is not enough to matter to a company of Facebook’s size, and a few new oversight procedures won’t change how the company operates.

The fine, while historic, is a small fraction of Facebook’s annual revenues. When news of the settlement broke on July 12, the company’s stock valuation immediately rose about $10 billion — double the cost of the fine.

Under the settlement, Facebook will have to hire privacy lawyers and set up a new “privacy committee,” but that doesn’t mean much if the company isn’t actually required to make operational changes. Most significantly, the settlement does nothing to actually restrict the social network’s ability to gather and use people’s personal information.

It’s true that the settlement doesn’t go far enough. But the criticism of the FTC is unfair and shortsighted. The agency is simply doing what it’s been set up to do — the FTC is designed to be a weak regulator incapable of meaningfully checking big business.

If you want to assign blame for the FTC’s inability to rein in companies like Facebook, look to Congress. Through purposeful policy choices made over decades, the Federal Trade Commission has been deliberately set up to fail consumers.

As FTC Chairman Simons said at the July 24 press conference announcing the settlement, current law is “a 100-year-old statute that was never intended to deal with privacy issues like the ones that we address today.” The agency’s primary privacy enforcement tool is a blanket consumer-protection statute prohibiting “unfair or deceptive acts or practices,” but companies can often avoid deception charges by either not communicating their practices at all, or by burying the details in long and unreadable privacy policies.

And Congress narrowed the definition of unfairness to only cover practices that are proven to cause consumers “significant harm,” a challenging prospect where the effects of privacy violations are not only difficult to detect, but even harder to quantify.

The narrowing of the FTC’s unfairness jurisdiction was part of a suite of changes pushed through Congress in the 1980s and 1990s. They were specifically designed to neuter the country’s most important consumer protection agency. Lawmakers effectively eliminated the FTC’s ability to issue regulations, restricted its investigatory powers, and depleted the agency’s staff; today the FTC has a third fewer employees it had 40 years ago — while the economy has grown three times in size.

It doesn’t have to be this way. Depriving the Federal Trade Commission of the tools it needs to maintain a fair and equitable economy was a deliberate choice on the part of Congress.

If Congress wants to give the FTC the power to rein in tech behemoths like Facebook, there are straightforward fixes: Pass comprehensive privacy laws that limit extraneous data collection, sharing, and usage; give the FTC rulemaking power and the ability to significantly fine companies that break the law; mandate greater transparency so the FTC has greater visibility into corporate practices; and give the FTC substantially more resources, including attorneys to investigate and enforce, as well as technologists who understand the nuances of how companies abuse people’s data.

After years of conscious neglect, it now appears there is a growing bipartisan interest in empowering the FTC to achieve its consumer protection mandate. Tech companies are responding to this pressure by ramping up their influence efforts: last year, Google, Facebook, and Amazon spent a record $48 million on lobbying the federal government.

Until Congress acts, we are doomed to perpetuate a cycle of outrageous privacy abuses followed by weak regulatory responses. Consumers deserve the right to browse, shop, and live their lives without worrying that Big Tech is exploiting their every move. The FTC doesn’t have the capacity to deliver that today. Only Congress can.

Justin Brookman (@JustinBrookman) is the director of consumer privacy and technology policy for Consumer Reports (@ConsumerReports /@CRAdvocacy); he previously served as Policy Director of the Federal Trade Commission’s Office of Technology Research and Investigation.

Tags Digital rights Facebook Federal Trade Commission Internet privacy

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