Has the Federal Trade Commission been overstepping its bounds? Yes, according to newly appointed Republican FTC Commissioner Melissa Holyoak.
“We must act within the authority granted by Congress,” Holyoak said on Tuesday during an address at an ad law conference hosted in New York City by the National Advertising Division, a self-regulatory organization that helps resolve truth-in-advertising disputes.
Like all regulatory agencies, the FTC essentially reports to Congress.
But some believe that it’s going beyond its mandate. In 2022, Republican FTC Commissioner Noah Phillips resigned his post before his term was up in disagreement with the commission’s attempts to expand its authority. Republican Commissioner Christine Wilson followed suit and left last year.
The FTC’s increasingly aggressive stance on competition enforcement, consumer protection, data privacy and AI regulation has also drawn criticism from both Republican lawmakers (“Khanservatives” aside) and billionaire Democrat party donors.
Unhealthy overstep?
Holyoak expressed concern during her talk that the FTC’s expansive approach to policy – which she referred to as “backdoor rulemaking” – “loses sight of the forest for the trees.”
As an example, she highlighted the updated Health Breach Notification Rule (HBNR), which the FTC finalized in April shortly after Holyoak was sworn in.
The original rule only covered the breach of identifiable health information in personal health records. The expanded version also applies to health apps and health-related connected devices not covered by HIPAA, such as wearables.
Holyoak dissented at the time, but the amended rule passed with a 3-2 Democrat majority vote.
In her dissent, she noted that HBNR, a rule with a previously very limited scope, might now apply to a gas station with a loyalty app that sells Advil, Band-Aids and pregnancy tests, or to an ecommerce app that offers maternity clothes and anti-nausea ginger tea.
“In the eagerness to effectuate a particular policy goal,” she told the crowd at NAD, “the Commission exceeded the congressional authorization, left itself open to legal challenge and sent a signal to Congress that the FTC is not to be trusted to abide by the law as written.”
And if Congress can’t trust the FTC “with faithful execution of the law as written,” she said, “Congress may decline to give the FTC additional authority.”
Surveillance straw men
Holyoak also had strong words during the conference for what she called the FTC’s recent tendency to construct straw-man arguments to attack stuff it doesn’t like.
“Take the surveillance straw man,” she said. The FTC has “repeatedly referred to a range of data practices as ‘commercial surveillance targeting.’”
Advertising is “surveillance advertising” and personal pricing is “surveillance pricing.” Ad tracking is “commercial surveillance.”
In an FTC staff report published on Thursday morning examining the data collection and use practices of large social media platforms and video streaming services, the word “surveillance” pops up again.
According to the report, nearly four years in the making, these companies “have engaged in vast surveillance of users with lax privacy controls and inadequate safeguards for kids and teens.”
(The Commission voted 5-0 to issue the report, although Holyoak was not involved in writing it. In a statement on Thursday, she commended FTC staff for their efforts in producing the report, but also voiced “strong concern” about certain aspects, including how some of the recommendations could impact free speech. You can read her full statement here.)
You could say, “What’s the big deal?” The FTC majority is trying to make a point by using hyperbole, and a word is just a word.
But Holyoak’s worry is that using this language “belies something more troubling,” she said, “a glossing over and perhaps even a degree of prejudgment of difficult issues.”
Calling for a nuanced view
Difficult issues such as behaviorally targeted advertising, for instance. It’s demonized, but is it all bad?
Dubbing it as surveillance advertising “makes it easier to conflate the lawful activity of targeted advertising with unfair or deceptive data collection,” she said.
“This new moniker does nothing to tease out the complexity of the privacy debate concerning the costs and benefits of behaviorally targeted advertising,” she said. “To the contrary, it wrongly suggests there is no complexity.”
And there most certainly is complexity, which calls for a nuanced point of view.
Holyoak therefore doesn’t vote on the party line.
For example, she issued a concurring statement in support of the FTC’s recent action banning anonymous social media app NGL from serving minors under the age of 18.
And she also voted in support of filing an amended complaint against Kochava in July.
The misuse of precise geolocation information that reveals a consumer’s medical, political and religious activities “presents great dangers to the freedoms of Americans,” Holyoak said.
“For consumers to realize the benefits of technology, they must be able to trust that technology – including tools that hold their sensitive personal data – and have trust that it will remain secure from wrongful government surveillance,” she said. “And here, by the way, I do in fact mean government surveillance, with all of its negative connotations.”
