There was hot ad tech legal drama in the Gem State this week.
A judge in Idaho intends to rule that the Federal Trade Commission’s case against Kochava can proceed.
But the FTC may have to make some changes to its complaint before moving forward.
On Tuesday, Idaho District Judge B. Lynn Winmill presided over a hearing about Kochava’s motion to dismiss the FTC’s motion to dismiss Kochava’s case against the FTC – which is also suing Kochava.
Please … stick with us.
Although Winmill didn’t issue a formal written decision yet – that, he said, is coming “fairly shortly” – he did say he doesn’t think Kochava’s arguments “are appropriate to rely upon to dismiss the complaint at this juncture in the proceedings.”
Before we proceed, here’s a quick refresher on how we got here, because it’s a tangled web.
Sparring suits
In August, just a few months after the Dobbs decision overturning Roe v. Wade, the FTC sued Kochava for allegedly making it possible for other companies to buy and sell sensitive geolocation information, including data tied to abortion clinics, places of worship and domestic abuse shelters.
The FTC’s lawsuit hit two weeks after Kochava preemptively sued the FTC, claiming the commission was unjustifiably threatening a suit after Kochava refused to settle.
One of Kochava’s main arguments is that the FTC is overstepping and that its suit relies on “sensationalized allegations untethered to facts.”
Kochava also argues that the FTC’s injunction is “unreasonably vague and grossly overbroad” and that the FTC doesn’t point to a specific law or regulation that prohibits Kochava’s business practices.
According to the FTC, Kochava’s business practices qualify as “unfair” under Section 5 of the FTC Act.
At the end of last year, the FTC filed a motion to dismiss Kochava’s case, calling it “duplicative” of the agency’s suit. But Kochava also filed a motion of its own to dismiss the FTC’s case – which it refiled last week to include reference to FTC Commissioner Christine Wilson’s very public resignation from the agency.
The Wilson question
Wilson, a Republican, published an op-ed in The Wall Street Journal explaining her decision to step down as the result of FTC Chair Lina Khan’s “disregard for the rule of law and due process.”
Her departure takes the FTC down from four commissioners to three, all of whom are Democrats. The other Republican commissioner, Noah Phillips, exited the agency in October after also criticizing the FTC’s new leadership, albeit in less incendiary fashion.
Notably, Wilson did not offer a dissenting opinion on the FTC’s case against Kochava last year. The vote was 4 to 1 in favor of suing, with Phillips as the lone dissenting vote.
But adding Wilson’s resignation letter to the public record as part of its motion to dismiss is a logical move for Kochava.
And it won’t be surprising if other companies that are also under heat from the FTC do the same, using Wilson’s strong statements as fodder to question the current FTC’s motives, theories and powers.
More ‘flesh on the bones’
Back in Idaho, Judge Winmill is clearly unamused that there are two lawsuits covering the same territory from each party.
He intimated that it’s going to be up to the FTC to consolidate the cases and clean up any “technical shortcomings in the allegations” against Kochava before refiling, including adding more specific examples of harm.
The case will likely need more “flesh on the bones” so that the defendant (Kochava) can respond appropriately, Winmill said.
Kochava took this as a positive sign.
In a statement, Kochava CEO Charles Manning said the hearing “was an important step toward resolving this matter” and that the company remains “hopeful that challenging the FTC’s ambiguous claims will ultimately benefit consumers and advertisers as a whole.”
Reasonable?
Toward the end of the hearing, Winmill did call out what could potentially be a gap – or at least an awkward spot – in Kochava’s argument, which he did by putting himself in the shoes of a regular person.
In its complaint, the FTC argues that the collection and use of location data is “opaque to consumers,” meaning people typically don’t know which companies collected their data or how it’s being used.
In Kochava’s view, this doesn’t prove harm.
Also, people do have control because they can turn off their phone if they don’t want to be tracked, noted Craig Mariam, Kochava’s attorney.
“Owning a cell phone and having it permanently glued to your hand is not a protected right under the constitution or any law,” Mariam said.
Which is true, but also begs the question of what a regular person can be expected to do.
“I think I’m a reasonable person, and I don’t turn my cellphone off before I go to the doctor,” Winmill said.
Mariam countered that the issue is whether any real or perceived harm is reasonably avoidable, and turning off a cellphone isn’t an extreme thing for someone to have to do.
Perhaps. But who turns off their phone when they visit the doctor or attend a religious function?
And if the plausibility of the allegations “depends upon how people behave and … whether a consumer has free and informed choice,” Winmill said, “I don’t think these are appropriate to rely upon to dismiss the [FTC’s] complaint at this juncture.”
