A Super-Powered FTC Should Scare Advocates

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

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The push to radically expand the Federal Trade Commission's regulatory authority over the Internet has garnered remarkably little outcry from Internet advocates. But the online privacy and civil liberties organizations that support the effort would do well to consider what may happen if a newly unfettered FTC someday turns against them.

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

[novanglus]

Omega42 is right that FTC has been unable to enforce the privacy policies it already has in place -- SPAM, telemarketing, etc.

But having unenforced regulations is worse than no regulations at all -- consumers get lulled into believing government will protect them, so they let down their guard and don't protect themselves. Until the FTC proves it can effectively enforce the regulations it already has, it's a VERY bad idea to give it more authority.

Laws already exist to protect consumers from deceptive marketing practices, including collecting data for one purpose and using it for another. But no one enforces those. And @chesterj1a: HIPAA already protects medical information, but what if some consumers WANT advertising targeted to them based on their interests, demographics, and buying habits? Thousands of people have signed up for hunch.com and similar sites for that expressed purpose.

[chesterj1a]

You are wrong. HIPPA does not protect consumer privacy related to online health marketing. It's a big loophole that threatens a consumer's privacy and their health. That's why we have asked the FDA and FTC to protect health consumers--something the ad industry and big Pharma are afraid a stronger FTC will do.

[ToolMangler1]

A License Required for your HOUSE?

If you own your home you really need to check this out. At the end of this email is the Google link to verify. If the country
thinks the housing market is depressed now, wait until everyone sees this. No one will be buying homes in the future.

A License will be required for your house...no longer just for cars and mobile homes....Thinking about selling your house?
Take a look at H.R. 2454 (Cap and Trade bill). This is unbelievable! Home owners take note and tell your friends and
relatives who are home owners!

Beginning one year after enactment of the Cap and Trade Act, you won't be able to sell your home unless you retrofit it to
comply with the energy and water efficiency standards of this "Cap & Trade" bill, passed by the House of Representatives.
If it is also passed by the Senate, it will be the largest tax increase any of us has ever experienced.

The Congressional Budget Office (supposedly non-partisan) estimates that in just a few years the average cost to every
family of four will be $6,800 per year. No one is excluded. However, once the lower classes feel the pinch in their wallets,
you can be sure that these voters will get a tax refund (even if they pay no taxes at all) to offset this new cost. Thus, you Mr. And
Mrs. Middle Class have to pay even more since additional tax dollars will be needed to bail out everyone else..

But wait. This awful bill (that no one in Congress has actually read) has many more surprises in it. Probably the worst one
is this: A year from now you won't be able to sell your house without some bureaucrat's OK. Yes, you read that right.

The caveat (there always is a caveat) is that if you have enough money to make required major upgrades to your home,
then you can sell it. But, if not, then forget it. Even pre-fabricated homes ("mobile homes") are included. In effect, this bill
prevents you from selling your home without the permission of the EPA administrator.

To get this permission, you will have to have the energy efficiency of your home measured. Then the government will tell
you what your new energy efficiency requirement is and you will be required to make modifications to your home under
the retrofit provisions of this Act, to comply with the new energy and water efficiency requirements.

Then you will have to get your home measured again and get a license (called a "label" in the Act) that must be posted
on your property to show what your efficiency rating is; sort of like the Energy Star efficiency rating label on your
refrigerator or air conditioner. If you don't get a high enough rating, you can't sell.

And, the EPA administrator is authorized to raise the standards every year, even above the automatic energy efficiency
increases built into the Act. The EPA administrator, appointed by the President, will run the Cap & Trade program
(AKA the "American Clean Energy and Security Act of 2009") and is authorized to make any future changes to the
regulations and standards he/she alone determines to be in the government's best interest. Requirements are set
low initially so the bill will pass Congress. Then the Administrator can set new standards every year.

The Act itself contains annual required increases in energy efficiency for private and commercial residences
and buildings. However, the EPA administrator can set higher standards at any time. Sect. 202 - Building
Retrofit Program mandates a national retrofit program to increase the energy efficiency of all existing
homes across America.

Beginning one year after enactment of the Act, you won't be able to sell your home unless you retrofit
it to comply with its energy and water efficiency standards. You had better sell soon, because the standards
will be raised each year and will be really hard (expen$ive) to meet in a few years. Oh, goody!

The Act allows the government to give you a grant of several thousand dollars to comply with the retrofit
program requirements IF you meet certain energy efficiency levels. But, wait, the State can set additional
requirements on who qualifies to receive the grants. You should expect requirements such as "can't have
an income of more than $50K per year", "home selling price can't be more than $125K", or anything else
to target the upper middle class (that includes YOU?) and prevent you from qualifying for the grants.

Most of us won't get a dime and will have to pay the entire cost of the retrofit out of our own pockets. More
transfer of wealth, more "change you can believe in." Sect. 204 - Building Energy Performance Labeling
Program establishes a labeling program that for each individual residence will identify the achieved energy
efficiency performance for "at least 90 percent of the residential market within 5 years after the date of the
enactment of this Act."

[tsigili]

There is already, far too much government, that is totally inept.

[omega42]

More fear mongering...The FTC won't even shut down telemarketers that ignore their own do not call list. How many stupid people had to complain about being "taken" before they went after Miss Cleo?

[chesterj1a]

Why is NetChoice and the online marketers that are its members afraid of an effective consumer cop on the digital beat? Think subprime loans and high-interest credit cards sold online; people ill being targeted with interactive ads for depression and other medical conditions after they visited a health information site; or a digital profile of you that includes your race/ethnicity, income levels, spending habits--all of which is invisible and uncontrollable by the individual user. Shame on NetChoice for helping to maintain the deregulatory conditions that led to the current financial crisis. They are truly afraid of an FTC that actually can protect consumers.

[brianbwb2011]

Sounds like the author is more concerned with the current ability of content providers to arbitrarily redefine the centuries of common law, spy on users, and plant malware (Sony's CD rootkit trojan, which killed cd and dvd players when removed from computers, springs to mind) than he is about protecting the public from the malignant machinations of the content and service providers.

His last line is especially typical of more right-wing agitprop composers.

"...let's look ahead to see how that power may be used-or abused-in unexpected ways..."

This is an obvious attempt to conjure up a non-specific, as-yet-undefined boogieman out of histrionically speculative "emperor cloth".