Federal Trade Commission Chairwoman Ramirez Testifies Before Congress Regarding 17 FTC Reform Bills Pending in Congress

June 9, 2016
7 minutes

On May 24, 2016, Federal Trade Commission (“FTC” or the “Commission”) Chairwoman Edith Ramirez delivered testimony before the House Energy and Commerce Committee’s Subcommittee on Commerce, Manufacturing, and Trade in a hearing entitled “Legislative Hearing on 17 FTC Bills.” The hearing and testimony addressed seventeen proposed bills that would modify or reform the FTC’s authority and procedures. The Chairwoman’s testimony endorsed provisions in several bills that would codify expansion of the FTC’s authority but expressed concern with others that would impose limits on the FTC’s jurisdiction or reform its procedures.

Below we address a number of the FTC reform bills pending in Congress that were the subject of Chairwoman Ramirez’s testimony.

H.R. 5097, Start Taking Action on Lingering Liabilities Act

The bill would require the termination of an FTC investigation in the event the Commission fails to contact the target of the investigation with a “verifiable” written communication every six months or formally votes to continue the investigation. Chairwoman Ramirez expressed concern that this provision could impede the Commission’s efforts to investigate injuries to consumers, while also duplicating protections already asserted by the FTC. In particular, the Chairwoman cited rules that “incentivize staff to engage in ongoing communications with entities subject to an investigation” and that permit a company subject to an access letter, Commission compulsory process, or a demand to preserve material to dispose of responsive material in the event more than twelve months pass between communications from FTC staff.

The Chairwoman also expressed concern that an investigation could be inadvertently terminated in the event of “lost mail or a procedural oversight.” In her oral response to questioning by committee members, Chairwoman Ramirez described the proposed legislation as potentially “penaliz[ing] consumers” for oversights on the part of Commission staff.

H.R. 5115, Statement on Unfairness Reinforcement and Emphasis Act

The bill would amend the Federal Trade Commission Act, 15 U.S.C. 45(n), to include portions of the 1980 FTC Policy Statement on Unfairness. Specifically, the bill would clarify that an injury or potential injury is not substantial if it is “trivial or merely speculative,” though it may cause substantial injury if it does “a small harm to a large number of people” or raises a significant risk of “concrete harm.” The bill would also require the FTC to consider, in determining whether an injury or potential injury is substantial, whether the act or practice results in: (1) monetary harm; (2) unwarranted health or safety risk; or (3) only in emotional or subjective harm. The bill would also prevent the FTC from determining that an act or practice is unfair unless the Commission also determines that the act or practice is injurious in its “net effects.” To establish that a practice is injurious in its net effects, the FTC would have to consider the “various costs of a remedy, including the costs to the parties directly before the Commission,” as well as general societal costs, including “increased paperwork, increased regulatory burdens on the flow of information, reduced incentives to innovation and capital formation, and other similar matters.”

The Chairwoman’s testimony expressed concern with these provisions, stating that the proposed codification may impede efforts to initiate enforcement. The Chairwoman suggested that the bill may undermine the FTC’s efforts to prevent harm before it occurs, contrary to the FTC Act’s grant of authority to prevent entities from engaging in unfair or deceptive acts or practices.

In her oral response to questioning by committee members, Chairwoman Ramirez stated that she believed that codification of certain portions of the Policy Statement and not others could create uncertainty and that by expressing concern about enforcement actions directed against “speculative harm,” the bill could impede the Commission’s efforts to initiate preventative action.

H.R. 5093, Technological Innovation through Modernizing Enforcement Act

The bill would impose an eight-year limit on FTC administrative consent orders. The Chairwoman expressed concern that rigid time limits on consent orders would take away flexibility in crafting orders. Her testimony cited ten prior federal court suits brought in response to violations of administrative orders more than fifteen years old. The testimony noted one 1995 action alleging violations of a 1976 order. In her oral response to questioning by committee members, Chairwoman Ramirez cited two data security cases (Twitter and Dave & Buster’s) as examples where consent orders included provisions with durations of less than twenty years.

H.R. 5109, Clarifying Legality and Enforcement Action Reasoning Act

The bill would require the FTC to publish an annual report to Congress on its consumer protection investigations, describing both cases that resulted in agency action as well as those closed without action during the past year. The Chairwoman expressed concern that this requirement would create negative publicity for those companies investigated by the FTC but for whom the FTC decides not to issue a complaint or pursue enforcement. She also argued that many investigations are closed for fact-specific reasons involving company trade secrets that could not be disclosed in such a report.

In her oral response to questioning by committee members, Chairwoman Ramirez noted that the report required by the bill would be unlikely to provide useful guidance as to the lawfulness of certain acts and practices without exposing subject companies to the possibility of identification, and that closing letters issued in cases closed without enforcement action already provide relevant guidance to regulated industry.

H.R. 5098, FTC Robust Elderly Protections and Organizational Requirements to Track Scams Act

The bill would require submission of an annual planning document to Congress to provide detailed information on policy, rulemaking, and structural plans, along with projected dates and timelines for such plans. The Chairwoman expressed concern that committing to such a plan each year would hamper the Commission’s ability to respond to newly emerging issues. She also noted that the FTC currently reports to Congress on its objectives, activities, and performance in a variety of forms.

H.R. 5118, Solidifying Habitual and Institutional Explanations of Liability and Defenses Act

The bill contains provisions that would prohibit the FTC from basing an enforcement action solely on the inconsistency of acts or practices with Commission-issued industry guidance or similar statements unless the acts or practices also violate a provision of law, but that a company may use compliance with guidance as evidence of legal compliance. The Chairwoman expressed concern that the bill would in effect confer a “safe harbor” on companies demonstrating compliance with guidance. The Chairwoman also expressed concern that such safe harbors could chill the Commission’s willingness to issue guidance.

In her oral response to questioning by committee members, Chairwoman Ramirez reiterated the concern that the bill would in essence create a safe harbor and also expressed concern that the bill inadequately defined what would constitute guidance, such that it could encompass less formal Commission statements such as blogs or business education materials.

H.R. 5136, the Revealing Economic Conclusions for Suggestions Act

The bill would require that any legislative or regulatory recommendation of the FTC be accompanied by an economic analysis by the Bureau of Economics of the Commission sufficient to demonstrate that the Commission has identified a problem it determines should be addressed, and include a description of the rationale for such legislation or regulation. The Chairwoman expressed concern that this bill would excessively burden the Commission and effectively prevent it from providing such recommendations.

Other Bills

The Chairwoman expressed support for several of the remaining proposed bills, either as drafted or with suggested modifications.

Proposed bills supported as written include:

  • H.R. 5111, Consumer Review Fairness Act: voiding non-disparagement clauses in form contracts and allowing the FTC to seek civil penalties for violations;
  • H.R. 5092, Reinforcing American-Made Products Act: giving the FTC exclusive authority to set and enforce the standard for products labeled “Made in the USA” or similar claims;
  • H.R. 4460, Youth Sports Concussions Act: giving the FTC civil penalty authority to address the importation and sale of sports equipment for which the importer or seller has made deceptive safety benefit claims;
  • H.R. 5239, Protecting Consumers in Commerce Act of 2016: expanding FTC jurisdiction to include the telecommunications and internet service provider industries by striking the telecommunications common carrier exception from the FTC Act;
  • H.R. 5255 (no short title): subjecting charitable, religious, educational and other nonprofit organizations to the FTC Act;
  • H.R. 5116, Freeing Responsible and Effective Exchange Act: permitting a bipartisan majority of Commissioners to hold a meeting that is closed to the public to discuss official business.

Proposed bills supported in principle, but with proposed modifications, include:

  • H.R. 4526, Stop Online Booking Scams Act: requiring disclosures in order to prevent online travel sites from deceiving consumers about their affiliation with hotels;
  • H.R. 5212, Bereaved Consumer’s Bill of Rights Act of 2016: conferring FTC authority to prescribe rules prohibiting unfair or deceptive acts or practices in the provision of funeral goods or services;
  • H.R. 5245, Better Oversight of Secondary Sales and Accountability in Concert Ticketing Act of 2016: directing the Commission to prescribe rules to protect consumers from unfair and deceptive acts and practices in connection with primary and secondary ticket sales;
  • H.R. 5104, Better On-line Ticket Sales Act: prohibiting, as an unfair and deceptive act or practice in commerce, the sale or use of certain software to circumvent control measures used by internet ticket sellers to ensure equitable consumer access to tickets for any given event.

For more information regarding any of the proposed bills or to discuss FTC consumer protection and/or privacy & data security enforcement generally, please feel free to contact Peter Brody, David McIntosh, Mark SzpakDebbie Gersh, Tim McCrystal, Laura Hoey, or your usual Ropes & Gray contact.