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Inside Privacy Updates on Developments in Global Privacy & Data Security from Covington & Burling LLP

FTC Commissioner Argues for Balanced Approach to Unfairness Cases

Posted in Federal Trade Commission, United States

As the Federal Trade Commission takes an increasingly broad view of its authority to regulate privacy and consumer protection, one of the agency’s five commissioners is calling for a more cautious approach.

In a speech today to TechFreedom and the International Center for Law and Economics in Washington, D.C., Commissioner Joshua D. Wright disagreed with the Commission’s recent approach to regulating “unfair” practices under Section 5 of the FTC Act.  Wright argued that before the Commission brings an “unfairness” complaint against a company, it first must conduct a rigorous economic analysis to determine whether the harms outweigh the consumer benefits.

The FTC Act prohibits the Commission from bringing an unfairness complaint “unless the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.”  In some cases, Wright said, the agency has not satisfied that standard before bringing a complaint.

Wright focused on the Commission’s January enforcement action and settlement with Apple, arising from the company’s alleged failure to adequately disclose to iTunes account holders that they would be billed for in-app purchases in the 15 minutes after they entered their password.  The Commission said this led to some parents being billed for purchases that their children made.  Wright was the lone dissenter from this enforcement action and settlement.

Wright largely agreed with the four other commissioners that there was evidence of some harm to consumers.   His disagreement, however, stemmed from the failure of the Commission to adequately consider the benefits of allowing a 15-minute period before consumers are forced to reenter their password.

“Anybody in the room with an iTunes account, iPad, or iPhone knows that the ease with which users can operate the platform affects one’s experience,”  Wright said.  “Apple knows that too.  And Apple had apparently determined that most consumers do not want to experience excessive disclosures or to be inconvenienced by having to enter their passwords every time they make a purchase.”

Wright said that “the Commission should have conducted a much more robust analysis to determine whether the injury to this small group of consumers justified the finding of unfairness and the imposition of a remedy.” 

Wright also discussed the FTC’s May data broker report, in which the Commission recommended that Congress consider passing legislation to regulate the data broker industry.  Wright said that he would like to see “serious cost-benefit analysis” that weighs evidence of actual consumer harms against the consumer value of data broker practices.