A Super-Powered FTC Should Scare Advocates

Steve DelBianco is the Executive Director of NetChoice, a Washington, D.C.-based group that represents the nation's leading e-commerce companies.

The big headline surrounding Rep. Barney Frank's massive financial consumer protection bill has been the proposed creation of a Consumer Financial Protection Agency, but it is the legislation's proposed change to the FTC that may have the most severe, long-lasting impact on the Internet.

The Frank bill (H.R. 4173) would remove the checks and balances that Congress imposed on the FTC in 1980 with the Magnuson-Moss Act. Passed in order to rein in an aggressively regulatory FTC, that measure established a process intended to ensure that benefits of new regulation are effectively weighed against potential consequences.

By repealing those protections, the Frank bill would dramatically reduce the ability of Congress and the public to rein-in potentially damaging regulatory efforts.

Why is the Internet privacy and civil liberties community - long opposed to excessive government regulation of the Internet - being so quiet about, and in some cases, even supportive of the proposed change?

It probably has a lot to do with FTC Commissioner John Leibowitz and his very public commitment to cracking down on how Internet companies collect, store and disseminate information about customers. Leibowitz is the Obama Administration's most vocal advocate for stricter Internet privacy rules and has been a champion to advocates of greater restrictions on Internet commerce.

For privacy advocates, expanding the power of the FTC means expanding the power of their greatest ally in government - a significant win that could deliver almost immediate results, as Leibowitz is certain to make Internet privacy a priority.

It is easy to understand the political calculus of privacy advocates - who have been frustrated in their efforts to enact sweeping federal privacy legislation - but it is not clear if they have fully thought through the long-term costs of supporting their best political ally.

The last time that the Federal Trade Commission had the sort of broad regulatory mandate called for under the Frank bill, there was no commercial Internet for the commission to regulate. Now, with the Internet permeating every aspect of commerce and trade, the FTC takes a broad interest in everything from privacy and e-mail, to the thorny issues surrounding online child protection.

Indeed, given the uniquely expansive nature of the FTC's charter, there are very few aspects of e-commerce and Internet communication that don't fall under its purview. A super-powered FTC would immediately become the de facto regulator of the Internet in the United States, a prospect that should be frightening to anyone familiar with the FTC's often-kneejerk response to emerging technologies and business models.

Even those who disagree with Commissioner Leibowitz's aggressively regulatory stance on privacy have to acknowledge that he is Internet savvy, and will at least understand the potential ramifications of Internet regulation.

The problem is that there is no way to guarantee a similar level of understanding on the part of Leibowtiz's successors, who will also enjoy nearly unfettered regulatory authority over the Internet. Once the power is invested in the Commission, good luck taking it away again.

Civil liberties and privacy experts know first-hand of ill-considered Internet regulation. A policy intended to protect kids can easily end up harming adults but shutting down important sources of legitimate content. A policy intended to fend off a technical annoyance (like a pop-up) can easily stifle legitimate Internet functions (like authentication mechanisms).

One also wonders whether those advocates have thought through the consequences of a deregulatory administration someday installing an FTC committed to removing regulatory barriers to commerce. The strong state-based Internet regulation that many advocates support could become the first casualty of an FTC vested with power to preempt state authority.

The legislative process may be slow and frustrating at times, but in general it has proven to be the most effective - and certainly the safest - route for imposing rules governing online behavior. And when Congress does choose to act, it can empower the FTC to move very quickly indeed to address pressing technology issues.

Three times since 1998, Congress has called on the FTC to address a pressing Internet issue. Starting with the Child Online Privacy Protection Act and continuing with the extremely successful National Do-Not-Call registry and the Can-Spam Act, the FTC has moved very quickly to implement federal laws containing critical consumer protections.

This is not a process that is broken, but rather one that shows every sign of functioning quite well. Before we change that process by handing unprecedented power over the Internet to one agency, let's look ahead to see how that power may be used-or abused-in unexpected ways.

By Steve DelBianco
Special to CBSNews.com