[Senate Hearing 117-765]
[From the U.S. Government Publishing Office]
S. Hrg. 117-765
STRENGTHENING THE
FEDERAL TRADE COMMISSION'S AUTHORITY
TO PROTECT CONSUMERS
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HEARING
BEFORE THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
APRIL 20, 2021
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available online: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
54-106 PDF WASHINGTON : 2023
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
MARIA CANTWELL, Washington, Chair
AMY KLOBUCHAR, Minnesota ROGER WICKER, Mississippi, Ranking
RICHARD BLUMENTHAL, Connecticut JOHN THUNE, South Dakota
BRIAN SCHATZ, Hawaii ROY BLUNT, Missouri
EDWARD MARKEY, Massachusetts TED CRUZ, Texas
GARY PETERS, Michigan DEB FISCHER, Nebraska
TAMMY BALDWIN, Wisconsin JERRY MORAN, Kansas
TAMMY DUCKWORTH, Illinois DAN SULLIVAN, Alaska
JON TESTER, Montana MARSHA BLACKBURN, Tennessee
KYRSTEN SINEMA, Arizona TODD YOUNG, Indiana
JACKY ROSEN, Nevada MIKE LEE, Utah
BEN RAY LUJAN, New Mexico RON JOHNSON, Wisconsin
JOHN HICKENLOOPER, Colorado SHELLEY MOORE CAPITO, West
RAPHAEL WARNOCK, Georgia Virginia
RICK SCOTT, Florida
CYNTHIA LUMMIS, Wyoming
David Strickland, Staff Director
Melissa Porter, Deputy Staff Director
George Greenwell, Policy Coordinator and Security Manager
John Keast, Republican Staff Director
Crystal Tully, Republican Deputy Staff Director
Steven Wall, General Counsel
C O N T E N T S
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Page
Hearing held on April 20, 2021................................... 1
Statement of Senator Cantwell.................................... 1
Statement of Senator Wicker...................................... 2
Letter dated April 20, 2021 to Hon. Maria Cantwell and Hon.
Roger Wicker from Neil L. Bradley, Executive Vice President
and Chief Policy Officer, Chamber of Commerce of the United
States..................................................... 5
Statement of Senator Fischer..................................... 25
Statement of Senator Tester...................................... 27
Statement of Senator Moran....................................... 29
Statement of Senator Klobuchar................................... 31
Statement of Senator Cruz........................................ 33
Statement of Senator Blumenthal.................................. 35
Statement of Senator Blackburn................................... 37
Statement of Senator Schatz...................................... 38
Statement of Senator Thune....................................... 40
Statement of Senator Peters...................................... 42
Statement of Senator Rosen....................................... 44
Statement of Senator Lummis...................................... 45
Statement of Senator Hickenlooper................................ 47
Witnesses
Hon. Rebecca Kelly Slaughter, Acting Chairwoman, Federal Trade
Commission..................................................... 8
Prepared statement of the Federal Trade Commission........... 10
Hon. Noah Joshua Phillips, Commissioner, Federal Trade Commission 16
Hon. Rohit Chopra, Commissioner, Federal Trade Commission........ 17
Hon. Christine Wilson, Commissioner, Federal Trade Commission.... 19
Appendix
Response to written questions submitted to Hon. Rebecca Kelly
Slaughter, Hon. Noah Joshua Phillips, Hon. Rohit Chopra, and
Hon. Christine Wilson by:
Hon. John Thune.............................................. 51
Hon. Todd Young.............................................. 52
Hon. Shelley Moore Capito.................................... 52
Response to written question submitted to Hon. Noah Joshua
Phillips and Hon. Christine Wilson by:
Hon. John Thune.............................................. 53
Hon. Todd Young.............................................. 53
Hon. Shelley Moore Capito.................................... 54
Response to written questions submitted to Hon. Rebecca Kelly
Slaughter, Hon. Noah Joshua Phillips, Hon. Rohit Chopra, and
Hon. Christine Wilson by:
Hon. John Thune.............................................. 55
Hon. Todd Young.............................................. 55
Hon. Shelley Moore Capito.................................... 56
STRENGTHENING THE
FEDERAL TRADE COMMISSION'S AUTHORITY TO PROTECT CONSUMERS
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TUESDAY, APRIL 20, 2021
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10 a.m., in room
SR-253, Russell Senate Office Building, Hon. Maria Cantwell,
Chair of the Committee, presiding.
Present: Senators Cantwell [presiding], Klobuchar,
Blumenthal, Schatz, Peters, Tester, Rosen, Hickenlooper,
Wicker, Thune, Cruz, Fischer, Moran, Blackburn, and Lummis.
OPENING STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
The Chair. Good morning. The Senate Committee on Commerce,
Science, and Transportation will come to order. We are here
this morning to have our first hearing of this 117th Congress
with the Federal Trade Commission. So, I welcome the Acting
Chairwoman and Commissioners to this very first hearing.
I would like to begin with a discussion of a report
released yesterday by the FTC. The report shines a spotlight on
COVID-related fraud and scams preying on American consumers and
their families during the pandemic. These bad actors are
kicking consumers when they are already down, peddling fake
COVID cures, trolling for personal data in order to commit
identity theft, and selling counterfeit PPP to first
responders. The FTC report shows a 45 percent increase in the
number of consumer complaints filed over 2020--for 2020 over
2019. This matches the increase in consumer complaints filed
with the Washington Attorney General's office during the height
of the pandemic.
That is why we are here today, to strengthen the
Commission's ability to fight for consumers. Unfortunately, the
FTC's long-standing authority to return money to victims is
endangered now at the Supreme Court. This authority, the so
called 13(b) Authority, is the bread and butter of the FTC's
consumer protection mission.
For more than 40 years, 13(b) has been used by the FTC to
return funds illegally taken from consumers. The FTC has
returned hundreds of millions of dollars to Americans injured
by unlawful business practices. For instance, in 2019 the FTC
returned $34 million to consumers in a settlement with the
Office Depot organization, which ran bogus virus scans on
consumers' computers and used false results to persuade
consumers to pay more for repairs. Because of 13(b), relief to
consumers included more than $3.7 million to 58,000 residents
of Texas, more than $800,000 to 12,000 residents from
Tennessee, and more than $1.2 million to about 20,000
Washington consumers.
Similarly, in 2019, a settlement against the University of
Phoenix, the FTC secured over $40 million in cash to over
146,000 U.S. students, as well as student debt cancellation.
The University of Phoenix had attracted students with a false
claim of job opportunities, including ads that had suggested
military--that had targeted military and Hispanic consumers.
The FTC returned more than $1.1 million to around 3,500
consumers in Tennessee and 3,000 consumers in Washington.
These cases just demonstrate the need to maintain the long-
standing FTC authority. And the COVID pandemic has intensified,
I believe, the need for that consumer protection. Since the
beginning of the pandemic, the country has been besieged by
scams and deception. For example, last April, the FTC sent a
warning letter to a health clinic in Olympia, Washington, that
was making unproven claims that it could treat COVID-19 with
just a high dose of vitamin injections. The Seattle
microbiologist marketed and sold unauthorized corona vaccines
to consumers for up to $1,000 each. The FTC sent him a warning
letter and he was later sued by our State's attorney general.
So, all of these scams, along with the one that was
perpetrated about making the moniker of an N95 mask when it
really did not meet that standard, all of these things are why
we want to make sure that the FTC has appropriate authority.
The Commission filed a complaint last week, which used their
new authority, that we just gave them, against another alleged
seller of a sham COVID cure. So, we very much appreciate that
you are using the new authority and working.
We need honest businesses, many of them small businesses,
should not have to compete with businesses who are using these
unfair tactics. So, it is not only good for consumers, it is
also good for our economy, and other businesses that are
playing by the rules. So, I know that today we will hear much
more about this, but we have to do everything we can to protect
this authority, and if necessary, pass new legislation to do
so.
So, thank you all for being here. I will introduce you in a
minute, but now I am turning to my colleague for his comments.
STATEMENT OF HON. ROGER WICKER,
U.S. SENATOR FROM MISSISSIPPI
Senator Wicker. Thank you, Madam Chair, and indeed this is
a distinguished panel of witnesses. It is always good to hear
from them, and we are glad to have you back before our
committee. I look forward to your testimonies.
For over 100 years, the FTC has been the chief consumer
protection agency of the United States. Its mission, stated
plainly in the FTC Act, is to protect consumers from unfair or
deceptive acts or practices in the marketplace, such as
deceptive advertising, harmful technology, illegal robocalls,
and scams. It also includes protecting consumers from
businesses that misuse their personal data or attempt to
process their data in discriminatory ways.
As the distinguished Chair has already said, unfortunately,
the COVID-19 pandemic has created new avenues for scammers and
cybercriminals to take advantage of consumers. The
unprecedented nature of the virus has opened the door to scams
related to fake cures and vaccines, as well as fake virus
tests. Most recently, the pandemic has created a market for
counterfeit vaccination cards purportedly from the CDC. This
adds to a long list of frauds, scams, and bad business
practices the FTC is continually working to address.
To combat fraud and protect consumers from unfair or
deceptive practices in the marketplace, the FTC has
historically relied upon its assumed authorities, under Section
13(b) of the FTC Act. This has enabled the FTC to stop illegal
activity or require scammers to give money back to those who
have been defrauded. Last Congress, in anticipation of the
Supreme Court's plans to address challenges to the scope of the
FTC's authority under 13(b), I included a provision in my
proposed data privacy bill, the SAFE DATA Act, that would
clarify the Commission's authority under the laws to stop
fraudulent activities and obtain monetary redress for
consumers.
This morning, I look forward to examining how Congress can
further clarify the statute to empower the FTC, not only to
enjoin improper behavior, but also to compensate victims for
their losses. I also look forward to discussing how to ensure
the proper assessment of monetary remedies, and that legitimate
businesses are given fair notice about practices the FTC may
deem to be unfair, as it expands its use of 13(b) to stop
wrongdoing.
The pandemic has further underscored the need for strong,
uniform data privacy legislation. Over the past year, our
normal activities of work, school, and visiting with family
moved online to prevent further spread of the coronavirus.
However, with no national data privacy law in place, continued
virtual interactions could pose serious and negative risks for
exposure, and potential exploitation, of the personal data of
millions of Americans. I am sure Commissioners will want to
discuss what the FTC has been doing during the pandemic to
protect the privacy and security of personal data and what
additional tools the agency needs to safeguard consumers'
information from misuse.
The FTC also plays an essential role in overseeing and
preventing unfair methods of competition in the marketplace.
Although the Commission's work on competition is not within the
jurisdiction of this committee, it does impact consumer welfare
and informs how companies may attempt to defraud, mislead, or
discriminate against consumers in the marketplace.
In this regard, Big Tech's dominance is of particular
concern. This dominance has led to an abuse of their market
power, in the form of censorship and content suppression, as
well as the abuse of consumers' data in the form of repeated
privacy violations and data misuse. As Justice Thomas opined 2
weeks ago, we now have a society in which a few Silicon Valley
CEOs decide what films you can stream, which books you can buy,
and what scientific discourse is allowed in public. Today's
hearing is an opportunity to discuss what more the FTC can do
to address these matters in furtherance of its consumer
protection mission.
Finally, this committee has been working to develop
bipartisan legislation to establish a national framework
permitting college athletes to be compensated for the use of
their name, image, and likeness--NIL. As this work continues,
it is clear that the FTC's expertise in protecting consumers
will be a necessary asset in ensuring compliance with any NIL
law and guarding student athletes, and their families, from
exploitation. I hope Commissioners will discuss what additional
tools, resources, and personnel expertise the FTC would need if
it takes on this important work and oversees this collegiate
sports marketplace as part of its consumer protection mission.
Clearly there is much to discuss today. I thank the
Commissioners for their testimonies, and I thank the
Commissioners for their bipartisan work. I look forward to an
informative discussion.
At this point, Madam Chair, I would mention that you and I
received a letter dated this morning from Mr. Neal L. Bradley,
on behalf of the Chamber of Commerce. He is the Executive Vice
President and Chief Policy Officer, consisting of three pages
addressing the issues of importance with regard to the Federal
Trade Commission and their interpretation of Section 19 of the
Act and Section 13(b) of the Act. And I would ask that that
letter be added to the record, at this point.
The Chair. Without objection.
[The information referred to follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Wicker. Thank you.
The Chair. Thank you, Senator Wicker. Thank you for that
comprehensive statement. I certainly appreciate you mentioning
those issues that I definitely am going to query the Commission
today on data security rules because I agree there is more that
needs to be done there. I hope that we will have a hearing in
May on this issue of market dominance on the news because
clearly there are so many issues there that both the DOJ and
the FTC should be looking into. We have just been looking for
the right time for us to get necessary work out the door so we
can turn to that focus. But clearly, we produced a report on
some of this last year, about their tech companies' market
dominance as it relates to media.
So, definitely very concerned about that and just thank you
for your leadership on NIL. I certainly appreciate the work
that you and your team and others, Senator Booker and
Blumenthal, everybody has been doing on such an important
issue. So, you are right. It is a good chance to also ask them
about that. So, yes, I do not think, in an information age,
there is any shortage of issues that the FTC should be more
aggressively involved in.
So, we are glad you are here. Let me introduce the
Honorable Rebecca Slaughter, who is the Acting Chair of The
Federal Trade Commission, the Honorable Noah Phillips, a member
of the FTC, the Honorable Rohit Chopra, who is with us as
Commissioner of the FTC, and remotely, the Honorable Christine
Wilson. Welcome to you all again. We are glad you are here.
Thank you for your ongoing work and, Madam Chair, we will start
with you.
STATEMENT OF HON. REBECCA KELLY SLAUGHTER, ACTING CHAIRWOMAN,
FEDERAL TRADE COMMISSION
Ms. Slaughter. Thank you, Chair Cantwell, and Ranking
Member Wicker, and members of the Committee, for inviting us
here today. I am grateful for your continued support of the
Federal Trade Commission and for the opportunity to testify
about strengthening our authority to protect consumers. I know
our staff, who have been working diligently throughout the
pandemic, share my appreciation for your interest in the work
we are doing and the challenges we face.
Americans are struggling. Yesterday, the Commission issued
a report, as the Chair noted, identifying the major challenges
consumers have faced, and continue to face, as a result of the
pandemic--health and safety concerns, economic distress, and
increased susceptibility to digital harm. While all Americans
have confronted these challenges, we know that Americans from
communities of color and lower income communities have been
hardest hit. I will focus my remarks today on how the FTC is
applying the resources and authority Congress has given us to
address these concerns and highlight the areas where I believe
strengthening our authority is most critical.
The Commission is profoundly grateful for the funding boost
we received in our annual appropriation, and particularly, in
the American Rescue Plan. Even before the pandemic, the growing
problems in both consumer protection and competition requiring
enforcement attention, were stretching our resources to the
breaking point. That situation was dramatically exacerbated in
the last year. We are working quickly to use the new money to
hire staff and strategically fund our data collection and
outreach efforts, with a specific focus on ensuring that we are
reaching our hardest hit communities.
When Congress gives us new authority, we will take it
seriously and put it to use responsibly. We welcome the COVID-
19 Consumer Protection Act, which provided us with new civil
penalty authority regarding certain COVID-19 deceptive acts and
practices. Just last week, only 4 months after the law was
passed, we announced our first action seeking penalties under
this new authority, targeting deceptive COVID-19 marketing of
vitamin D and zinc products.
I want to emphasize that, when it comes to our current
efforts, I am a strong proponent of a growth mindset. I
challenge myself and the Commission at every turn, to look at
all the tools we have been given and find ways to deploy them
with greater effect. I recognize, however, that there are
limits to the growth mindset.
The FTC faces significant obstacles when it comes to our
authority and resources. Among the most urgent challenges we
face is a judicial attack on our ability to provide monetary
relief to consumers under Section 13(b) of the FTC Act. We use
13(b) in a broad range of cases, including telemarketing fraud,
anti-competitive pharmaceutical practices, data security and
privacy, scams that target seniors and veterans, and most
recently, COVID-related scams.
Section 13(b) enforcement cases have returned billions of
dollars to consumers, including $11.2 billion in refunds to
consumers, during just the past 5 years. Returning money to
consumers who have been harmed, is among the most important
things we do. But the courts are dramatically curtailing our
ability to deliver that relief, and right behind the cases
challenging our redress authority under 13(b), is a line of
cases challenging our ability to get injunctive relief.
Enforcement actions will slow and redress for consumers will
dry up, if Congress does not act quickly to affirm our full
authority under Section 13(b).
Along with 13(b), our other most pressing challenge remains
resources. As I noted, we are incredibly grateful for the
additional funding provided to the Commission. But we still
remain significantly underresourced and overleveraged. Even
before the recent merger wave, we were averaging twice as many
annual merger filings as we had been 10 years ago, while our
employee count remained flat. In fact, we had 50 percent more
employees at the beginning of the Reagan Administration than we
do today. And our filing rates keep going up.
On the Consumer Protection side, there is similar growth in
both breadth and depth of problems in the markets, especially
digital markets, that require enforcement. But our ability to
keep up with this volume to work, against large, sophisticated
companies, without substantial increase in resources, will be
limited.
In addition to restoring 13(b) and augmenting resources, I
want to note additional ways I believe Congress could
strengthen our ability to deter legal conduct and return more
funds to consumers. Specifically, I would welcome broader civil
penalty authority, establishment of a consumer redress fund,
and independent litigating authority for our civil penalty
cases.
In closing, I want to thank you for the opportunity to
discuss our work and reiterate my commitment to you. When
Congress chooses to vest the FTC with resources and authority,
we will use it responsibly and effectively to protect the
American people. I look forward to answering your questions.
[The prepared statement of FTC Commissioners follow:]
Prepared Statement of the Federal Trade Commission
I. INTRODUCTION
Chair Cantwell, Ranking Member Wicker, and Members of the
Committee, we are pleased to appear before you today.\1\ Despite the
unprecedented challenges of the past year, the Federal Trade Commission
(Commission or FTC) has endeavored to protect consumers and
competition. A key part of this work has been combatting COVID-related
harms. The Commission staff recently released a report describing the
major challenges consumers face from the pandemic and the Commission's
efforts to help: using reports from consumers to identify and respond
to emerging unlawful practices in real time; filing more than a dozen
law enforcement cases; directing the removal of deceptive claims
related to COVID-19 made by more than 350 companies; and educating
consumers and businesses through more than 100 alerts on COVID-related
topics.
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\1\ This written statement presents the views of the Federal Trade
Commission. The oral statements and responses to questions reflect the
views of individual Commissioners, and do not necessarily reflect the
views of the Commission or any other Commissioner.
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The civil penalty authority in the newly-enacted COVID-19 Consumer
Protection Act\2\ and additional funding the Commission recently
received from the American Rescue Plan will enable us to intensify our
efforts to protect consumers from unscrupulous actors that seek to
exploit the pandemic and its economic fallout. The Commission just
brought its first action seeking monetary penalties under its new
authority, targeting deceptive COVID-19 marketing of vitamin D and zinc
products.\3\
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\2\ Pub. L. No. 116-260, 134 Stat. 1182, Division FF, Title XIV,
Sec. 1401(b)(1).
\3\ FTC Press Release, In First Action Under COVID-19 Consumer
Protection Act, FTC Seeks Monetary Penalties for Deceptive Marketing of
Purported Coronavirus Treatments, https://www.ftc.gov/news-events/
press-releases/2021/04/first-action-under-covid-19-consumer-protection-
act-ftc-seeks (April 15, 2021).
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In this testimony, we provide a high-level summary of the
Commission's efforts and highlight the pressing need, in light of legal
challenges, for Congress to affirm the FTC's authority to return money
to consumers using Section 13(b) of the Federal Trade Commission Act.
II. COVID-19 CONSUMER PROTECTION EFFORTS
The Commission has worked diligently to identify and address the
effects of the COVID-19 pandemic on American consumers and businesses.
The Commission's response to COVID-19 has included law enforcement,
consumer education and outreach, and data collection, each of which is
discussed in more detail below.
a. Law Enforcement
Most recently, the FTC deployed its new authority under the COVID-
19 Consumer Protection Act to charge that a chiropractor and his
company deceptively marketed products containing vitamin D and zinc as
scientifically proven to treat or prevent COVID-19.\4\ This action is
merely the latest in a long line of enforcement efforts that began
early in the pandemic. The FTC issued its first warnings to consumers
about COVID-19 related scams in February 2020, even before the
declaration of a national emergency.\5\ As schemes proliferated in
response to demand for scarce goods, to peddle treatments and cures,
and to exploit consumers' and small businesses' financial distress, the
FTC moved quickly to challenge deceptive claims. The agency filed its
first action\6\ just one month after the President declared a national
emergency concerning the COVID-19 outbreak on March 13, 2020.\7\ Since
then, the FTC has sued entities for allegedly breaking promises to
quickly ship personal protective equipment (PPE) and cleaning
products,\8\ tricking consumers into paying for sanitizing products
that were never delivered,\9\ falsely claiming that their products
could treat and/or prevent COVID-19,\10\ and making deceptive claims
regarding stimulus benefits.\11\ In addition, to protect consumers
attempting to replace or supplement income during the pandemic, the
Commission--along with 19 federal, state, and local partners--led a
nationwide crackdown against scams making false promises of income and
financial independence.\12\
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\4\ See supra n. 3.
\5\ Coronavirus: Scammers follow the headlines, https://
www.consumer.ftc.gov/blog/2020/02/coronavirus-scammers-follow-headlines
(Feb. 10, 2020).
\6\ Complaint, FTC v. Ponte Investments, LLC, Case No. 1:20-cv-
00177 (D.R.I.), available at https://www.ftc.gov/system/files/
documents/cases/sbacomplaint.pdf. The FTC alleged that the company
falsely claimed an affiliation with the U.S. Small Business
Administration (SBA) and marketed themselves to small businesses as an
approved lender under SBA's Paycheck Protection Program (PPP).
\7\ Proclamation 9994 of March 13, 2020, available at https://
www.govinfo.gov/content/pkg/FR-2020-03-18/pdf/2020-05794.pdf.
\8\ Complaint, FTC v. SuperGoodDeals.com, Inc., Case No. 20-cv-3027
(E.D.N.Y.), available at https://www.ftc.gov/system/files/documents/
cases/202_3135_supergooddeals_-_complaint.pdf; Complaint, FTC v. QYK
Brands LLC, Case No. 8:20-cv-01431-JLS-KES (C.D. Cal.), available at
https://www.ftc.gov/system/files/documents/cases/202_3147_qyk_brands_-
_complaint.pdf; Complaint, FTC v. Am. Screening, LLC, Case No. 4:20-cv-
1021 (E.D. Mo.), available at https://www.ftc.gov/system/files/
documents/cases/202_3158_american_screening_-_complaint.pdf; Complaint,
FTC v. Zaappaaz LLC, Case No. 4:20-cv-02717 (S.D. Tex.), available at
https://www.ftc.gov/system/files/documents/cases/202_3136_zaappaaz_-
_complaint.pdf.
\9\ Complaint, FTC v. One or More Unknown Parties Deceiving
Consumers Into Making Purchases Through: www.cleanyos.com, Case No.
5:20-cv-02494 (N.D. Ohio), available at https://www.ftc.gov/system/
files/documents/cases/complaint_w-a_filed.pdf.
\10\ Complaint, FTC v. Golden Sunrise Nutraceutical, Inc., Case No.
1:20-cv-00540-DAD-SKO (E.D. Cal.), available at https://www.ftc.gov/
system/files/documents/cases/202_3146_golden_
sunrise_-_complaint.pdf; Complaint, FTC v. Ching, Case No. 2:20-cv-
03775 (C.D. Cal.), available at https://www.ftc.gov/system/files/
documents/cases/whole_leaf_complaint.pdf; Complaint, In re Ching,
Docket No. 9394 (FTC), available at, https://www.ftc.gov/system/files/
documents/cases/d09394_administrative_part_iii_complaint.pdf.
\11\ Complaint, In re Traffic Jam Events, LLC, Docket No. 2:20-cv-
1740,9395 (FTC), available at https://www.ftc.gov/system/files/
documents/cases/traffic_jam_events_complaint.pdfhttps://www.ftc.gov/
system/files/documents/cases/d9395_traffic_jam_complaint_final.pdf.
\12\ FTC Press Release, As Scammers Leverage Pandemic Fears, FTC
and Law Enforcement Partners Crack Down on Deceptive Income Schemes
Nationwide, https://www.ftc.gov/news-events/press-releases/2020/12/
scammers-leverage-pandemic-fears-ftc-law-enforcement-partners (Dec. 14,
2020).
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Starting in March 2020, the FTC also launched a campaign to
challenge companies' deceptive COVID-19 claims--directing the companies
to cure violations and pursuing enforcement actions if problematic
claims were not quickly removed. To date, the FTC has issued more than
350 warning letters, many in conjunction with the Food and Drug
Administration (FDA), to sellers and marketers that claimed that their
products could treat or prevent COVID-19.\13\ The Commission also
issued warning letters with the Small Business Administration regarding
small business relief\14\ and joint letters with the Federal
Communications Commission (FCC) to Voice Over Internet Protocol service
providers and others ``assisting and facilitating'' illegal
telemarketing calls, including calls to market products such as
fraudulent home test kits.\15\ The Commission has monitored responses
to these warning letters closely, and has been pleased to see that in
the overwhelming majority of cases, letter recipients removed
problematic claims quickly. The Commission is determined to pursue
swift enforcement action against noncompliant warning letter
recipients.
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\13\ Copies of all of the FTC's COVID-19 related warning letters
are available here: https://www.ftc.gov/coronavirus/enforcement/
warning-letters.
\14\ FTC Press Release, FTC and SBA Warn Operator of SBA.com and
Lead Generator Lendio to Stop Potentially Misleading Coronavirus Relief
Loan Marketing, https://www.ftc.gov/news-events/press-releases/2020/05/
ftc-sba-warn-operator-sbacom-lead-generator-lendio-stop (May 18, 2020);
Press Release, FTC and SBA Warn Six Companies to Stop Potentially
Misleading Marketing Aimed at Small Businesses Seeking Coronavirus
Relief Loans https://www.ftc.gov/news-events/press-releases/2020/06/
ftc-sba-warn-six-companies-stop-potentially-misleading-marketing (June
24, 2020).
\15\ FTC Press Release, FTC and FCC Send Joint Letters to VoIP
Service Providers Warning against `Routing and Transmitting' Illegal
Coronavirus-related Robocalls, https://www.ftc.gov/news-events/press-
releases/2020/04/ftc-fcc-send-joint-letters-voip-service-providers-
warning-against (Apr. 3, 2020); FTC Press Release, FTC and FCC Send
Joint Letters to Additional VoIP Providers Warning against `Routing and
Transmitting' Illegal Coronavirus-related Robocalls, https://
www.ftc.gov/news-events/press-releases/2020/05/ftc-fcc-send-joint-
letters-additional-voip-providers-warning (May 20, 2020).
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In light of the eviction crisis caused by the pandemic, the
Commission has partnered with fellow enforcers at the Consumer
Financial Protection Bureau (CFPB) to focus on ensuring renters are not
subjected to unlawful practices.\16\ The Commission also will continue
its efforts to ensure that tenant screening companies comply with the
Fair Credit Reporting Act, so that consumers who have gone or will go
through an eviction are not further stigmatized by incomplete or
inaccurate information as they seek new housing.\17\ The Commission is
also monitoring and investigating conduct by multistate landlords that
may violate the FTC Act or other laws if they evict tenants in
violation of national, state, or local eviction moratoriums, as Acting
Chairwoman Slaughter and Acting CFPB Director Uejio recently warned in
a joint statement.\18\
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\16\ Press Release, FACT SHEET: The Biden-Harris Administration's
Multi-Agency Effort to Support Renters and Landlords, https://
www.whitehouse.gov/briefing-room/statements-releases/2021/03/29/fact-
sheet-the-biden-harris-administrations-multi-agency-effort-to-support-
renters-and-landlords/ (Mar. 29, 2021).
\17\ An example of the FTC's efforts to protect tenants even before
the pandemic is our case against AppFolio, in which the defendant
agreed to settle charges that it failed to follow reasonable procedures
to ensure the accuracy of criminal and eviction records in tenant
screening reports and reported obsolete information. See Complaint,
United States v. AppFolio, Inc., Case No. 1:20-cv-03563 (D.D.C. Dec. 8,
2020), available at https://www.ftc.gov/system/files/documents/cases/
ecf_1_-_us_v_appfolio_complaint.pdf.
\18\ Joint Statement by FTC Acting Chairwoman Rebecca Kelly
Slaughter and CFPB Acting Director Dave Uejio (Mar. 29, 2021), https://
www.ftc.gov/news-events/press-releases/2021/03/joint-statement-ftc-
acting-chairwoman-rebecca-kelly-slaughter.
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The Commission will remain vigilant in order to protect the public
from harms that stem directly and indirectly from the COVID-19
pandemic. The FTC is committed to tackling emerging threats, adjusting
our strategies wherever necessary, and working in close coordination
with our partners.
b. Consumer Education and Outreach
The Commission has buttressed its law enforcement actions with
consumer and business education. Since the beginning of the pandemic,
the FTC has worked aggressively to dispel misinformation and confusion
about the pandemic and related issues that have fueled COVID-related
scams. The Commission's education campaign has several facets: consumer
and business alerts; a multi-media campaign; substantive business
guidance; and outreach with partners.
Early in the pandemic, the Commission began issuing alerts warning
consumers and the business community of COVID-related frauds. To date,
the FTC has issued more than 100 consumer and business alerts on a wide
range of COVID-related topics, including economic impact payments,
health claims, online shopping, privacy in a virtual environment,
contact tracing, government imposter scams, job scams, and
misinformation.\19\ The FTC sends its alerts to more than 367,000 e-
mail subscribers, which include consumers, businesses, partners, and
the media. In turn, many of these subscribers share the information
with their communities, greatly expanding the reach of the agency's
message. The FTC has developed a multimedia campaign with a dedicated
website (ftc.gov/coronavirus) that contains a library of materials for
consumers and businesses in several different languages.
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\19\ All of the FTC's business and consumer alerts are available at
http://ftc.gov/coronavirus.
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As the pandemic required many work, school, recreational, and
social activities to transition from in-person to online and virtual
platforms, the shift to digital life presented new opportunities for
bad actors to exploit. The Commission worked to prevent this
exploitation from occurring in the first instance. Accordingly, in
April 2020, the Commission published guidance for education technology
companies and schools regarding their duties to protect children's
privacy and personal data--including warnings of the parental consent
requirements for data collection imposed by the Children's Online
Privacy Protection Act (COPPA).\20\ The FTC also took enforcement
actions to stop digital harms.\21\
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\20\ COPPA Guidance for Ed Tech Companies and Schools during the
Coronavirus, https://www.ftc.gov/news-events/blogs/business-blog/2020/
04/coppa-guidance-ed-tech-companies-schools-during-coronavirus (Apr. 9,
2020).
\21\ Although the conduct in these matters occurred before the
COVID-19 outbreak, the relief in these orders seeks to protect
consumers from digital harms that have been exacerbated by the
pandemic. See Complaint, United States v. HyberBeard, Inc., Case No.
3:20-cv-03683 (N.D. Cal.) (enforcement of the COPPA Rule against kids
app developer), available at https://www.ftc.gov/system/files/
documents/cases/192_3109_hyperbeard_-_complaint.pdf; Complaint, In re
Zoom Video Comms., Inc., Docket No. C-4731 (FTC) (administrative action
challenging claims that gave consumers a false sense of security about
how the company protected their information), available at https://
www.ftc.gov/system/files/documents/cases/1923167zoomcom
plaint_0.pdf; Complaint, In re Flo Health, Inc., File No. 1923133 (FTC)
(charges a developer of a period and fertility-tracking app with
allegedly sharing consumer health information with outside data
analytics providers after promising that such information would be kept
private, available at https://www.ftc.gov/system/files/documents/cases/
flo_health_complaint.pdf.
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Finally, FTC staff has engaged in national and local outreach with
partners to reach a variety of audiences, including older consumers,
ethnic and community media, housing organizations, re-entry groups,
library patrons, and the military community. The staff has used
webinars, tele-town halls, Twitter chats, Facebook Live events, and
interviews with local and national media to reach its audiences. During
the pandemic, FTC staff has participated in hundreds of virtual
webinars, presentations, and interviews--in English, Spanish, and
Mandarin. The FTC also has used new methods to reach people in
economically and geographically diverse communities who are targeted by
COVID-19 scam artists. For example, the FTC conducted a national radio
media tour, mailed post cards to communities with low broadband access,
and delivered letters to community health professionals in 5,000 rural
and urban health clinics to help people avoid COVID-related fraud.
As the pandemic has deepened, some new consumer financial issues
have arisen and others have been exacerbated. To ensure we are
responding appropriately to the issues consumers are facing, the FTC
coordinated a series of virtual listen-and-learn sessions across the
country. Participants have included representatives from legal
services, social services, elder justice centers, departments of aging,
housing counselors, Catholic Charities, the Better Business Bureau, and
the offices of State Attorneys General. Based on input from
stakeholders, the FTC is enhancing and expanding its COVID-19 financial
recovery and resiliency campaign, the centerpiece of which will be a
web-based toolkit available in multiple languages.
c. Data Collection
The FTC's Consumer Sentinel Network collects millions of reports
from the public about fraud, identity theft, and other consumer
problems, and makes them available to thousands of law enforcement
users across the country. In the weeks following the first known cases
of COVID-19 in the U.S., the FTC developed systems to track and alert
the public to shifts in Sentinel reporting. On ftc.gov/exploredata, the
FTC launched public dashboards showing aggregate Sentinel data on
reports associated with COVID-19 by age, type of fraud, and geographic
location, with figures that are updated daily. Since January 2020 and
as of April 7, 2021, the FTC has received more than 436,000 such
reports, reflecting $399 million in fraud losses.\22\
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\22\ The figures reflect reports in Sentinel that specifically
mention words related to the pandemic, such as COVID, stimulus, N95 and
related terms. To provide the most relevant results, some subcategories
are excluded. For more information, visit https://public.tableau.com/
profile/federal.trade.commission#!/vizhome/COVID-19andStimulusReports/
Map.
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The FTC's monitoring and analyses of Sentinel data reveal increased
fraud activity in 2020. Specifically, the number of fraud, identity
theft, and other reports to Sentinel (excluding Do Not Call) increased
more than 45 percent over 2019 numbers, and reported losses from fraud
grew from more than $1.8 billion in 2019 to $3.3 billion in 2020.\23\
Being able to use Sentinel data to spot trends has helped the FTC
respond to emerging scams in real time--from bringing cases to halt
fraudulent activity, to targeting alerts warning of the newest fraud,
to addressing specific threats, such as the proliferation of identity
theft related to unemployment insurance benefits.\24\
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\23\ Some of the increase in complaints for 2020 is due to a new
large data contributor, namely the FBI's Internet Crime Complaint
Center, which added about 200,000 complaints in 2020. In addition, the
FTC launched a re-designed website to capture consumer reports more
easily at the end of October 2020. Nevertheless, the rise in reports is
highly significant. From FTC's websites and call center alone, the
surge in reports was about 970,000 in 2020, and many Sentinel data
contributors also experienced an increase in complaint volume in 2020.
\24\ Identity thieves targeted unemployment insurance benefits in
record numbers in 2020. Of the identity theft reports received in 2020,
over 400,000 came from people who said their information was misused to
apply for a government benefit, and the overwhelming majority of these
related to unemployment insurance. This represents a staggering
increase of nearly 3000 percent from 2019. These reports were
overwhelmingly about fraudulently obtained unemployment benefits
claims, a problem that has proliferated during the pandemic. Working in
cooperation with the U.S. Department of Justice Unemployment Insurance
Fraud Task Force, the FTC launched www.IdentityTheft.gov/
unemploymentinsurance to provide information to the public on where to
report and how consumers can protect their credit.
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Ensuring that the experiences of all consumers are represented in
Sentinel is critically important to the agency's work. To expand
accessibility, the FTC launched a new modernized reporting website,
ReportFraud.ftc.gov, in October 2020. The updated site includes a
COVID-19 banner, providing an easy way for consumers to report COVID-
related issues. And, this month, the FTC launched the Community
Advocate Center, which is part of the agency's ongoing work to
collaborate with legal services organizations to learn about consumer
protection needs and problems affecting the lower-income communities
they serve. The Center provides a new way for organizations that
provide free and low-cost legal services to report fraud and other
illegal business practices directly to the FTC on behalf of their
clients.
III. LEGISLATION IS NEEDED TO ENSURE EQUITABLE MONETARY
RELIEF UNDER SECTION 13(b) OF THE FTC ACT
Over the past four decades, the Commission has relied on Section
13(b) of the Federal Trade Commission Act to secure billions of dollars
in relief for consumers in a wide variety of cases, including
telemarketing fraud, anticompetitive pharmaceutical practices, data
security and privacy, scams that target seniors and veterans, and
deceptive business practices, among many others.\25\ More recently, in
light of the pandemic, the FTC has used Section 13(b) to take action
against entities operating COVID-related scams.\26\ Section 13(b)
enforcement cases have resulted in the return of billions of dollars to
consumers targeted by a wide variety of illegal scams and
anticompetitive practices, including $11.2 billion in refunds to
consumers during just the past five years.\27\ Section 13(b) is a
critical tool in support of our enforcement missions, but its
effectiveness is currently imperiled, and this uncertainty is hurting
our ongoing enforcement efforts.
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\25\ 15 U.S.C. Sec. 53(b).
\26\ See, e.g., FTC Press Release, FTC Sues California Marketer of
$23,000 COVID-19 ``Treatment'' Plan, https://www.ftc.gov/news-events/
press-releases/2020/07/ftc-sues-california-marketer-23000-covid-19-
treatment-plan (July 31, 2020).
\27\ See https://public.tableau.com/profile/
federal.trade.commission#!/vizhome/Refunds_15797
958402020/RefundsbyCase.
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Section 13(b) of the FTC Act is the agency's primary and most
effective way of returning money to consumers that was unlawfully taken
from them. The relevant portion of Section 13(b), often referred to as
the ``second proviso,'' authorizes the FTC to sue directly in Federal
court for violations of the FTC Act and states that ``in proper cases,
the Commission may seek, and after proper proof, the court may issue, a
permanent injunction.'' Beginning in the 1980s, seven of the twelve
courts of appeals, relying on longstanding Supreme Court precedent,
interpreted the language in Section 13(b) to authorize district courts
to award the full panoply of equitable remedies necessary to provide
complete relief for consumers, including disgorgement and restitution
of money. For decades, no court held to the contrary. In 1994, Congress
ratified its intent to enable the FTC to obtain monetary remedies when
it expanded the venues available for FTC enforcement cases,
strengthening the Commission's ability to bring redress cases.\28\
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\28\ Federal Trade Commission Act Amendments of 1994, S. Rep. No.
103-130, at 15-16, as reprinted in 1994 U.S.C.C.A.N. 1776, 1790-91. As
the Senate Report noted, ``Section 13 of the FTC Act authorizes the FTC
to file suit to enjoin any violation of the FTC Act. The FTC can go
into court ex parte to obtain an order freezing assets, and is also
able to obtain consumer redress . . . . . . The FTC has used its
section 13(b) injunction authority to counteract consumer fraud, and
the Committee believes that the expansion of venue and service of
process in the reported bill should assist the FTC in its overall
efforts.'' Id.
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Recent judicial rulings, however, indicate a dramatic shift in how
courts are interpreting and applying Section 13(b) in FTC cases. For
example, in 2019, the Seventh Circuit, in FTC v. Credit Bureau Center,
LLC,\29\ overruled its three decades of precedent and held that Section
13(b) no longer allows the FTC to obtain monetary relief. The Credit
Bureau Center opinion held that the word ``injunction'' in the statute
allows only behavioral restrictions and not monetary remedies. Last
fall, the Third Circuit, in FTC v. AbbVie,\30\ relying heavily on the
analysis in Credit Bureau Center, similarly concluded that the
Commission could not obtain any monetary relief under Section 13(b). In
AbbVie, for example, the court held that the defendant drug company
violated the antitrust laws by engaging in sham litigation to keep out
generic competition, but nonetheless reversed the district court's
award of $448 million meant to repay overcharged consumers. The net
effect of the AbbVie ruling is that an adjudicated violator is
nonetheless free to keep substantial ill-gotten profits extracted from
consumers, based on a legal interpretation of Section 13(b) that no
court of appeals had adopted prior to 2019.
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\29\ FTC v. Credit Bureau Center, LLC, 937 F.3d 764 (7th Cir.
2019).
\30\ FTC v. AbbVie Inc., 976 F.3d 327 (3d Cir. 2020).
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This issue is now pending before the U.S. Supreme Court, and the
agency presented oral argument before the Court in January 2021.\31\
Although the Commission hopes to obtain a favorable ruling, the recent
judicial trends exemplified by Credit Bureau Center and AbbVie are
concerning. If the Supreme Court were to adopt the Seventh and Third
Circuit's interpretation of Section 13(b), it would eliminate the
primary tool that the FTC uses today to return money to consumer
victims.
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\31\ AMG Capital Mgmt. LLC v. FTC, No. 19-508. AMG is an appeal by
defendants from a 2018 Ninth Circuit ruling in which the court re-
affirmed its prior precedent interpreting Section 13(b) to allow the
FTC to obtain monetary relief. FTC v. AMG Capital Mgmt., LLC, 910 F.3d
417 (9th Cir. 2018).
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The uncertainty in the law is taxing the Commission's law
enforcement resources. Defendants now routinely attempt to delay
ongoing litigation for as long as possible in the hope that the Supreme
Court will allow them to escape liability for any monetary relief, and
several matters have been stayed pending the forthcoming Supreme Court
decision.\32\ Defendants are also refusing to engage in settlement
discussions unless the Commission agrees to abandon all claims for
monetary relief. One defendant has gone as far as to initiate
preemptive litigation in the Seventh Circuit to take advantage of the
fact that the Commission already is precluded from seeking monetary
relief under Section 13(b) there.\33\ These developments have slowed
the resolution of our pending enforcement cases, requiring the
Commission to expend more resources, and preventing staff from taking
on new work.
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\32\ See, e.g., FTC v. Cardiff, No. 5-18-CV-02104, Dkt. # 511 (C.D.
Cal. Oct. 9, 2020) (staying ruling on monetary relief pending
disposition of AMG); FTC v. Match Group Inc., No. 3-19-CV-02281, Dkt. #
54 (N.D. Tex. Oct. 9, 2020); FTC v. Lending Club Corp., No. 18-CV-
02454, 2020 WL 4898136 (C.D. Cal. Aug. 20, 2020).
\33\ See Nerium Int'l, LLC v. FTC, No. 1:19-CV-7189 (N.D. Ill.
filed Nov. 1, 2019) (motion to dismiss granted Aug. 31, 2020).
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In addition, two other recent Third Circuit decisions
reinterpreting Section 13(b) jeopardize the FTC's ability to enjoin
illegal conduct in Federal court. In FTC v. Shire ViroPharma, a case
involving a drug company's alleged abuse of FDA's citizen petition
process to delay generic competition, the court held that the FTC can
bring enforcement actions under Section 13(b) only when a violation is
either ongoing or ``impending'' at the time the suit is filed.\34\ That
decision unnecessarily limits the Commission's ability to obtain
monetary relief for consumers who have been harmed by unlawful conduct
that occurred entirely in the past. And, in the Third Circuit's
decision in FTC v. AbbVie, the court cited Shire ViroPharma in dicta
while agreeing, incorrectly, that the FTC cannot sue under Section
13(b) unless conduct is imminent or ongoing.\35\ Notably, in its motion
to dismiss the Commission's antitrust complaint, Facebook has cited
these decisions and argued that Section 13(b) bars the Federal court
suit.\36\
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\34\ FTC v. Shire ViroPharma, Inc., 917 F.3d 147 (3d Cir. 2019).
\35\ AbbVie, 976 F.3d at 376.
\36\ Memorandum in Support of Facebook, Inc.'s Motion to Dismiss
FTC's Complaint, FTC v. Facebook, Inc., Case No. 1:20-cv-03590-JEB
(D.D.C.).
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These decisions hamper the Commission's longstanding ability to
protect consumers by enjoining defendants from resuming their unlawful
activities in cases where the conduct has stopped but there is a
reasonable likelihood that the defendants will resume their unlawful
activities in the future. These decisions also limit the FTC's ability
to settle cases efficiently. Targets of FTC investigations now
routinely argue that they are immune from suit in Federal court because
they are no longer violating the law, despite the fact that there is a
likelihood of recurrence, and they make these arguments even in cases
when they stopped violating the law only after learning that the FTC
was investigating them.
Overall, the judicial threats outlined above are grave and, if
Congress does not act promptly, the FTC's ability to protect consumers
and execute its law enforcement mission will be significantly impaired.
IV. CONCLUSION
Throughout the past year, the Commission has worked tirelessly to
stop bad actors from exploiting the pandemic at the public's expense.
But the Commission's work is far from over. COVID-related scams are
likely to persist as the country continues to grapple with this
pandemic. Combatting these scams will remain a top priority for the
Commission, and we will continue to use every tool we have to stop this
predatory behavior, including seeking civil penalties under the newly
enacted COVID-19 Consumer Protection Act, where appropriate.\37\ We
also request that Congress act to clarify Section 13(b) of the FTC Act
and preserve the FTC's ability to enjoin illegal conduct and restore to
consumers money they have lost. A legislative solution that addresses
the threat to the FTC's authority to obtain redress for consumers would
enhance our efforts to protect consumers from COVID-related harms.
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\37\ Pub. L. No. 116-260, 134 Stat. 1182, Division FF, Title XIV,
Sec. 1401(b)(1).
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We look forward to continuing to work with the Committee and
Congress, and we would be happy to answer your questions.
The Chair. Thank you, Chair Slaughter. Now we will hear
from Commissioner Phillips. Welcome, thank you for being here.
STATEMENT OF HON. NOAH JOSHUA PHILLIPS, COMMISSIONER, FEDERAL
TRADE COMMISSION
Mr. Phillips. Thank you. Chairwoman Cantwell, Ranking
Member Wicker, members of the Committee, thank you for the
opportunity to appear before you. I am honored to testify with
my fellow Commissioners about the important work we do at the
FTC.
Thanks to you, our legal and financial wherewithal to fight
the wave of scams the epidemic brought with it is substantially
greater. Fighting bad actions like these are the bread and
butter of the FTC's Consumer Protection Program and deserve to
remain a focus.
I want to spend the few minutes that I have on Section
13(b), in particular, as it applies to consumer protection.
Should the court rules us--rule against us in AMG, we will need
a fix. Without one, in too many cases where money should be on
the table, it will not be. As you consider a fix, I believe the
focus should be on helping consumers, not on inappropriately
punishing businesses.
In the last few years, some have pushed for more money
across the board, frequently citing deterrence as the goal.
Courts have been pretty clear that deterrence is penal in
nature and I am concerned that disgorgement, in particular,
will be used as a penalty, especially in cases where consumer
harm is low. Penalties make sense when you have clear rules.
Where rules are not clear, penalties do not work well. It makes
sense to post the speed limit and fine you if you exceed it. It
does not make sense to announce that you can drive at a fair
speed, and fine you when you drive over 65.
This concept is central to the design of the FTC. The
agency was created to examine business practices, first
regarding competition, later consumer protection, and where we
deemed them violative of broad terms like unfair and deceptive,
condemn them. This broad authority enables us to be nimble, to
address new issues like privacy, and to help develop the law.
We can advise Congress, as we did censuring non-disparagement
clauses, in cases that provided a basis for the Consumer Review
Fairness Act.
We can also send a message to the courts, as we did with
pay for delay agreements, on which we made important progress
last week in the U.S. Court of Appeals for the Fifth Circuit.
But because we are enforcing broad terms that give businesses
less notice, we do not have general penalty authority. On the
flip side, where a company is subject to an order, or we have
adopted a rule, or Congress has passed a statute, or we send
notice under 5M1B. In all of these circumstances, where rules
are clear, penalties apply.
Section 19, another one of our tools, provides a contrast.
Where conduct is fraudulent or dishonest, but they not be as
clearly defined, equitable money is available. There is less of
a notice issue because businesses know that fraud can get them
into trouble.
We use Section 13(b) to stop harmful conduct in a wide
swath of areas--fraud, pharmaceutical, antitrust cases, privacy
and data security, mergers and deceptive advertising. The
powers that you give us, can and will be applied broadly. But
the appropriate remedies should not be the same in every case.
We should have a different result for fraud, for example, than
we do for data breach caused by unreasonable data security
practices.
The equitable remedies, traditionally available to us under
13(b), are largely developed in cases involving, and perfectly
suited to, outright fraud. For example, courts developed a
framework for monetary relief, in which the agency starts with
a defendant's gross receipts, as a proxy for consumer loss.
Courts have also held that the agency is not required to offset
the value of products that consumers receive. For pure fraud,
it makes sense to ensure that consumers get all their money
back. In other cases, however, the equitable result might not
be to return every penny paid. Maybe consumers receive some, or
even most of the value from the product of service. They ate
the cereal. They stayed in the hotel room. And equity should
reflect that fact.
My concern is that, without additional clarification, in a
13(b) fix, you will increasingly see the FTC seek to punish
companies under the guise of disgorgement. For me, the most
important and pressing concern is the ability, not only to stop
ongoing fraud, but to get consumers back the money they have
lost.
Thank you and I look forward to addressing your questions.
The Chair. Thank you, Commissioner Phillips. Commissioner
Chopra, welcome. Thank you for your comments. We look forward
to hearing them.
STATEMENT OF HON. ROHIT CHOPRA, COMMISSIONER, FEDERAL TRADE
COMMISSION
Mr. Chopra. Thank you, Chair Cantwell, Ranking Member
Wicker, and members of the Committee. It is an honor to be here
with my colleagues. I appreciate efforts by you all and
Congress to address the uncertainties surrounding the agency's
authority under Section 13(b). But of course, we all know that
a 13(b) fix will not fix many of the FTC's challenges.
Time and time again, when large firms flagrantly violate
the law, the FTC is unwilling to meaningfully pursue
accountability. Take the example of Google, where the company's
repeated law violations over the last decade were frequently
met with favorable treatment from the FTC. In 2011, the
Commission entered an order against Google to halt its unlawful
privacy practices. But just 1 year later, the FTC announced the
company violated it. Around the same time, there were growing
concerns about Google's anti-competitive practices. But in
2013, the Commission closed its antitrust investigation into
Google, allowing the company to submit a weird, non-binding
letter of commitments. In 2014, the FTC announced it caught
Google breaking the law again, regarding in-app purchases by
children. But it did not end there. The FTC then caught Google
engaging in years of illegal surveillance of children on
YouTube. The Commission's latest resolution, a highly favorable
settlement, where the tech giant was even allowed to retain
algorithms enhanced by illegally obtained data by kids.
While the FTC is quick to bring down the hammer on small
businesses, companies like Google know that the FTC is simply
not serious about holding them accountable. We, together, must
turn the page on the FTC's perceived powerlessness. First, we
must make clear that FTC orders are not suggestions. Google is
not the only company to engage in repeat offenses. In 2012,
after the FTC finalized an Order with Facebook, about it its
privacy abuses, the company violated the agreement almost
immediately, over and over again. But in 2019, Facebook was
able to extract a settlement from the FTC that gave the company
a lot to celebrate. The FTC did not require Facebook to make
any material changes to its business model or its user
surveillance. The FTC even handed out special immunity
provisions for Facebook's top executives. The settlement was a
devastating setback for consumer privacy.
Congress and the Commission must implement major changes
when it comes to stopping repeat offenders. Since the
Commission has shown it might lack the will, sometimes, to
enforce agency orders, Congress should allow victims and state
attorneys general to seek injunctive relief in court, to halt
violations of FTC orders.
Second, we must make sure that the FTC is meaningfully
deterring wrongdoing in the first instance. The Commission
often agrees to no money-no fault settlements, even in cases of
egregious fraud, like, fake review and Made in USA scams, where
bad actors simply agree to follow the law going forward. And
when the FTC does seek money from wrongdoers, it can be
insufficient. Under Section 13(b), if a bad actor defrauds you
of $1 million, the most they can be required to pay is $1
million. This is not a deterrent, particularly when the
probability of getting caught is so low.
We must take action now to trigger additional remedies,
such as penalties and damages, without imposing any new
requirements or uncertainty on businesses. In addition,
Congress can authorize the FTC to seek civil penalties in a
broader range of cases, including for knowing violations of
Section 5, and other dishonest or fraudulent conduct.
Last but not least, we must address the abuse of Section
230 of the Communications Decency Act. Tech companies
aggressively exploit Section 230 to evade accountability. And
even when the immunity does not apply, the lack of clarity
taxes public resources and slows down enforcement. I am
particularly concerned that e-commerce marketplaces are
becoming a haven for counterfeit and unsafe goods, including
fake PPE and medicines to treat COVID-19.
Members of this committee have put forth a number of
proposals for Section 230 reform, including removal of the
immunity in laws by civil law enforcement, like the FTC. I
strongly support Congressional efforts to reign in these
excesses, which can put brick and mortar small businesses, and
local newspapers and journalists at a competitive disadvantage.
In conclusion, COVID-19 and the endless scandals involving
large technology firms have reminded us, we must work together
to ensure the FTC has the tools and uses all of them to protect
American families and honest businesses from these abuses.
Thank you so much and I look forward to your questions.
The Chair. Thank you, Commissioner Chopra. Now we will turn
to our last witness, Commissioner Christine Wilson, who is
joining us remotely, welcome.
STATEMENT OF HON. CHRISTINE WILSON, COMMISSIONER, FEDERAL TRADE
COMMISSION
Ms. Wilson. Thank you. Chairman Cantwell, Ranking Member
Wicker, and members of the Committee, I am pleased to appear
before you today, albeit remotely. I would like to discuss
three areas this morning in which Congress can support the
FTC's mission. By clarifying the FTC's authority under Section
13(b) of the FTC Act, enacting Federal privacy legislation, and
approaching the topic of antitrust reform judiciously.
Recent Federal court decisions have challenged the FTC's
ability to use Section 13(b) to obtain injunctive and equitable
monetary relief. Defendants use these challenges--these
decisions to challenge the FTC's authority in ongoing cases and
settlement negotiations. We face difficulty prosecuting and
resolving cases. Congressional clarification of 13(b) would
help immensely.
Stakeholders have expressed legitimate concerns about
13(b). The absence of a statute of limitations can be cured by
including one in legislation. Concerns about the unfounded use
of 13(b) to get disgorgement in antitrust cases can be cured by
setting boundaries on when the FTC will seek disgorgement. The
factors in the FTC's now rescinded 2003 disgorgement policy
statement provide a good roadmap. To address concerns about
13(b) in consumer protection cases involving, not fraudsters,
but legitimate companies selling legitimate products, albeit
with deceptive claims, Congress could direct courts to account
for the value of consumers retained from the product, despite
the deception. The legitimate concerns of stakeholders can be
addressed, while also restoring our ability to use 13(b) to
pursue wrongdoers.
The second topic I would like to cover is Federal privacy
legislation. FTC Commissioners, on a bipartisan basis, have
long urged Congress to pass privacy legislation. Consumer and
industry groups agree. The first and best option would be for
this Congress to enact privacy legislation. You are best
situated to make the value judgments inherent in privacy
legislation. And we stand ready to assist with implementing
that legislation through role making and enforcement.
But what if Congress has other legislative priorities? The
FTC has been lambasted for not doing enough to protect consumer
privacy. I disagree with those critiques, but our jurisdiction
and tools are limited. That said, rulemaking, under Section 18
of the FTC Act, known as Mag-Moss rulemaking, is within our
authority. Granted, a Mag-Moss rulemaking is not the optimal
solution, but in the absence of Congressional action, and in
the face of continuing harm, including growing infringements of
our civil liberties, I support Acting Chairwoman Slaughter in
considering this path. By design, Mag-Moss rulemaking is a
lengthy and cumbersome undertaking. I would be thrilled to
undertake the Mag-Moss process, only to have Congress preempt
that effort by passing privacy legislation. Absent privacy
legislation, a Mag-Moss process would move us closer to
providing transparency for consumers, establishing guardrails
for businesses, and erecting safeguards for our civil
liberties. But inaction is not an option.
Finally, I will address calls to overhaul antitrust
enforcement. Here, I offer a cautionary note. Calls for
antitrust reform typically are premised on concerns about so-
called Big Tech. But there are many types of concerns,
including consumer privacy, content moderation, and anti-
competitive conduct. Some commentators aggregate these concerns
to support breaking up large tech companies. The better
approach I submit, is to address each concern with appropriate
tools. Privacy concerns require privacy legislation and content
moderation concerns may require reforms to Section 230. That
leaves competition concerns.
I believe our antitrust laws are sufficiently broad and
flexible to address the dynamic tech sector. In the 1990s, DOJ
won its antitrust case against Microsoft, the dominant tech
firm of that era. Today, DOJ, FTC, and State AGs have filed
suit against Google and Facebook, using existing antitrust law.
With all due respect, let us see how these changes go before
making sweeping changes. This judicious approach is important
because many proposals threaten to wreak havoc on our broader
economy by politicizing antitrust enforcement, stifling
innovation and R&D, and driving prices higher, at a time when
many of our fellow Americans still suffer economic fallout from
the pandemic.
What kind of incentives do we want to create? Incentives to
invest in R&D and charge low prices? Or to engage in free
writing and regulatory gamesmanship? I am not saying our
current approach is perfect. I support retrospectives to
determine whether we are making the right calls in merger
review. I support greater transparency on the part of the
agency, not only when we bring cases, but when we decline to
bring them. And Congress can play a role by clarifying that the
same standard applies to FTC and DOJ merger challenges,
providing more funding for the agencies, including through
merger filing fee adjustments and giving the FTC authority over
non-profits and common carriers.
In closing, we welcome the opportunity to provide technical
assistance to Congress on these issues, and I look forward to
answering your questions.
The Chair. Commissioner, thank you so much, and again,
thank you to the whole Commission for joining us. And I see
that you all--well, you are before Congress. Why not take the
opportunity to be broad on all the things that are challenging
in your day-to-day functions. So, we appreciate that. But we
really do want to focus in on this issue of disgorgement and to
make sure that we really are addressing this appropriately. So,
I just want to ask all the Commissioners--all of you support
the FTC's use of disgorgement?
Ms. Slaughter. Yes.
Mr. Phillips. Senator, as I indicated in my opening
statement, I think that there are--disgorgement creates, kind
of, a problematic model for us. I think restitution is where we
ought to focus for consumer protection.
The Chair. So, you do not like the word, but you believe
that consumers should be compensated for some of the harm.
Mr. Phillips. Yes.
The Chair. Thank you.
Mr. Chopra. Yes. I think when a company violates the law
and steals from people, or profits from it, the least we should
do is make them forfeit that.
The Chair. Commissioner Wilson?
Ms. Wilson. Yes. I support monetary redress----
The Chair. OK.
Ms. Wilson. For consumers.
The Chair. Great. So, the reason I am saying this is
because, one thing I want to point out is that, if the Supreme
Court makes a decision and we need to do something to further
clarify the law, I do not want to spend a lot of time. Now,
having seen these COVID cases in my state, I--in the fraud
cases, I should say. I do not want to leave a lot of time to go
on. I do not want a free reign atmosphere. So, Chair Slaughter,
how do you think we best address that? Would you say you and
the Commissioners are pretty much in sync about the solutions
there?
Ms. Slaughter. Well, thank you for the question, Madam
Chair. Listen, we have a Commission full of smart, engaged
people who have different views on a number of topics, but
also, a fair amount of common ground. And I think we can offer
you our individual views, and we can defer to Congress in terms
of making the determination.
But where I think we all agree, and I will certainly
capitalize on what you said, is the need to act quickly. Even
while the Supreme Court case is pending, the uncertainty around
13(b) is affecting our work and affecting our cases. It is
making it harder for us to get that redress to consumers. It is
outright barred in some circuits, and other defendants are just
saying, let us wait and see. We do not want to negotiate. We do
not want to get into these conversations. It is making it
harder for us to stop illegal conduct, and it is making it
harder for us to make your constituents whole, when they have
been harmed.
So, I would certainly urge you to act quickly and act
comprehensively, to make sure that we are providing relief to
consumers and, as my colleagues have indicated, deterring
illegal behavior. Because what we really want is for consumers
not to get hurt in the first place,
The Chair. Exactly. Thank you, that is so well said. I have
had my own experience with another agency, the Federal Energy
Regulatory Commission, on the Enron cases and literally, people
were not implementing rules against market manipulation. So, we
gave them a new authority and they used it. And guess what?
They better policed the markets. And so, I think these are
important tools.
So, I hope--I appreciate the letter from the Chamber, but I
hope they are not insinuating the first time COVID authority
should not have been passed. I am assuming, Commissioner
Phillips, you support the first-time authority. I do not want
to take up too much time, but you support that first time
authority on COVID penalties, that we gave the Commission?
Mr. Phillips. I do. I thank you for it. I recently voted
for the case where we used it.
The Chair. Right. So, my point is, this kind of strong tool
can be a big deterrent in a marketplace where there are so many
legitimate actors, and yet, there are some bad actors that
plague the whole sector. And so, I very much--I want to get
everybody on the data security rulemaking, if I could. Does
everybody support a data security rulemaking by the FTC?
Commissioner Slaughter?
Ms. Slaughter. I do. I think it is something we need to
explore.
Mr. Phillips. I would prefer if Congress would pass a data
security statute, but I would support, you know, subject to the
meets and bounds of the rule, a rulemaking.
Mr. Chopra. Yes. I think we need to codify rules that give
clear sense of what is expected and trigger real consequences
for violations.
The Chair. Thank you. Commissioner Wilson?
Ms. Wilson. Yes, I would absolutely support Acting Chair
Slaughter moving forward with a Magnusson-Moss rulemaking on
consumer privacy and agree with Commissioner Phillips that
having Congress move forward with Federal privacy legislation
would certainly be the optimal solution.
The Chair. Yes, I was asking----
Ms. Wilson. But as a fall back.
The Chair. I was asking about data security. Listen,
Senator Wicker and I are doing our best to solve a lot of very
thorny problems of the information age. I guarantee you it is
bigger than both of us. It is going to take a lot of--a lot of
effort to get the context. I actually do not think the policies
are that are hard. It is just the context, right? The context,
just as we did moving quickly on COVID because everybody came
to an agreement. Oh, this is absurd to allow people to go
around and market this in the middle of a pandemic, right? So,
we all came together. That was pretty easy. You know, in the
privacy case, the information age is playing out. But--no
doubt.
But so--but, Commissioner, I was asking, actually about
data security, as opposed to the large privacy context. Are you
for a rulemaking by the FTC, with or without Congress' help,
for data security?
Ms. Wilson. Yes, I would support that.
The Chair. Thank you. Senator Wicker.
Senator Wicker. Well, thank you, Madam Chair. This letter,
dated April 20, is now a part of the record. And it is a bit
unfair because the Commissioners have seen it only briefly
before the hearing began. But let me just ask--maybe I will
start with you, Commissioner Phillips. The letter says, ``The
issue for the FTC is that the text of the statutes allow the
FTC to seek and courts to grant monetary relief only under
Section 19, not Section 13(b). By using--'' It goes on to say,
``By using 13(b) the FTC has foreclosed its ability to seek
monetary damages''. What do you say to that?
Mr. Phillips. I think, to some extent, what the statutory
text says is what the court is going to decide in AMG. I think,
for our purposes, the question is under what circumstances we
should get money and how it should be calculated. Where I--just
based on my brief review of the letter, I do not think money
should be limited to fraud cases.
Senator Wicker. But does the use of 13(b) foreclose the
Commission's ability to seek any monetary damages?
Mr. Phillips. That is not the position we have taken in
court, no.
Senator Wicker. Madam Chair?
Ms. Slaughter. No, I do not think it does. And I would just
note, I have not had a chance to review the letter in detail,
but even just skimming it, I see a number of really problematic
assertions and interpretations of the law, with which I think,
at least I strongly disagree, and I----
Senator Wicker. But--and let me just ask you to do that on
the record. But with regard to that sentence, that the courts
can grant monetary relief only under Section 19. By using 13(b)
you foreclose the ability to seek monetary damages.
Ms. Slaughter. Candidly, Senator, I do not really
understand what that means.
Senator Wicker. OK, I see, all right.
Ms. Slaughter. So, I would have to review it and understand
the argument a little better.
Senator Wicker. No, again, it is fair for you to, all four
of you to respond on the record, and so, I ask you to do that.
Well, disgorgement versus restitution versus compensation. Help
me real briefly, Commissioner Phillips, is there a distinction
there? Or are all four of you on the same page, in terms of the
way we write this?
Mr. Phillips. I think colloquially, at least the way I am
using disgorgement, we are talking about the disgorgement of
ill-gotten gains. It is the profits. There is a difference
between that and restituting to consumers, redressing them for
the harms that they have suffered.
Sometimes these are the same numbers, right? Every money I
pay into a fraud, there is no value. But you were asking the
question earlier about, sort of, legitimate businesses. If I
sell you a hotel room--I will take the Wyndham case. I sell you
a hotel room for a night, but you do not have adequate data
security. The harm that you suffer, right, is the hotel room
minus the data security, starting as the courts have us do in
the context of fraud under 13(b), with 100 percent, the whole
value of the hotel room. I do not think that is the right way
to do it.
Senator Wicker. Mr. Chopra, are you and Commissioner
Phillips having a little disagreement about that distinction?
Mr. Chopra. Well, I guess it is--I think the definition is
right. I agree with him. I think, in my view, when a company
has egregiously violated the law, we might not always be able
to figure outsee who the specific victims are. But that does
not mean they should be able to get--you know, keep some of
those ill-gotten gains.
The FTC, I mean, many of its Made in USA fraud cases, for
example, accompany labels of good as Made in America, but it is
really made in China. We often give these, kind of, no money
orders in the past, because it is hard to figure out who the
victims are. But in my view, of course, they should have to
forfeit the gains from this illegal practice, and even pay
penalties.
Senator Wicker. OK. Now, let us start--let me--let me ask
Commissioner Wilson a different question. And goodness, we only
have a minute here, but Commissioner Chopra mentioned, very
emphatically, mishandling by this Commission and the Google
matter and the Facebook matter. And I want to see if we can get
responses. It may take longer than that, Madam Chair. But
particularly, from Commissioner Wilson and Commissioner
Phillips. What do you say to the very emphatic statements that
Commissioner Chopra made about the Facebook and Google
decisions?
Ms. Wilson. Thank you for the question. Senator Wicker, I
have not reviewed in detail the 2013 recommendation memos to
the Commission from the legal and economic staff. But I would
like to make clear that a staff recommendation memo is not the
end of my inquiry when I decide whether I will support a staff
recommendation. I typically review the testimony and the
documents that are cited in the recommendation memos. I review
submissions from the parties. And I have significant
interactions with staff, in terms of oral briefings and the
parties, in terms of their advocacy.
So, even if I had spent a fair amount of time with the
memos that have now been published, I do not have all of the
information I would require to determine whether the earlier
Commission decision was correct. And I would say there is a
risk when reassessing a recommendation many years later. At the
time, many decisions regarding competition cases, there is an
assessment of likely future events. There is uncertainty
regarding the outcome of those future events. And so, when
reviewing a case recommendation many years later, we have the
benefit of seeing the actual outcomes and the later known
outcomes may mask the true level of uncertainty that was
important when the decisions were made.
Senator Wicker. Commissioner Phillips, respond, if you
will, to what Mr. Chopra said.
Mr. Phillips. Sure, and just to clarify, my understanding
about your question is, you are asking about the settlement of
the Google YouTube case, the COPPA case, and the Facebook
privacy case.
Senator Wicker. I am asking you to respond to the testimony
of Mr. Chopra.
Mr. Phillips. Sure. In those cases, which were penalty
cases, in one case because of a rule applying to COPPA, and the
other one an FTC order, penalties are appropriate and the
amounts that we collected exceeded any reasonable estimation,
in my view, of the profits of the companies. The 13(b) question
is different because we are not looking at the same scenario.
We are not looking at those clear rules. And in my view, I
think we ought to aim at redressing consumer harm. That ought
to be our lode star.
Senator Wicker. Well, OK. Madam Chair, I have exceeded my
time. Let me make an observation. The Commissioners typically
submit a unified statement for the record as witness testimony.
Which it does indicate the matters on which they agree. But
then, they come in here and their testimony, while tactful and
ladylike and gentlemanly, is far different. And it would just
seem to me that it would be helpful to me, as a member of the
Committee, if we got in advance, as we usually do with other
Commissions and with other panels, a real sense of the
differences of opinion. And I will not ask you to rule on that,
because I do not know that we can. But to me, it would be
helpful if Commissioners would submit the real testimony that
they are going to give, so that we have a chance to go over
that and try to be prepared for the give and take.
So, thank you, Madam Chair.
The Chair. Well, I thank you, Senator Wicker, for that
observation. And I think I am understanding your point, or at
least, I should say that my interests are to move quickly, if
the Supreme Court does act on this case because you can have
lots of things struck down for a variety of reasons. Does not
mean you still does not believe in the authority. That is why I
have asked the Commissioners whether they all believe in this
authority. They do.
The question is, what is the legal framework for it and,
yes, I think it is astounding that Facebook has paid $5 billion
in fines. But that is based on previous orders by the FTC that
they then violated and were, in other instances of the law,
that were violations. So, yes, I think we have to be clear what
we are talking about, as it relates to 13(b), the right legal
framework if we need, you know, difference. But, to me, the
case law is there and very relevant. This has been a tool that
has been used for decades. We certainly do not want to throw it
out. I have anxiety over the fact that we could have
disagreement about this.
So, yes, I agree that getting the Commission to, at least,
look at language, if we ended up having to propose it instead
of them coming up with it. Which, you know, you cannot say that
it is really their function. I mean, they should be doing
rulemaking, in my opinion. So, yes, they could also give us
fixes to 13(b). But if they do not, I guarantee you we will
propose something and ask them for their input. And yes, we
should have it in advance of having a formal discussion. So, I
agree with your main point there. So, I do think that this is
very important and very timely, so----
Do we have--Senator Fischer is next.
STATEMENT OF HON. DEB FISCHER,
U.S. SENATOR FROM NEBRASKA
Senator Fischer. Thank you, Senator Cantwell. The COVID-19
pandemic caused incredible challenges this past year. One thing
that kept spirits up, though, was cheering on our college
sports teams from home. So, the student athletes across the
country continued to train and compete during these difficult
circumstances, when they could, often while wearing masks or
with empty stands.
Last year, former FTC Chairman Simons issued supportive
words for national Name, Image, Likeness legislation for
student athletes. He stated his long-standing concern the
students are not getting what they should get, in terms of
compensation. Ms. Slaughter, do you share this concern,
particularly given existing FTC authorities should protect
student athletes under SPARTA?
Ms. Slaughter. Thank you, Senator, for the question. Yes, I
am very concerned about exploitation of student athletes.
Senator Fischer. Thank you. Commissioner Phillips, as
states continue to enact NIL legislation to ward off recruiting
disadvantages, do you believe a uniform national framework
could effectively protect student athletes?
Mr. Phillips. Yes, I do, Senator.
Senator Fischer. Thank you. Ms. Slaughter, in remarks you
made back in February, you highlighted the need for strong data
privacy legislation at the Federal level, that the pandemic
only pushed more of our work, our children's education, and
even our personal interactions online, exasperating data risks.
I appreciate the FTC's work to use its existing authorities to
guard against consumer harms in this space. However, in what
key ways could passage of a Federal data privacy law strengthen
how the FTC protects privacy? And does passing such a law
remain a priority for you?
Ms. Slaughter. Thank you, Senator. I take very seriously
our obligation to look at the authority Congress has already
given us, as Chair Cantwell reflected, and make sure we are
using it as well as we can. And to that end, the authority that
we have to look at privacy issues right now, from a rulemaking
perspective, would be under Section 18 or the Magnuson-Moss
Act.
I agree with what Commissioner Phillips said earlier, that
clear rule are good. They are good for businesses. They are
good for consumers. It is valuable to have clear rules for the
marketplace. So, I want us to use the authority that Congress
has already given us, as well as possible. But, as Commissioner
Wilson noted in her opening, the rulemaking authority we have
under data privacy right now is much more cumbersome than the
traditional Federal rulemaking authority under the
Administrative Procedures Act.
And so, I would very much appreciate, and continue to think
it is a priority for Congress to pass data privacy legislation
that would give us more clear rulemaking authority, impose
civil penalties on violators for all the reasons Commissioner
Chopra and others have discussed, that penalties can really
incentivize compliance, which is what we want. We do not want
companies to violate the law to begin with. And then, I also
think it is important for Congress to consider how meaningful
limitations on how data is collected and used are important,
rather than leaving us stuck in a notice and consent framework,
which is how most of our law operates today. I think that that
inadequately protects consumers, puts too much burden on them,
and allows violations to continue rather rampant in the
markets.
Senator Fischer. You spoke of the usefulness of the FTC
requiring consumer notice in recent privacy cases that involve
that false marketing. And you stated that notice can be
effective in letting consumers vote with their feet. However,
does the effectiveness of notice, in this scenario, depend on a
marketplace that has healthy competition?
Ms. Slaughter. Yes, Senator, that is exactly right. And
this is actually why I think we cannot fully separate our
consumer protection mission from our competition mission. I
think that these issues are very much intertwined. And when
there is not healthy competition in a market, then consumers do
not have any choice but to consider to use a particular product
or service, even if the terms of that use are things with which
they are uncomfortable. So, I think you are right that these
issues are very closely connected.
Senator Fischer. Thank you. Thank you, Madam Chair.
The Chair. Thank you, Senator Fischer. Well, that brings up
a question, as it relates to--at what point--so, I asked
everybody whether they supported doing a rulemaking on data
security and everybody said yes. OK, but obviously, you do not
have one. So, now we have also had a discussion about what you
have and do not have, as far as a framework. And you would
rather us have a framework. I agree. We should give those
frameworks. But then, there becomes a role and responsibility
for all of you to act in doing your job.
So, this question by Senator Fischer, like, well, what is
going to--you know, where do you draw the line? So, I do not
know but maybe we will start with you, Mr. Chopra.
Mr. Chopra. Yes, Senator, I think we----
The Chair. So, if you all want to and we are not giving you
that framework, then why not do it? At least as it related to
that very narrow thing. And the reason why I say that is
because I think everybody is pretty uniform across the United
States of America that thinks that data security and data harm
is happening to them, when you think of the Equifax and the
Multiplicity of things. And I think that the Federal Trade
Commission has done some great work, as it relates to telling
companies, this is not acceptable data security hygiene for a
company handling this much data and information, on behalf of
consumers. You cannot have, you know, three junior IT people
running data security for you. You have to build an
infrastructure.
So, the Commission has been good about that, but why not
just keep going? If this is such a large issue, and you all
have answered yes, why not keep going?
Mr. Chopra. Yes, Madam Chairwoman, whether it is Equifax,
Marriott, or so many others, this is not just about identity
theft. This is also about Chinese state surveillance. There is
more and more attacks that are more national security oriented,
and the harms are very great. I say, we should have started
already. And, Madam Chairwoman, Ranking Member Wicker, if
Congress passes a law, that is good, too. But I think getting
started quickly will even help us implement any law that
Congress might pass, or we may use our own authorities to move
forward.
The Chair. Thank you. I think we have Senator Tester is
next. Senator Tester? Or is Senator Tester with us?
STATEMENT OF HON. JON TESTER,
U.S. SENATOR FROM MONTANA
Senator Tester. OK, sorry--sorry about that, Madam Chair. I
assumed I was way down the list. But thank you very, very much.
I appreciate the opportunity.
So, this is a question for the panel. Look, the scams
around COVID have been amazing. You guys, probably, are fully
aware of them, requesting personal information and $50 for a
home test, and, you know, money for this, money for that. And
there are a number of bills up there. But the fact is, Montana,
my state, is a large population. We tend to be a little
elderly, a lot of veterans, homes with limited amount of access
to the internet, in some cases. Many of the reported scams in
Montana happen via telephone and some phony contract. Look, you
get it. It stinks. It smells. I do not know what kind of vermin
do this kind of work, but we have got to get our arms around
it.
So, my question is, how is the FTC planning to reach rural
consumers to educate them about these COVID-19 scams? Who wants
to go first? Any of you?
Ms. Slaughter. Thank you, Senator. I am happy to start with
the answer to that question. I think you are right. The COVID-
19 scammers, like all other scammers, are preying on our most
vulnerable populations. That includes veterans. It can include
people in rural communities who are harder to reach. And so,
making sure that our outreach efforts are targeting those
populations, in addition to our law enforcement efforts, is a
real priority for us.
In terms of reaching rural populations, we have, in
addition to doing all of our online outreach, we have also sent
physical post cards out. We recently set up a community
advocate center to make sure that our work and our resources
are accessible to people who are not following our blog posts
or engaging with us on Twitter. So, working with advocates is--
and working with state attorney's general and making sure we
are understanding what is going on in communities across the
country, so that we can respond appropriately, is very much
incumbent on us.
And I would just add that there was particular money
dedicated, in the American Rescue Plan, COVID money to do some
of this outreach and that is one of the things that we are
putting to work right away.
Senator Tester. Anybody else want to----
Mr. Phillips. Sure, Senator. I agree with everything the
Acting Chair said. Very quickly, when the pandemic began we
started doing events, also, with AARP, with the EJCC,
stakeholder groups that are particularly focused on
communicating to the elderly. That new money that you approved,
and we all thank you for it, just to elaborate a little bit on
what the Acting Chair said, that money goes to printing books,
right? And creating advertisements that we can send to all
sorts of stakeholders to help get messages out, to protect
themselves from scams against identity theft. It is very
important.
Senator Tester. OK. I am going to move on to my next
question, because I am limited in time. Before I leave, though,
I just want you to know, I get probably six phone calls a day
on this thing, robocalls. And please figure out how we can
knock these guys down. I mean, it is unbelievable. I got one
yesterday that was just over the top bad. So, if you could help
on that.
Look, I am a farmer. I go back every weekend. I have been
farming since I was basically 15 years old. I used to be able
to take a pair of pliers and a screwdriver and work on my
tractor. Now, if my tractor breaks down, I have to call the
dealer because I do not have the software or the programs. They
have a, I guess, a patent on that stuff, so that I cannot fix
my tractor, OK? And we have got bills to fix this, but I am
wondering what the FTC has done to protect consumers from anti-
competitive policies on right to repair, since we spoke last
August?
Mr. Chopra. So, Senator, I am happy to start. The FTC has a
law called the Magnuson-Moss Warranty Act, which prevents some
of the anti-competitive tying. I think we need to start ramping
up our enforcement there because, clearly, there are those who
are breaking the law. But, Senator, we will also be doing more
on this, in my view, to tackle places where the law does not
cover. This is not just about tractors. It is about our
electronics. It is even about military equipment, and even
manufacturing and service equipment in medical facilities. We
have to take this on, and we have to do it quickly.
Senator Tester. Anybody else?
Ms. Wilson. Yes, Senator Tester, this is Christine Wilson.
Sir, you and I talked last year during our oversight hearing
about our struggles to fix tractors and chippers. I absolutely
agree with you that this is an issue during the workshop that
we held with a variety of different stakeholders. We received
valuable input on this issue.
I agree with Commissioner Chopra that we should be looking
to use both our consumer protection and our competition
enforcement to address these issues. I believe that, too
frequently, we have competition issues, efforts by
manufacturers to limit downstream competition for the repair of
vehicles and electronics, and those are dressed up as consumer
protection issues. I think we need to pierce that veil and move
forward with enforcement on the antitrust side and the consumer
protection side.
Senator Tester. Well, I want to thank you, Ms. Wilson and I
want to thank you, Mr. Chopra, for your responses to that. We
just need to do something because there is so much
consolidation going on in rural America right now. And I know
Mr. Chopra talked about, you know, medical communities, and all
that, and that is very, very important, also, probably just as
important. But if we want to have people live in rural America,
we have got to stop crap like this, or it is just going to
further evacuate rural America.
Thank you, both. Thank you, Madam Chair.
The Chair. Senator Moran is next.
STATEMENT OF HON. JERRY MORAN,
U.S. SENATOR FROM KANSAS
Senator Moran. Chairwoman Cantwell, thank you very much.
Pleased to have the FTC in front of our committee today. Thank
you for making that possible.
Commissioners, earlier this year you announced legal action
against three brokers based in New York, who allegedly used
automated software to illegally buy tens of thousands of
tickets for concerts and sporting events, and then, resold them
at higher prices. This action represents the first ever
utilization by the FTC of the authorities provided to it under
the BOTS Act, which I introduced with Senator Schumer and it
became law in 2016. So, first of all, thank you for utilizing
the authorities we granted you. The question, it could be for
all, but I have several other questions I would like to get to.
I would just like an update. Do you have the necessary
authorities that you need to pursue these kind of price gouging
opportunities? This unfair trade practice, exhibited by those
who buy things and sell them at much higher prices, utilizing
the computer?
Ms. Slaughter. Thank you, Senator. As you know, this is an
issue that is close to my heart, as well, and I was really
happy that we were able to bring these cases. It is another
example of Congress speaking recently, telling us that
something is a priority, giving us authority, and us going out
and using that authority as Congress intended. Hereby, using
civil penalties to make sure that the cost of breaking the law
is higher than the benefit that the companies derive from it.
So, you have given us that authority, in this particular case,
and we are going to continue to look for ways to use it, and we
appreciate it.
Senator Moran. So, you have what you need, Commissioner?
Ms. Slaughter. I think on these questions, particularly
about BOTS, yes. I do not think that that gets, necessarily, to
the entirety of the issues in the ticket markets, which also
implicate competition concerns, as well. But that is where we
need to be applying our antitrust tools, as well as our
consumer protection tools.
Senator Moran. Me and my staff welcome any input that you
would have in how we could be of help in that regard.
My state, like many, earlier this year experienced severe
cold weather. It occurred in the month of February. It drove up
increased demand for natural gas throughout our region. This
weather left--that weather impacted municipal gas utilities in
their communities, who had no choice but to purchase gas at
significantly inflated prices, by the magnitude of hundreds of
the percentage more than the normal cost at that time of year.
And now, we are left with the consequences of trying to pay
those bills. In February--February 22, the Energy Regulatory
Commission--Federal Energy Regulatory Commission, FERC
announced an investigation. I am just interested, Chairwoman
Slaughter, is there any interest in this topic at the FTC?
Ms. Slaughter. Thank you, Senator. I think it is fair to
say that energy markets are important to us for a number of
reasons. And what you are talking about, particularly, sounds
to me a lot like price gouging, which is a real problem, one
that has not historically been addressed under the FTC Act. But
I am very interested in making sure that we are really using
the full breadth of the law that we have to attack market
practices that are unfair to consumers as a method of
competition. And price gouging can sound in that space, as
well. So, I think it would be a new effort for us, but that
does not mean it is not one that we should explore.
Senator Moran. I think Senator Blumenthal and I have
explored this topic of price gouging with the FTC before and
maybe it was also in our appropriations process with the FTC
before us. But again, let me know, or my staff know, if there
is something that you would request of me.
Finally, 13(b) authority, there is a case pending before
the Supreme Court that could severely impact the FTC's ability
to obtain monetary relief, when the Commission has reason to
believe a company is violating, or is about to violate, a FTC
statute--a statute that the FTC enforces. If the FTC's
understanding of Section 13(b) is held by the Supreme Court to
be incorrect, there will be a significant impact on the FTC's
ability to force companies to pay restitution to defrauded
customers. While the FTC will still be able to get an
injunction against a company's behavior, it would no longer be
able to collect those damages.
While the FTC's 13(b) authority has been debated in recent
months, I propose to give the FTC other important authorities
to enforce privacy obligations in my Consumer Data Privacy and
Security Act, introduced last year, soon to be reintroduced
again, with continuing efforts with Senator Blumenthal, to see
if we can find a bipartisan solution, along with Senator
Cantwell, to accomplish that. That legislation includes first
time civil penalty authority and new rulemaking powers.
How important is it for these new authorities to the FTC's
ability to be able to enforce Federal privacy law? And do you
support the inclusion of new authorities in Federal privacy
legislation?
Ms. Slaughter. Thank you, Senator. I would be happy to
review the specific provisions of the Act--the bill that you
are talking about. But as a general matter, yes, I think new
authorities, new remedies, would be very helpful in Federal
data privacy legislation.
Senator Moran. Are you prepared to ask Congress to respond,
should the Supreme Court rule in a way disfavorable to the
authorities the FTC currently believes it has?
Ms. Slaughter. Yes. In fact, Senator, we have already asked
Congress to respond. The five sitting FTC Commissioners, on a
bipartisan basis last fall, all wrote together to ask you to
act quickly to restore the 13(b) authority. Chair Cantwell has
talked already this morning about the importance of acting
quickly. And I would just encourage you not to wait for the
Supreme Court to rule because the uncertainty around our 13(b)
authority is already affecting our cases and hurting consumers.
Senator Moran. I would express to you and to Chairman
Cantwell, Ranking Member Wicker, that I am certainly prepared
to engage in that process.
The Chair. Thank you.
Senator Moran. Thank you all for being with us this morning
and I look forward to seeing you in person in the future. Look
forward to seeing you in front of our Appropriations
Subcommittee as we determine, not only the authorities in the
Commerce Committee, but the funding in the Appropriations
Committee for the FTC.
The Chair. Thank you, Senator Moran. Senator Klobuchar.
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator Klobuchar. Thank you very much, Chair Cantwell and
thank you to all of you Commissioners.
I know this was brought up by you, Chair Slaughter, and
that is the resource issue. As we are looking at the FTC, which
I am pleased that you are doing this, taking on these tech
cases and specifically the Facebook case--not to mention all
the other work you have right now--I believe that we cannot
take this biggest companies in the world on with duct tape and
Band-aids. And that is why Senator Grassley and I actually have
a bill to change the merger fees and the way that they have
been assessed. And we have not done this for decades and he is
firmly behind this bill, as are many other Republicans and
Democrats, which actually lifts the burden on some of the
smaller companies merging. But on the mega mergers, $5 billion
and over, adds fees so that it would bring in significant money
for your agencies.
And just to understand, as I make the case for this bill,
which I believe may be moving faster than we thought, it seems
merger filings are starting to bounce back. What are your
expectations regarding the FTC's merger review workload over
the next 12 months? Guess I would ask you, Chair.
Ms. Slaughter. Thank you so much, Senator, for the question
and for your support and interest in these issues. You are
absolutely right about the scope of the work in front of us, at
the cost of doing it, and the demand on our resources. As I
pointed out in my opening testimony, even before a recent
merger wave that we are now in, we have had--we have been
averaging about twice as many merger filings annually as we did
10 years ago, and our employee count has remained flat. That
means twice as much work for the same amount of people. That is
difficult.
And then, in the last--over the last year, we saw a dip in
merger filings through the beginning of the pandemic. But over
the last, I would say, 6 months, they have been extraordinarily
high. We had over 300 filings in the month of March. That is
the second highest number, second only to over 400 in the month
of November. And so, these numbers are continuing. They are
continuing to be high, and it is not just high numbers of
filings. That is, sort of--you know, if you think about simple
statistics and proportions, that also means more cases that
require enforcement action. We do not want to leave any of
those cases on the table, and so, your work is really helpful
to getting us there.
Senator Klobuchar. Thank you. Well, we are hoping to move
this quickly and, as you know, we have had wide bipartisan
support for it.
Commissioner Chopra, you have done a lot on privacy, along
with many of the Commissioners and along with our Chair,
Senator Cantwell, Senator Blumenthal, and many others. Do you
believe the FTC needs rulemaking authority to ensure that the
agency is equipped to serve as the primary enforcer of Federal
privacy legislation? Just talk a little bit about that.
Mr. Chopra. Yes, we have some. We need enhanced one if we
could. It will move faster that way. And ultimately, we need
rules that are easy to follow, easy to enforce, and that can
trigger real penalties for those who violate the law when it
comes to invading our privacy. I think our no money
settlements, when it comes to privacy violations, have not
really deterred misconduct, particularly from the biggest tech
companies.
Senator Klobuchar. And do you agree that consumers should
have the ability to access their data and control how it is
used, including the right to opt into their sensitive personal
data being used?
Mr. Chopra. Consumers need a lot more rights, particularly
when it comes to control and there needs to be a lot more
accountability for those who violate it.
Senator Klobuchar. Very good. Anyone can take this, but
could you elaborate on the FTC's enforcement efforts and how
they would be hampered if they--if you lost the power to seek
disgorgement and what effect on consumers that would be? I do
not know if you want to take that Commissioner Phillips,
Wilson, whoever would like to answer that.
Mr. Phillips. Thank you, Senator. Let me focus, in
particular, on the redress of losses that consumers experience.
I think we are seeing today pushback from companies because of
the legal uncertainty of 13(b). I think, if the court rules
against us, we are going go to be unable to give people back
money that they have lost, and that is authority that we should
have.
Senator Klobuchar. Exactly, and that is--you are talking
here about this 9th Circuit case. Correct, I think if 9th
Circuit is affirmed, the FTC could seek, sorry, disgorgement,
but the 7th Circuit disregarded years of precedent when it said
that Congress did not provide for monetary relief, and now the
3rd Circuit has agreed. So, we have got a major situation going
on.
Mr. Phillips. Well, as you know, Senator, there are a bunch
of different cases dealing with several different issues. So,
there is the availability of money, there is the timing of when
we can go in and use 13(b). I think we are going to get some
clarity, one way or the other, in AMG. And I think, if we do
not get the answer that we want, we definitely are going to
need a fix from you.
Mr. Chopra. Senator, briefly, a court actually set aside a
$448 million judgment against a pharmaceuticals company that
engaged in an anti-competitive scam and that money is now not
recoverable. We do need Congress to act, and we do need the FTC
to really live up to hold some of these large firms
accountable.
Senator Klobuchar. So, what you are saying to me is, maybe
instead of using fancy legal terms, like disgorgement, we
should actually talk about the actual money that should be
going to help consumers. Thank you for that advice.
Thank you, everyone.
The Chair. Thank you. Senator Cruz.
STATEMENT OF HON. TED CRUZ,
U.S. SENATOR FROM TEXAS
Senator Cruz. Thank you, Madam Chair. Welcome,
Commissioners and it is always good to see the FTC here. I
spent two wonderful years at the FTC. There are a lot of
terrific men and women who work there at the Commission.
As you know, I have deep, deep concerns, in particular
about Big Tech. I think Big Tech today represents the greatest
accumulation of power--market power and monopoly power over
information that the world has ever seen. And the players in
Big Tech are getting more and more brazen. They behave as if
they are completely unaccountable and, at times, they behave
more like nation states than private companies. I think the
Commission has not done nearly enough to reign in the abuse of
power of Big Tech.
When it comes to content moderation, they are absolutely a
black box. They refuse to answer questions. In the Senate, we
have promulgated questions to Big Tech over and over again
about their content moderation decisions. Who are they
blocking, specifically? What are the numbers? Under what
circumstances? What are the remedies? What is the
decisionmaking? And Big Tech's standard answer to all of that
is essentially, jump in a lake. That they do not have to
answer.
We saw, before the prior election, Big Tech take an even
greater step and block the New York Post. Shut down the
Nation's fourth largest print newspaper, because Big Tech
disagreed with a story that they had put out. That market
power, with zero transparency and zero accountability, I think,
it is dangerous. And I think it is dangerous for free speech.
It is dangerous for free and fair elections.
In your collective judgment, what can and what should the
Commission do to reign in the abuse of power for Big Tech?
Mr. Chopra. Senator Cruz, there is no question that these
firms wield enormous power over our lives, over our economy,
and over our democracy. I was happy that the FTC voted to issue
a complaint against Facebook and its anti-competitive
practices. But it is clear, there was a lot of missed
opportunities to reign it in before. And local journalists,
media have been destroyed by many of these practices.
We have to do more. Congress has to do more when it comes
to abuses of Section 230. And we also have to get to the bottom
of the black box algorithms that they have. The FTC has issued
some orders to understand some of those content curation
practices, how those algorithms make decisions, and ultimately,
we need to hold them accountable for when they violate the law.
Ms. Wilson. Senator Cruz, this is Christine Wilson. If I
can have just a moment to respond, as well. I agree with you
that there are significant concerns about content moderation,
content curation. As Commissioner Chopra indicated,
Commissioner, now Acting Chair Slaughter, and Commissioner
Chopra and I worked together to design the 6(b) study that
Commissioner Copra referenced. And I think that is, perhaps,
the most important task that the FTC is undertaking right now.
As to the question of whether the FTC currently has
authority to address these issues. Can content suppression be
an unfair practice under our Consumer Protection and
Competition Mandates? I believe that if firms act in ways that
are contrary to their material representations, or terms of
service, it could be an unfair or deceptive act. I do not want
the FTC to be the speech police. We are not equipped to judge
political speech. But it is within our authority to determine
whether companies are living up to their promises to consumers.
As for questions of unfair competition. If firms agree to
censor a specific and disfavored perspective, it could raise a
question of whether there was an illegal agreement, under
Section 1 of the Sherman Act. So, for example, if different
social media companies take down similar content in the same
24-hour period, that could raise a question about whether
companies reached a potential illegal agreement behind the
scenes, to silence certain perspectives. Obviously, parallel
conduct is necessary, but not sufficient, to prove an antitrust
violation. But I would be interested in taking a look at some
of these simultaneous takedowns to determine whether there is
an underlying agreement that was driving those actions.
Ms. Slaughter. Senator, I just wanted to add that I agree
with you that we need to be really concerned about the exercise
of market power by these extremely large companies. I think--I
was pleased to support the complaint we had against Facebook. I
share the concerns Commissioner Chopra articulated earlier
about our resolutions of the order enforcement case against
Facebook earlier, and the YouTube case against Google, because
I was concerned that it would not adequately incentivize
companies to start following the law. Neither of them would
adequately incentivize companies to start following the law.
And going back to the topic of this hearing, I think we
need to think about the role platforms have to play in the
dissemination of COVID scams, for example. This is another
area--Commissioner Chopra pointed to Section 230. I think this
is an area where we see the scams popping up again and again
and again on these platforms. And 230 can inhibit our ability
to hold platforms accountable for being the marketplace of bad
action, instead of good ideas.
Senator Cruz. Well and let me encourage you. I think there
is particular value the Commission can add, in terms of
transparency, in terms of addressing the black box. So, for
example, Big Tech claims there is not political bias. Well,
they happen to have a monopoly on all the information and data
you would look to to assess whether there is political bias.
And so, I have asked repeatedly, in the 2020 election
cycle, how many Republican candidates for office did you block
posts from? How many Democratic candidates? There is an answer.
It is a concrete number. They have it. They refuse to give it.
Simply making that information public, for multiple cycles,
what they are doing, I think would be incredibly beneficial,
reigning in the abuse of power. And I think the Commission has
ample authority to require those disclosures right now.
Ms. Slaughter. Well, can I just--I just want to point out,
Senator, I, as Commissioners Wilson and Chopra indicated, very
much supported and think the 6(b) study that we are doing on
social media platforms is extremely important. I would like it
to have result in us adding some transparency to the
marketplaces. But the 6(b) statute specifically prohibits us
from disclosing certain information that we receive as a part
of those studies, you know, where it is tied to particular
companies. So, we can comment on market trends, but I want to
be mindful of the limitations of our statutory authority, which
we obviously cannot go over. So--and set expectations
reasonably there.
The Chair. Well, thank you. We definitely--I mentioned
earlier we are going to have a hearing about abuse of market
power later in May. And so, I appreciate your question and
definitely--I might add an addendum. I think it is not only, go
jump in a lake. It is, go jump in a lake and I will pay $5
billion in fine because I am making so much money it does not
matter. And so, when it is both of those, I think we really
have to do something. So, thank you for your questions. Senator
Blumenthal.
STATEMENT OF HON. RICHARD BLUMENTHAL,
U.S. SENATOR FROM CONNECTICUT
Senator Blumenthal. Thanks, Madam Chair. We really do have
to do something, and my fear is that Big Tech is watching. It
is paying tens of millions of dollars to lobbyists. It has
learned the Microsoft lesson, which is do not wait to be sued.
And the message they are sending back to the heads of those
companies is, more talk, we are good, business as usual.
So, I want to say, amen to Commissioner Chopra's
observations about the need for action. And I think that there
should be another takeaway from this hearing, which is, that if
Ted Cruz and Richard Blumenthal can agree on excessive power
and abuse of power, there will be some action. And that
includes Section 230 because, as you have said very well,
Acting Commissioner Slaughter, vaccine cards onsites, sold
there with knowledge by the tech platforms is knowledge of an
illegal act. The mere selling of those cards is a violation of
law, and only their immunity protects them.
So, put aside content suppression. Put aside the
algorithms. Put aside all of the other potential violations of
law. We have a here and now. There is an immediate threat to
public health. Fake vaccine cards being sold. Can the FTC do
something?
Ms. Slaughter. Thank you, Senator. I think this is a
perfect example of one of the challenges that we face that is
real and material, for exactly the reasons that you talk about.
When Senator Tester was speaking earlier about robocalls, one
of the things that I think about that issue is similar to this,
which is, we can and should go after the individual scam
artist. Sometimes, they are beyond our reach; sometimes they
are not. We will get them. It is Whack-a-mole. It is the same
as with the vaccine card scammers. We should go after as many
of them as we can. But if they still have the platform on which
to operate, and we cannot hold the platform accountable for
that, then the scams will proliferate----
Senator Blumenthal. Let me just make a suggestion. I
apologize for interrupting. Seems to me that if the sale of
fraudulent and fake vaccine cards, representing a real threat
to public health, is a violation of criminal law, it ought to
be a referral to the Department of Justice. Which does not
implicate immunity.
Ms. Slaughter. No, I think that that is right. I think that
if we ever saw anything that indicated a criminal violation we
should and would refer it to the Department of Justice.
Senator Blumenthal. Well, let me make a suggestion that you
consider doing it. I think that there is more than ample reason
to make that kind of referral, and I will hope that you will
consider doing it.
Voice. Senator--Senator----
Senator Blumenthal. Let me raise another area, privacy. I
want to follow up on the Chairman's questions about--or the
Ranking Member's question about the FTC's oversight of consent
decrees. Earlier this month, stolen data--stolen data, on 533
million Facebook users, was leaked to the public. Facebook
said, well, it is old news. The theft occurred in September
2019. Yes, the violations of privacy are now, but we are not
going to notify anyone. It also reneged on its promises to
separate What's App information from Facebook. Facebook is now
forcing users to consent to sharing, or else it will disable
their accounts in a month. I want to ask, is the Commission
prepared to investigate Facebook's failure to notify users of
those privacy violations, as a possible violation of the
consent decree and reversal of privacy commitments to What's
App users. These consent decrees are meaningless unless they
are enforced.
Ms. Slaughter. That I 100 percent agree with you on. I
cannot talk about any particular fact pattern, but I will tell
you that I believe we can and should and will be investigating
every potential violation of consent decrees that we see
against these large companies, for exactly the reason that you
articulated. If we are not following up on our orders, then why
have them in the first place.
Senator Blumenthal. Will you being reviewing,
comprehensively, all of your past consent decrees so you can
assess whether or not they have been violated?
Ms. Slaughter. Yes, I think that is important, but I think
it is important to prioritize the consent decrees we have with
the largest companies, where the biggest harm is at stake.
Mr. Chopra. Senator, it has become a rite of passage among
Silicon Valley behemoths that they can get an FTC order and,
apparently, many of them feel they can just violate it. So, I
think we need to not only look if it is an order violation--
even if it is not, there needs to be some accountability for
wrongdoing.
I have also argued that, if the FTC continues to be
perceived as unwilling to enforce its own orders, we may need
to do--Congress may need to do what was done in the Packers and
Stockyards Act to make sure that individuals can sue in court
to halt violations of those orders.
Senator Blumenthal. I agree wholeheartedly. Individuals
ought to have a right to go to court if, for whatever reason,
the FTC is failing to enforce its own orders. Thank you all for
your service and I look forward to working with you and hearing
from you at a Subcommittee Hearing that we are having next
week, on COVID related frauds, including fake vaccine cards.
Thank you.
The Chair. Thank you. Senator Blackburn.
STATEMENT OF HON. MARSHA BLACKBURN,
U.S. SENATOR FROM TENNESSEE
Senator Blackburn. And thank you, Madam Chairman. And I
really appreciate this hearing today so much.
Commissioner Chopra, I want to start with you. First of
all, thank you for your call last week and the conversation
about the CFPB. Senator Cruz just touched on reigning in Big
Tech, which, as you know, that is something that the FTC should
be doing more of. And I am working with others on what I just
term, a Virtual Youth Protection Agenda. The Virtual Youth
Protection Agenda addresses privacy, data security, online
antitrust, and then, also, some work in Section 230. And
holding Big Tech to account, where they overstep the line, in
230, where they abuse the privacy rights of individuals is
something that, I think, that the FTC has to pay more attention
to.
You look at the Facebook settlement. Five billion dollars,
it should have been $50 billion. They have built their worth as
a company by utilizing data. When you are using these Big Tech
platforms, you are the product.
So, I would love to hear from you, just for a minute before
we move on. What else can the FTC do to reign in Big Tech? What
are the additional tools that you need?
Mr. Chopra. Well, I think we have to use a lot of the tools
we already have. We already have a policy statement on
deceptively formatted advertisements, where they can be held
accountable for their algorithmic promotion of content. We
already have existing orders against Google, against Facebook,
against Twitter, and the list goes on and on. We should enforce
them.
But, Senator, we do need help, I think, from Congress to
offer more clarity to reign in the abuses of Section 230. It is
being used to traffic unsafe, counterfeit goods with impunity.
And there has to be something done to make sure that our
economy is safe. That brick-and-mortar businesses can fairly
compete and that we actually can have a Democratic society that
is not--that is free and fair and not mostly dictated by a
handful of companies.
Senator Blackburn. OK, let me ask you this. In 2016, I
worked in a bipartisan manner, bicameral we passed the BOTS
Act. And I know that Senator Moran mentioned this just a little
bit earlier. So, as we continue to monitor the entertainment
industry, is there anything else this committee should be aware
of--things that you all have learned, as we look at the
entertainment industry and as we look at what is happening with
the BOTS and then, likewise, with the BOTS Act? And then, could
that template of the BOTS Act be used in other applications or
for other industries?
Ms. Slaughter. Thank you, Senator. You are right. We have
brought our first BOTS Act case. It is important and I think
BOTS Act does provide an important template for other
industries, in a couple of ways. Bots are not just a problem in
ticket sales. They go well outside that. And so, it might
provide a template for looking at the use of Bots to circumvent
meaningful limitations in other areas.
But the other way I think the BOTS Act is a useful
template, is that it gives us specific civil penalty authority.
So, we do not have to engage in tortured negotiations about
what particular harm to individual consumers, where we have a
stick that we can use to deter bad actions. So, I think it is
useful there.
In terms of other questions in the ticket industry, I
would--I do not think Bots are the entirety of the problem that
we have in ticket markets. And I would encourage Congress and
the Committee to look also at the competition questions that
are involved and the concentration in entertainment markets,
and also, in practices like whitelisting sites, where consumers
think they are going to one site to get a ticket, but it
actually is a fake site.
So, those are things that we need to look at from an
enforcement perspective, but I also think they merit the
attention of Congress, as well.
Senator Blackburn. Thank you. We will continue to work with
you on that. My time is about up. I have got a 13(b) question.
I will submit that to you for an answer. And Madam Chairman,
thank you so much.
The Chair. Thank you, Senator Blackburn. Senator
Hickenlooper, then followed by Senator Thune. Oh, I am sorry.
Senator Schatz followed by then, Senator Thune.
STATEMENT OF HON. BRIAN SCHATZ,
U.S. SENATOR FROM HAWAII
Senator Schatz. Well, I thank you, Chair Cantwell, Vice
Chair Wicker, and thank you to all the Commissioners.
I want to start with Commissioner Chopra. An FTC study
found that one in five people had an error on at least one of
their credit reports and five percent of consumers had errors
that were economically damaging to them. In this business, even
a small error rate means millions of Americans are denied jobs
or housing. People pay more for credit or are denied loans all
together. This industry can and does ruin lives with millions
of simple errors. It can put innocent people in a hole that is
impossible to get out of.
So, what do we need to do, Commissioner Chopra? Do you have
the authorities that you need, under statutory law? Is there
more the FTC can be doing? Is there more that Congress can be
doing?
Mr. Chopra. So, Senator, when I ask people, ``How much
error do you tolerate in your bank account balance?'' the
answer is zero percent. But when it comes to credit reports, we
see so many of them are rife with errors and it is not just the
credit reports. It is also tenant screening reports. It is also
employment background check reports. And increasingly, we have
a new type of industry, where companies are collecting massive
amounts of data. Data brokers, including the Big Tech
companies, that may be rife with errors, as well.
So, this is, like, has so much impact on our lives and we
need to make sure that there is meaningful enforcement of the
Fair Credit Reporting Act, and all of our laws. We are at the
50th anniversary of the FCRA. Some things have worked well;
some things have not. And I do think we need to have
conversations about what more can be done to reign in the
errors that are riddled throughout credit reports and data
brokers.
Senator Schatz. Commissioner, excuse me, Chairwoman
Slaughter, I want to thank you for the great work that the
Commission does and on a bipartisan basis. My question is
basic. Where are you with resources? From the authorizing and
appropriating committee's standpoint, a lot of us will be
arguing about the policy changes that we all think are
necessary. We will be introducing legislation. But it seems to
me that you have plenty of authority and not enough
technologists and lawyers and analysts. And I am wondering if
you can tell me, what are your needs in order to execute on the
laws that are already on the books?
Ms. Slaughter. I really appreciate the question, Senator,
and your support and interest. You are right that resources is
one of our major issues, maybe the biggest issue with which we
struggle right now. When you think about the demands on the
Commission across the breadth of our mission areas, from
competition through consumer protection, we are not, I think,
as well equipped as we even come close to needing to be to
tackle them in meaningful ways.
We had 50 percent more employees at the beginning of the
Reagan Administration than we do today. And when you think
about how our mission has grown, data privacy was not really a
thing we talked about at the beginning of the Reagan
Administration. Competition looked entirely different from an
enforcement perspective there. And what the markets looked like
was totally different.
So, yes, we need a lot more resources. And I just want to
put a fine point on it. The absence of resources means that our
enforcement decisions are harder. If we think that we have a
real case, a real law violation, in front of us, but a
settlement on the table that is, maybe, OK but does not get the
job done, we have to make difficult decisions about whether it
is worth spending a lot of taxpayer dollars to go sue the
companies who are going to come in with many, many law firms
worth of attorneys and expensive economic experts versus taking
that settlement. I think doing those suits is the right thing
to do, in a lot of cases, but we have to be open-eyed about
what that means, in terms of where else we would have to forego
enforcement.
And then, the last point I would make to your point about
expanding technologists and other kinds of expertise, I think
that is also exactly right. We need to build out our analytical
skill sets, so that we are not just relying on attorneys and
economists, but we have more technologists--more other kinds of
analysis that we bring to bear on the cases that we bring and
the investigations that we do. So, we are really,
comprehensively understanding the markets that we are
addressing.
Senator Schatz. Thank you. And final quick question,
Section 230 is increasingly used as a defense against the
Federal Government in civil actions, which is hindering FTC and
DOJ. Is there something you think we can do about that, like
pass the legislation that John Thune and I have introduced?
Ms. Slaughter. Yes, I think that your legislation makes a
really important step forward and I am particularly
appreciative of the exemption that it gives for civil law
enforcement, from 230. We have talked a couple times today
about the ways 230 has been used to immunize platforms from
dealing with illegal conduct that is happening on their sites.
And COVID scams are a great example of that problem. So, yes, I
think that would be helpful.
Senator Schatz. Thank you very much.
The Chair. Thank you, Senator Schatz. Senator Thune.
STATEMENT OF HON. JOHN THUNE,
U.S. SENATOR FROM SOUTH DAKOTA
Senator Thune. Thank you, Madam Chair. And Senator Schatz
asked my first question and----
Senator Schatz. I am sorry, John.
Senator Thune. That is--and, Madam Chair--Acting Chair, you
answered it. So, I appreciate that. We are really interested in
moving something that would address Section 230 in a way that
is thoughtful, I think, in terms of reforms, but do get at this
shield that is used repeatedly. And I would argue now, with
these platforms, continue to moderate content in a way that was
not intended when the law was passed back in 1996. So, I think
it is time for some reforms and Senator Schatz and I would love
to get this scheduled and voted on, Madam Chair.
Let me then flip to this question. In 2018, I had requested
the FTC use its Section 6(b) authority to study consumer
information data flows of large technology companies, and I was
pleased to see that the FTC, last February, issue 6(b) orders
to several major tech companies.
Acting Chair Slaughter, could you provide an update on the
Commission's work, with respect to the 6(b) orders issued to
Facebook, Apple, Alphabet, including Google, Amazon, and
Microsoft, in February 2020? And as Congress continues to
identify ways to protect consumer data, do you believe this
initiative will help shed light on the data practices of these
large tech companies? And I would welcome the thoughts of any
other Commissioners, as well.
Ms. Slaughter. Thank you, Senator. I believe the 6(b) to
which you are referring from last February actually targeted
the acquisitions--the non-reportable acquisitions of those
companies. And I think that is also a really important area of
Commission attention and study. When you see companies do many
serial acquisitions, that are below the HSR reporting
threshold, we do not get to see each of those as they are
happening. But the big picture of how those consolidations can
happen, those rollups happen as a result can be really
meaningful for competition and merits our attention. So, that
information has been gathered and analysis is ongoing.
At the same time, last--or, not at the same time. A little
bit after that, last fall, we issued a separate 6(b)--set of
6(b) orders to nine social media and video streaming platforms,
looking at these questions of data collection and use and
algorithms, and I think we have referenced it a couple times
before. That, I think, is going to provide really meaningful
input to the Commission that will help inform how we address
these big picture questions that sound, in both competition and
consumer protection. And I am hopeful that we can produce
something that is also useful to Congress and the public,
because I think transparency here is important. But of course,
in both of these cases, we have to be mindful of the
limitations, in Section 6(b) about what information we can make
public. So, my goal would be to make as much public as we
legally can. But we have to, of course, mind our statutory
limitations.
Mr. Phillips. Senator, I did not support that latter 6(b).
I felt that it was underinclusive as to the targets and
overinclusive as to topics. I felt that it looked at too much
at the same time. And so, having to respect the anonymity that
is legally required, we would not be able to get the kind of
data that we need, on how the data flow. But I absolutely agree
that studying data flows in the economy, from big firms, also
from small firms, is a good use of our authority.
Mr. Chopra. Senator, if I could just add, part of this
study will--should also solicit documents about including
content curation and content moderation type practices,
including how it is done algorithmically. My personal view is
that that study is very important but waiting for--we should
not wait for it to conclude to fix Section 230. I think Section
230 is an urgent priority to get reform and I do support,
especially as an initial step, not subjecting civil law
enforcement for firms to raise that immunity as a defense.
Senator Thune. OK, great, thank you.
Ms. Wilson. Senator Thune, this is Christine Wilson. If I
could just add, I do agree with what Acting Chairwoman
Slaughter said about both of these 6(b) studies. I think it is
important to look at the sub-HSR acquisitions that are
occurring, not just in Big Tech, but in other areas, as well,
for example, kidney dialysis and other industry rollups that
are occurring, and I fully support efforts of the FTC to do
that.
But I also echo the importance of the 6(b) study regarding
information flows. That is a study that Commissioners Chopra
and Slaughter and I worked on while Chairman Simons was still
there. I do think it is the single most important thing that
the FTC is doing right now. And we will certainly use that
information to inform both our enforcement and policy efforts,
as well as our technical assistance to Congress. Perhaps this
is one area where Commissioner Phillips and I disagree. I do
not think we need to report out the information to make it
useful to us. I think just having that information, even if we
cannot publish it because we cannot necessarily anonymize it
effectively, is still going to help us refine our enforcement
approach.
Senator Thune. Madam Chair, my time is expired, but if I
could just ask if, at some point, you could answer this
question. I think Senator Tester, perhaps, asked a similar
question already, but that is the enactment of the TRACED Act,
which was, you know, we passed in December 2019. You have seen
a drop in robocall complaints, I understand, and I would, at
some point, if you could elaborate on some of the recent
enforcement actions that you have taken with respect to
robocalls, that would be great.
The Chair. Thank you. Thank you, Senator Thune.
Senator Thune. Thank you, Madam Chair.
The Chair. Yes, we should follow up on that information
both, you know, at home and on mobile devices. So, Senator
Peters is next, and I think we have a couple of members in the
queue. Senator Rosen and Senator Hickenlooper. I do not have
anybody else on this side. if there are, please let us know.
But Senator Peters, if you could ask you question and then,
call on Senator Rosen. I am going to step out for just a
minute. But if you could get those two done, that would be
great. Thank you. Senator Peters.
STATEMENT OF HON. GARY PETERS,
U.S. SENATOR FROM MICHIGAN
Senator Peters. Thank you, Madam Chair. Acting Chairwoman
Slaughter, earlier this month Michigan's Attorney General
shared a press release warning that Michiganders of a COVID-19
vaccine reward scam that was occurring in our state.
Individuals receiving the fraudulent post-vaccine survey, e-
mails and texts were congratulating them for getting the
vaccine, so they now qualified for a free reward. All you have
to do is pay for shipping and handling. Give me your credit
card. And the reward never shows up. And it was going on in a
pretty wide basis.
Reports suggest the scammers may have targeted their
victims using vaccine card selfies. But the vaccine cards do
not have, as you know, e-mails on them or phone numbers on
them. So, it is questionable whether or not that was the
source. So, but my question to you, has the FTC investigated
whether these scammers have purchased vaccine information or
used data bases of personal information, like phone number and
e-mail addresses, from data brokers in order to target these
victims?
Ms. Slaughter. Thank you, Senator. I cannot comment on any
particular fact pattern of investigation, but I will tell you
that we are very much prioritizing investigating all complaints
we hear about COVID-related scams. And working closely with
State attorney's general and consumer advocates is really
important for us, as well, not only to gather the information
that we need to do appropriate law enforcement, but also get
the information out to communities to make sure people do not
fall for these scams to begin with. So, we need to be doing
both of those things.
Senator Peters. Well, I have introduced in the past, and
plan to reintroduce, a Data Broker List Act, which is going to
increase transparency and security of personal data. It will
require data brokers to register and maintain comprehensive
security system. You may be familiar with.
My question to you is, would increasing transparency around
data brokers' activity make it easier for the FTC to track
scammers, like the ones we are talking about, who are targeting
innocent citizens?
Ms. Slaughter. Thanks, and I apologize for not addressing
the data broker point of your original question. When I was
listening to it, it felt to me a little bit like an FTC issue
spotting law school exam because you pointed to all sorts of
different issues, including the data broker universe, which
operates in an extremely opaque background. Where people have
no, not only, knowledge of, but also choice about what
information is collected, by whom, how it is sold. So, I think
transparency is absolutely a minimum step that we need there.
We also need accountability for these companies. And we need
consumers to have more authority to decide who gets to have
their information in the first place, so that we do not have
this, sort of, infrastructure that feeds the advertising
surveillance ecosystem, in ways that are really harmful to your
constituents and others.
Senator Peters. So, I gather from that answer, more
transparency is something that we definitely need, you fully
support.
Ms. Slaughter. Yes. Short answer, yes. I think more
transparency would be great. Thank you, Senator.
Senator Peters. Well, no, I appreciate the law school
answer, as well. But definitely, we will continue to work on
the transparency, and I appreciate your efforts in that area.
Another question for you is that the COVID-19 pandemic has
also caused an increase in government contracts, to address the
needs for Americans, as we recover from this crisis.
Unfortunately, there have been numerous instances of bad actors
that have taken advantage of the emergency to improperly
influence the Federal procurement contracts and grant making.
They have been using a number of unscrupulous tactics to try to
get around some of the competitiveness provisions that exist in
contracting practices.
I am Chairman of the Homeland Security and Government
Affairs Committee. We have oversight jurisdiction of Federal
contracts. And I want to certainly ensure that the Federal
procurement practices protect contractors and taxpayers, from
any kind of anti-competitive activity.
So, my question to you, ma'am, is what is the FTC doing to
enforce against contractors who are improperly influencing
Federal contracting?
Ms. Slaughter. Thank you, Senator, for the question. I
think it is an interesting one. Contracting--government
contracting, in this particular context, is not one that comes
up all the time. But I think, as you describe it,
misrepresentation and illegal conduct, in association with
getting government contracts, is illegal and is something that
we can and should investigate. So, wherever we can get
complaints and get information, that is something we can apply
our investigatory resources and law enforcement tools to. And
so, I would be happy to take a look at whatever complaints you
can send our way.
Mr. Chopra. Senator, could I just add that I think the
consolidation that we have seen in the defense industry has
been very problematic for public procurement. We are spending
more and more money for some of the same exact services and
making sure that the FTC polices those defense mergers with the
DOD is absolutely critical.
We also need to put a stop to bid rigging. And I think,
actually, that should be best done criminally. When contractors
coordinate on their bids, that is a--could be a criminal
violation and it should be pursued as such.
Senator Peters. Right. I appreciate that. Thank you, for
all of you for your testimony here today. I would like to
recognize Senator Rosen, for your questions.
STATEMENT OF HON. JACKY ROSEN,
U.S. SENATOR FROM NEVADA
Senator Rosen. Well, thank you, Senator Peters, and I
really appreciate this oversight hearing today. And I want to
thank Acting Chairwoman Slaughter and all the Commissioners,
for being here and for their hard work.
But I would like to build upon Senator Peters' concerns
over consumer fraud, as it relates to identity theft. Because,
last year, when the Commission appeared before the Committee
during the height of the pandemic, I shared my concerns with
you about rampant consumer fraud individuals and families are
facing around the country, especially in my home state of
Nevada. Consumer fraud, especially acute because the pandemic
hit our economy harder than almost any other State. The
scammers capitalized on the hardship of the unemployment of
Nevadans, using stolen personal information derived from
countless data security breaches, phishing attacks,
impersonation scams that were meant to steal their unemployment
relief, and of course, then, their stimulus payments.
So, Chairwoman Slaughter, could you please update the
Committee on any new steps the FTC has taken to address the
significant rise in identity theft during the pandemic? And
could you also, maybe, mention what specific additional
resources we could do to educate the public of these online
threats and risks? Or what resources you might need to go after
these fraudsters online?
Ms. Slaughter. Thank you, Senator. Well, first I will start
by thanking you, in particular, for the money that you
appropriated to the FTC in the American Rescue Plan, which
included specific allocations to do more COVID-related scams
enforcement and to do more consumer education. We are working
quickly to put that money to use, to hire staff, to expand our
outreach. Because we want, in the first instance, to stop
people from getting scammed to begin with, and then, to go
after scammers who still manage to find victims.
And so, I think that it is incredibly important. You are
absolutely right that scammers are capitalizing on people's
desperation. That is adding injury to the already profound pain
and suffering that people are experiencing right now. And so,
we are very much committed to going after it. You are right
that identity theft has been one of the big areas we have seen
an increase. And it is one where we need to use the money that
you have given us to expand our outreach in education, hire
more staff, and bring more enforcement actions.
Senator Rosen. Thank you. I want to build on identity theft
and fraud, particularly as it is relating to our veterans.
Nevada is home to over 225,000 veterans, nearly 20,000 service
members, and certain scams are more likely to target members of
our military, or our veterans. According to the Nevada Attorney
General's office, the most common scams include fraudulent
mortgage relief programs, high-interest military loan scams, of
course again, identity theft. And Nevada ranked 4th in 2020 for
the highest per capita cases of reported identity theft.
So, veterans in my state, of course they can turn to the
Nevada Attorney General's Office of Military Legal Assistance
and they do get free legal assistance there, to anybody who is
active duty, reserve, National Guard. And they are doing
excellent work to protect our veterans. But, Chairman
Slaughter, could you share with us how your office is working
with the Department of Veteran's Affairs, as well as our State,
local, and non-profit veteran's organizations, to get the word
out to address these illegal scams that are targeting our
military and our veterans, please?
Ms. Slaughter. Thank you, Senator. You are absolutely
right. The veterans and military service members are a
particular target of scams, in part because of how frequently
they have to move around. And that is something that has been
in the Commission's attention for a long time. But activating
those partnerships with other enforcement agencies, whether it
is the VA, State attorneys general, or as you pointed to,
advocates on the ground, is really important to make sure we
are seeing everything we need to see, we are reaching the
people we need to reach.
Just last month, maybe the end of the month before, the FTC
launched the Community Advocate Center, which is designed, in
part, to help us better connect with advocacy organizations
that are reaching populations that we are not reaching well,
through our online outreach or other programs that we have been
using, historically. So, that is one way that I think we want
to particularly address veterans' groups.
Veterans are also a priority in our Every Community
Initiative, where we are trying to target enforcement efforts.
So, I appreciate the question and can commit that it will
continue to be a priority for the agency.
Senator Rosen. I appreciate the hard work that you are
doing. We have no shortage of folks that are going to try to
take advantage of others, and we have beat them to the punch
with education, information, and resources.
So, I yield back my time. Thank you.
Senator Peters. Well, thank you, Senator Rosen. Senator
Lummis, you are recognized for your questions.
STATEMENT OF HON. CYNTHIA LUMMIS,
U.S. SENATOR FROM WYOMING
Senator Lummis. Thank you, Mr. Chairman, and thank you,
Commissioners, for appearing before the Committee today.
My questions are going to start to focus on BOTS. As you
know, there has been a tremendous rise in e-commerce during
COVID. And during this time, there has also been a big spike in
the use of BOTS. BOTS were used to buy up entire supplies of
physical goods that were made scarce during the pandemic, such
as, toilet paper and other paper products. What is the FTC's
level of concern related to these types of uses of BOTS? And
this is for any Commissioner that chooses to answer.
Mr. Chopra. Senator, I appreciate the question. Anytime
that technology is being deployed to corner the market and rip
people off, that obviously is a huge concern. The Commission
currently enforces a law about ticket BOTS, which I will let
some of my colleagues talk about. But here is what we are
seeing on some of these platforms. People making mass
purchases, engaging in price gouging. And that is something we
have to think about the incentives of those tech platforms to
properly police and we need to be working with the State
attorneys general to crack down on some of the worst of it. But
obviously, more authority would be useful in addressing that
concern.
Senator Lummis. So, do you consider some of these practices
to be anti-competitive? And since consumerism in general seems
to be switching, and perhaps over the long-term, to a more
digital model, what can states do, and what can you help states
do, to take on these issues?
Mr. Chopra. Well, generally speaking, Senator, when
companies or scammers use, you know, to intercept any sort of
computer system to allow them to purchase all goods and not let
others fairly compete, that actually could be a violation of
some of our computer fraud laws. I am happy to answer a
question for the record. When it comes to whether it is anti-
competitive, I believe there are certainly some real
implications there. But we absolutely need to do more, when it
comes to working with states on this issues. Because we need a
free market that is competing on price and quality, not being
cornered by criminals using technology.
Mr. Phillips. Senator, just briefly, to add to what
Commissioner Chopra said. I think one thing we do need to look
out for, and to work with states to look out for, to the extent
there are participants in the market that are using the guise
of computer programs to work together to bid rig, or corner
markets, or whatever it is, then you can very easily tip into
anti-competitive territory.
Ms. Slaughter. And I will just jump in, too, to point out,
Commissioner Chopra referenced the ticket BOTS Act. That gives
us very specific and clear authority to go after the use of
BOTS to circumvent distribution measures in ticket markets. But
we do not have that same clear, direct authority in other kind
of markets. So, while I believe we should be thinking
creatively and aggressively about how the FTC Act, generally,
or some of our other specific statutes might apply, in any
circumstance where Congress makes very clear that particular
conduct is illegal and should be pursued under the FTC Act,
that makes it a lot easier for us to do that, especially when,
as with the BOTS Act, that is coupled with civil penalties, so
that there is a real incentive for companies to comply.
Senator Lummis. So, do you think that a statutory response
is warranted here?
Ms. Slaughter. I think it would make it much easier for us
to bring enforcement actions against the kind of conduct about
which you are concerned.
Senator Lummis. OK. Thank you. Thank you very much. Are
there particular sectors that are being targeted more than
others for scams during COVID-19?
Mr. Chopra. So, Senator, we have seen a huge uptick in all
sorts of complaints, particularly when it comes to government
benefits. I think, because of the continuous data breaches,
over and over again, there are more ways for people to steal
identities and to defraud the government and to even steal
people's identities.
You know, we know that our military service members and
veterans report identity theft and other fraud at a much higher
rate. We know that seniors are particularly vulnerable. So,
there are pockets of places where we know, but there is so much
we do not know. So, it is important that we really figure out
the sources of where this fraud is propagating. I am concerned
that many of the widespread frauds are being trafficked online.
And we need to look at how some of those large firms are
policing their platforms.
Senator Lummis. Well, thank you very much, Commissioners. I
appreciate your testimony today. Mr. Chairman, I yield back.
The Chair. Thank you. Senator Hickenlooper.
STATEMENT OF HON. JOHN HICKENLOOPER,
U.S. SENATOR FROM COLORADO
Senator Hickenlooper. Thanks so much. I appreciate that,
Madam Chair, and thank you for holding such an informative
session today.
I have another question for Ms. Slaughter, if I can. I
understand that, in 2018, the FTC's Division of Consumer and
Business Education launched a Cybersecurity Education
Initiative, directed and focused to support small businesses.
As a small business owner, myself for many years, I recognize
how important it is that small businesses be able to address
some of the real challenges that we are facing right now. And
that is--I think that is--what the FTC was doing was a great
step in that direction.
So, Chair Slaughter, I would love to hear what feedback you
have, for those small businesses, for the FTC. In Colorado, we
have a National Center for Cybersecurity we set up
independently, in conjunction with the military, but the goal
being to help small businesses, but also, local municipalities.
So, what you have heard from small business. I am going to try
to think about how it might also apply to small, you know,
counties, small cities and towns, as well.
So, anyway, does a--I guess I would love to hear a little
bit of the feedback and then, if you have any plans on
incorporating this feedback into some form of technical
assistance that could go out to the small business community?
Thanks.
Ms. Slaughter. Thank you, Senator. You are right. Small
businesses have been targeted, continue to be targeted, and we
know that they can be real victims of scammers and bad actors,
and anti-competitive conduct, the same way individuals can be.
And so, protecting them is an important priority, and just as
you reflected, that starts with educating them and outreach.
So, the programs that you referenced, I think, are important,
having to do with data security. The Start with Security and
Stick with Security education programs can be helpful to small
businesses because they can be especially susceptible to data
vulnerabilities and things like ransomware attacks. And we want
to avoid that happening to begin with.
We also know that small businesses can be susceptible to
scams related to government benefits. So, for example, the PPP
program was something where we saw small business scams attach
to, at the beginning of the pandemic.
So, continuing to do outreach and education for small
businesses, not only about cybersecurity, but also about scam
protection, remains a priority for us. And again, I want to
thank Congress for the recent money you appropriated to us to
help do more of that outreach and education.
And then, sorry, let me just add, I want to make sure that
we are following up--it is not just educating businesses for
how to avoid scams, but we are following up to pursue companies
that violate the law in ways that harm small businesses.
Whether it is scams or anti-competitive conduct, or anti-
competitive mergers, we need to be staying on top of those
issues and doing everything we can to help small businesses not
get hurt to begin with, and then, help them get relief if the
injuries do occur.
Mr. Chopra. Senator, can I just add to the Acting
Chairwoman's--I totally agree that we also need to help small
businesses get restitution when they have been harmed by some
of these data breaches. Too often, we basically think, well,
let us just tell them to stop, but do not do anything to help
the victims. More and more small businesses are in need of
password managers, security keys, and other protocols to help
them protect themselves. And we need to do more when those
small businesses are victimized, when their confidential
business information is stolen, and to help them really
compete.
Senator Hickenlooper. Great, thank you. Thank you, Mr.
Chopra. And I will yield back my time. I think this is
illustrative of how much has been done, but also, how much work
we still have to do, in terms of trying to safeguard small
businesses, individuals, everybody from all these scams and
fraudulent efforts to use cybersecurity to attack us.
The Chair. Thank you. Well, we are definitely--we will
definitely have more time with the Commission on those issues
in the future. So, I thank all my colleagues for participating
today. I do not know if we have anybody else. But while we are
doing, I guess, a last call with our colleagues to see if there
is anybody else who is interested in making a question, I just
want to clarify a couple things from the hearing.
First, we did give the Commission anti-manipulation
authority. You do have that authority for wholesale markets.
When we gave you that authority, we thought you would do a
better job of policing the impacts of gas prices in certain
market segments of the United States, which seem to have
perpetually high prices. I do not--but so, as people talked
about price gouging today, what do we think the difference is,
or authority that you have that you have not used, and an
authority on price gouging? Could somebody elaborate?
Mr. Chopra. So, with respect to the Energy Market
Manipulation Rule, that covers, I believe, wholesale markets.
The Chair. Yes.
Mr. Chopra. The FERCs authority has some--there is some
parallelism to that. Most of our work has actually been in the
retail gas area. We have limited authority on price gouging.
And unlike the states, we do not have a general authority on
price gouging. That is really at the State level. But I agree.
I think we need to be thinking hard about what our future
footprint is in the energy markets to make sure that consumers
have choice and energy is affordable.
The Chair. Well, as I mentioned, this has been a very
successful tool for FERC, as it relates to its market-based
authority. For the FTC, I think what happened to us is, one
summer we had the highest gas prices in the Nation in Spokane,
Washington. And we were like, why do we have the highest gas
prices in the Nation? It made no sense.
And we asked the FTC to track that supply chain of why,
because a lot of people--in the Puget Sound area we have high
gas prices because--well, one of the issues is all our oil is
from the Alaska market. And so, it is an isolated market, and
you can have issues with that. So, it is not as effective as a
more robust market. In this case, though, Spokane was not
getting its oil from Alaska. So, the FTC we asked you to do a
report.
So, all I am saying is, to me, we are still here today with
lots of issues about price gouging and as a manipulation
authority, I would hope you would look at that and just--we can
get clarity in the future about what else we need.
So, with that, I do not think we have anybody else in the
queue. So, the record will remain open for two weeks. I thank
all of the Commissioners for being here. You can see we had a
robust session of questions from our colleagues, on a variety
of topics. But clearly 13(b) is most pressing, so we hope that
we will resolve that issue one way or another. And so, the
authority will continue to rest with the FTC to take aggressive
action. And we ask that senators submit questions for the
record by May 4th and that you help us by returning anything as
quickly as possible, but no later than two weeks after that
date.
So, that concludes our hearing. Again, thank you for to the
Commissioners for your attendance. We are adjourned.
[Whereupon, at 12:09 p.m., the hearing was adjourned.]
A P P E N D I X
Response to Written Questions Submitted by Hon. John Thune to
Hon. Rebecca Kelly Slaughter, Hon. Noah Joshua Phillips, Hon. Rohit
Chopra, and Hon. Christine Wilson
Question. Currently, per an order from the Centers for Disease
Control and Prevention (CDC), a moratorium is in effect for residential
evictions through June 30, 2021. On April 13, 2021, the CDC issued an
updated FAQ document stating the following.
Do landlords have to make their tenants aware of the CDC order and
Declaration?
The Order itself does not require landlords to make tenants aware
of the Order and Declaration. But other relevant law, for instance the
Fair Debt Collection Practices Act and the Federal Trade Commission
Act, may require landlords, or their agents, to do so. Under these
statutes, evicting tenants in violation of the CDC, state, or local
moratoria, or evicting or threatening to evict them without apprising
them of their legal rights under such moratoria, may violate
prohibitions against deceptive and unfair practices. Landlords must
otherwise comply with all requirements of the Order. Also, even if not
legally required, landlords are encouraged to tell their tenants about
the Order.
Can you please describe the specific authority the FTC has in
enforcing the CDC's eviction moratorium, as the aforementioned FAQ
excerpt very broadly references laws under the FTC's jurisdiction?
Answer. The Department of Justice has the authority to enforce the
CDC's eviction moratorium order\1\; it may initiate criminal
proceedings as appropriate for violations of the order, seeking
imposition of the criminal penalties provided under 18 U.S.C.
Sec. Sec. 3559, 3571; 42 U.S.C. Sec. 271; and 42 C.F.R. Sec. 70.18.
---------------------------------------------------------------------------
\1\ The U.S. District Court for the District of Columbia vacated
the CDC's eviction moratorium order, but has stayed that decision
pending appeal.
---------------------------------------------------------------------------
The Federal Trade Commission (``FTC'') has the authority to enforce
Section 5 of the FTC Act and the Fair Debt Collection Practices Act
(``FDCPA''). Section 5 of the FTC Act prohibits unfair or deceptive
acts or practices in or affecting commerce. 15 U.S.C. Sec. 45(a)(1). An
act or practice is unfair if it 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. 15 U.S.C. Sec. 45(n). An act or practice
is deceptive if it involves a material representation, omission or
practice that is likely to mislead a consumer acting reasonably in the
circumstances. See Federal Trade Commission Policy Statement on
Deception, appended to Cliffdale Assocs., Inc., 103 F.T.C. 110, 174-83
(1984).
The FTC's authority to enforce the FDCPA includes the authority to
enforce any rule promulgated thereunder by the Bureau of Consumer
Financial Protection (``CFPB''). The CFPB recently issued an interim
final rule, effective May 3, 2021, which addresses debt collector
conduct associated with the CDC moratorium.\2\ Under the interim final
rule, debt collectors, as defined by the FDCPA, seeking to evict
certain tenants for non-payment of rent must provide those tenants with
clear and conspicuous notice that the consumer may be eligible for
temporary protection from eviction under the CDC moratorium. The notice
must be provided on the same date as the eviction notice, or, if no
eviction notice is required by law, on the date that the eviction
action is filed. Debt collectors must provide the notice in writing.
---------------------------------------------------------------------------
\2\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
rule-clarifies-tenants-can-hold-debt-collectors-accountable-for-
illegal-evictions/.
---------------------------------------------------------------------------
______
Response to Written Question Submitted by Hon. Todd Young to
Hon. Rebecca Kelly Slaughter, Hon. Noah Joshua Phillips, Hon. Rohit
Chopra, and Hon. Christine Wilson
Question. The Cancer Moonshot is incredibly important to this
country and early cancer detection is a critical part of opening up new
opportunities to develop new therapies. I understand that GRAIL has
made a breakthrough and developed a multi-cancer early detection test
that can detect more than 50 cancers in an asymptomatic patient and is
entered into a transaction agreement with Illumina, Inc.
Can you elaborate on why the FTC is challenging this transaction?
Answer. On March 30, 2021, the FTC filed an administrative
complaint and authorized a Federal court lawsuit to block Illumina,
Inc.'s proposed acquisition of GRAIL, Inc. (``Grail''). The complaint
alleges that the proposed acquisition would likely diminish innovation
in the United States market for multi-cancer early detection (``MCED'')
tests, and likely reduce the choice and quality of these tests and make
these life-saving products more expensive. In other words, the
complaint alleges that the acquisition is likely to harm consumers in
the United States.
According to the complaint, MCED tests could detect up to 50 types
of early-stage cancer, most of which are not screened for at all today,
saving millions of lives around the world. Grail is one of several
competitors racing to develop and ultimately commercialize these liquid
biopsy tests, which analyze a patient's blood or other fluid through
DNA sequencing. Illumina is the only provider of next-generation DNA
sequencing (``NGS'') platforms that are a viable option for Grail and
other MCED test developers in the United States. Illumina's NGS
platforms are an essential input for developing and commercializing
MCED tests. Grail and each of its MCED test competitors must rely on
Illumina's NGS platforms to research, develop, launch, and sell their
MCED tests successfully.
As the only viable supplier of an essential input, Illumina has
several tools that it could use to harm Grail's MCED test competitors.
For example, Illumina could raise prices charged to Grail competitors
for NGS instruments and consumables; impede Grail competitors' research
and development efforts; or refuse or delay executing licensing
agreements that all MCED test developers need to distribute their tests
to third-party laboratories.
The complaint alleges that the proposed acquisition would give
Illumina both the incentive and ability to disadvantage MCED test
developers that pose a significant competitive threat to Grail, and to
limit the competitiveness of any MCED product that it expects to
compete closely with Grail's MCED test. Because Grail's MCED test
rivals have no choice but to use Illumina's NGS platforms, they would
not be able to divert from Illumina if it raises their costs or
otherwise disadvantages them.
The complaint also alleges that even if a viable substitute to
Illumina's NGS platforms entered the market, it would take years for
MCED test developers to switch to a platform other than Illumina's
because they would have to reconfigure their tests to work with the new
NGS platform, and in some circumstances, conduct new clinical trials.
The administrative trial is scheduled to begin on August 24, 2021.
______
Response to Written Questions Submitted by Hon. Shelley Moore Capito to
Hon. Rebecca Kelly Slaughter, Hon. Noah Joshua Phillips, Hon. Rohit
Chopra, and Hon. Christine Wilson
Question. As you may know, many states are adopting or considering
legislation as to how companies must communicate the ingredients that
make up their cleaning products. While the purpose of these efforts
make sense, I am concerned that a patchwork of regulation across the
country will cause confusion for consumers and create an unnecessary
burden on businesses.
How would a national standard on cleaning product's ingredient
communication benefit consumers in terms of the ability to access
clear, consistent information regardless of where they live or where
they purchase cleaning products?
Answer. As a general matter, national standards benefit consumers
by providing a baseline of information to which they are entitled
regardless of where they live or where they purchase.
They also benefit businesses by providing transparent guidelines
about compliance with Federal law. Especially in the absence of strong
Federal standards, states understandably will act to provide benefits
to their residents.
The Environmental Protection Agency has particular expertise and
related regulatory requirements on cleaning products and chemicals;
therefore, we would welcome their opinion on the effects of specific
labeling or disclosure standards in this area. In the past, FTC staff
has provided assistance to EPA and other agencies on developing
consumer labels and would do so if needed in this area.
______
Response to Written Question Submitted by Hon. John Thune to
Hon. Noah Joshua Phillips and Hon. Christine Wilson
Question. Currently, per an order from the Centers for Disease
Control and Prevention (CDC), a moratorium is in effect for residential
evictions through June 30, 2021. On April 13, 2021, the CDC issued an
updated FAQ document stating the following.
Do landlords have to make their tenants aware of the CDC order and
Declaration? The Order itself does not require landlords to make
tenants aware of the Order and
Declaration. But other relevant law, for instance the Fair Debt
Collection Practices Act and the Federal Trade Commission Act, may
require landlords, or their agents, to do so. Under these statutes,
evicting tenants in violation of the CDC, state, or local moratoria, or
evicting or threatening to evict them without apprising them of their
legal rights under such moratoria, may violate prohibitions against
deceptive and unfair practices. Landlords must otherwise comply with
all requirements of the Order. Also, even if not legally required,
landlords are encouraged to tell their tenants about the Order.
Can you please describe the specific authority the FTC has in
enforcing the CDC's eviction moratorium, as the aforementioned FAQ
excerpt very broadly references laws under the FTC's jurisdiction?
Answer. The Department of Justice has the authority to enforce the
CDC's eviction moratorium order\1\; it may initiate criminal
proceedings as appropriate for violations of the order, seeking
imposition of the criminal penalties provided under 18 U.S.C.
Sec. Sec. 3559, 3571; 42 U.S.C. Sec. 271; and 42 C.F.R. Sec. 70.18.
---------------------------------------------------------------------------
\1\ The U.S. District Court for the District of Columbia vacated
the CDC's eviction moratorium order, Ala. Ass'n of Realtors v. U.S.
Dep't of Health and Human Services, No. 1:20-cv-03377-DLF (D.D.C. filed
May 5, 2021), but has stayed that decision pending appeal, Ala. Ass'n
of Realtors v. U.S. Dep't of Health and Human Services, No. 1:20-cv-
03377-DLF (D.D.C. filed May 14, 2021).
---------------------------------------------------------------------------
The Federal Trade Commission (``FTC'') has the authority to enforce
Section 5 of the FTC Act and the Fair Debt Collection Practices Act
(``FDCPA''). Section 5 of the FTC Act prohibits unfair or deceptive
acts or practices in or affecting commerce. 15 U.S.C. Sec. 45(a)(1). An
act or practice is unfair if it 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. 15 U.S.C. Sec. 45(n). An act or practice
is deceptive if it involves a material representation, omission or
practice that is likely to mislead a consumer acting reasonably in the
circumstances. See Federal Trade Commission Policy Statement on
Deception, appended to Cliffdale Assocs., Inc., 103 F.T.C. 110, 174-83
(1984).
The FTC's authority to enforce the FDCPA includes the authority to
enforce any rule promulgated thereunder by the Bureau of Consumer
Financial Protection (``CFPB''). The CFPB recently issued an interim
final rule, effective May 3, 2021, that addresses debt collector
conduct associated with the CDC moratorium.\2\ Under the interim final
rule, debt collectors, as defined by the FDCPA, seeking to evict
certain tenants for non-payment of rent must provide those tenants with
clear and conspicuous notice that the consumer may be eligible for
temporary protection from eviction under the CDC moratorium. The notice
must be provided on the same date as the eviction notice, or, if no
eviction notice is required by law, on the date that the eviction
action is filed. Debt collectors must provide the notice in writing.
---------------------------------------------------------------------------
\2\ See CFPB Rule Clarifies Tenants Can Hold Debt Collectors
Accountable for Illegal Evictions (Apr. 21, 2021), https://
www.consumerfinance.gov/about-us/newsroom/cfpb-rule-clarifies-tenants-
can-hold-debt-collectors-accountable-for-illegal-evictions/.
---------------------------------------------------------------------------
______
Response to Written Question Submitted by Hon. Todd Young to
Hon. Noah Joshua Phillips and Hon. Christine Wilson
Question. The Cancer Moonshot is incredibly important to this
country and early cancer detection is a critical part of opening up new
opportunities to develop new therapies. I understand that GRAIL has
made a breakthrough and developed a multi-cancer early detection test
that can detect more than 50 cancers in an asymptomatic patient and is
entered into a transaction agreement with Illumina, Inc.
Can you elaborate on why the FTC is challenging this transaction?
Answer. On March 30, 2021, the FTC filed an administrative
complaint and a Federal court lawsuit to block Illumina, Inc.'s
proposed acquisition of GRAIL, Inc. (``Grail''). The Commission has
since authorized staff to dismiss the Federal court complaint seeking a
preliminary injunction, due to proceedings in Europe that currently bar
the parties from consummating the transaction.
The administrative process continues.
The administrative complaint alleges that the proposed acquisition
would likely diminish innovation in the U.S. market for multi-cancer
early detection (``MCED'') tests, and likely reduces the choice and
quality of these tests and make them more expensive. The case is an
example of the anticompetitive harms that were described by the FTC and
DOJ's recently issued Vertical Merger Guidelines.
According to the complaint, MCED tests could detect up to 50 types
of early-stage cancer, most of which are not screened for at all today,
saving millions of lives around the world. Grail is one of several
competitors racing to develop and ultimately commercialize these liquid
biopsy tests, which analyze a patient's blood or other fluid through
DNA sequencing. Illumina is the only provider of next-generation DNA
sequencing (``NGS'') platforms that are a viable option for Grail and
other MCED test developers in the United States. Grail and each of its
MCED test competitors must rely on Illumina's NGS platforms to
research, develop, launch, and sell their MCED tests successfully.
As the only viable supplier of an essential input, Illumina has
several tools that it could use to harm Grail's MCED test competitors.
For example, Illumina could raise prices charged to Grail competitors
for NGS instruments and consumables; impede Grail competitors' research
and development efforts; or refuse or delay executing licensing
agreements that all MCED test developers need to distribute their tests
to third-party laboratories.
The complaint alleges that the proposed acquisition would give
Illumina both the incentive and ability to disadvantage MCED test
developers that pose a significant competitive threat to Grail, and to
limit the competitiveness of any MCED product that it expects to
compete closely with Grail's MCED test. Because Grail's MCED test
rivals have no choice but to use Illumina's NGS platforms, they would
not be able to divert from Illumina if it were to raise their costs or
otherwise disadvantages them.
The complaint also alleges that even if a viable substitute to
Illumina's NGS platforms were to enter the market, it would take years
for MCED test developers to switch to a platform other than Illumina's
because they would have to reconfigure their tests to work with the new
NGS platform, and in some circumstances, conduct new clinical trials.
The administrative trial is scheduled to begin on August 24, 2021.
______
Response to Written Question Submitted by Hon. Shelley Moore Capito to
Hon. Noah Joshua Phillips and Hon. Christine Wilson
Question. As you may know, many states are adopting or considering
legislation as to how companies must communicate the ingredients that
make up their cleaning products. While the purpose of these efforts
make sense, I am concerned that a patchwork of regulation across the
country will cause confusion for consumers and create an unnecessary
burden on businesses.
How would a national standard on cleaning product's ingredient
communication benefit consumers in terms of the ability to access
clear, consistent information regardless of where they live or where
they purchase cleaning products?
Answer. As a general matter, national standards benefit consumers
in terms of the ability to access clear, consistent information
regardless of where they live or where they purchase. They also benefit
businesses engaged in commerce in more than one state, which only need
to abide by one standard, and avoid conflicts among standards that do
not align. The Environmental Protection Agency has particular expertise
on these issues and regulatory requirements related to cleaning
products; therefore, we would defer to their opinion on the effects of
specific labeling or disclosure standards in this area. In the past,
FTC staff has provided assistance to EPA and other agencies on
developing consumer labels and would do so if needed in this area.
______
Response to Written Questions Submitted by Hon. John Thune to
Hon. Rebecca Kelly Slaughter, Hon. Noah Joshua Phillips, Hon. Rohit
Chopra, and Hon. Christine Wilson
Question. Currently, per an order from the Centers for Disease
Control and Prevention (CDC), a moratorium is in effect for residential
evictions through June 30, 2021. On April 13, 2021, the CDC issued an
updated FAQ document stating the following.
Do landlords have to make their tenants aware of the CDC order and
Declaration?
The Order itself does not require landlords to make tenants
aware of the Order and Declaration. But other relevant law, for
instance the Fair Debt Collection Practices Act and the Federal
Trade Commission Act, may require landlords, or their agents,
to do so. Under these statutes, evicting tenants in violation
of the CDC, state, or local moratoria, or evicting or
threatening to evict them without apprising them of their legal
rights under such moratoria, may violate prohibitions against
deceptive and unfair practices.
Landlords must otherwise comply with all requirements of the Order.
Also, even if not legally required, landlords are encouraged to tell
their tenants about the Order.
Can you please describe the specific authority the FTC has in
enforcing the CDC's eviction moratorium, as the aforementioned FAQ
excerpt very broadly references laws under the FTC's jurisdiction?
Answer. The Department of Justice has the authority to enforce the
CDC's eviction moratorium order; it may initiate criminal proceedings
as appropriate for violations of the order, seeking imposition of the
criminal penalties provided under 18 U.S.C. Sec. Sec. 3559, 3571; 42
U.S.C. Sec. 271; and 42 C.F.R. Sec. 70.18.
The Federal Trade Commission (``FTC'') has the authority to enforce
Section 5 of the FTC Act and the Fair Debt Collection Practices Act
(``FDCPA''). Section 5 of the FTC Act prohibits unfair or deceptive
acts or practices in or affecting commerce. 15 U.S.C. Sec. 45(a)(1). An
act or practice is unfair if it 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. 15 U.S.C. Sec. 45(n). An act or practice
is deceptive if it involves a material representation, omission or
practice that is likely to mislead a consumer acting reasonably in the
circumstances. See Federal Trade Commission Policy Statement on
Deception, appended to Cliffdale Assocs., Inc., 103 F.T.C. 110, 174-83
(1984).
The FTC has the authority to enforce the FDCPA and any implementing
regulations. The Consumer Financial Protection Bureau recently issued a
rule, effective May 3, 2021, which addresses debt collector conduct
associated with the CDC moratorium. Under the interim final rule,
third-party debt collectors, as defined by the FDCPA, seeking to evict
certain tenants for non-payment of rent must provide those tenants with
clear and conspicuous notice that the consumer may be eligible for
temporary protection from eviction.
______
Response to Written Question Submitted by Hon. Todd Young to
Hon. Rebecca Kelly Slaughter, Hon. Noah Joshua Phillips, Hon. Rohit
Chopra, and Hon. Christine Wilson
Question. The Cancer Moonshot is incredibly important to this
country and early cancer detection is a critical part of opening up new
opportunities to develop new therapies. I understand that GRAIL has
made a breakthrough and developed a multi-cancer early detection test
that can detect more than 50 cancers in an asymptomatic patient and is
entered into a transaction agreement with Illumina, Inc.
Can you elaborate on why the FTC is challenging this transaction?
Answer. On March 30, 2021, the FTC filed an administrative
complaint and authorized a Federal court lawsuit to block Illumina,
Inc.'s proposed acquisition of GRAIL, Inc. (``Grail''). The complaint
alleges that the proposed acquisition would likely diminish innovation
in the U.S. market for multi-cancer early detection (``MCED'') tests,
and potentially reduce the choice and quality of these tests and make
them more expensive.
According to the complaint, MCED tests could detect up to 50 types
of early-stage cancer, most of which are not screened for at all today,
saving millions of lives around the world. Grail is one of several
competitors racing to develop and ultimately commercialize these liquid
biopsy tests, which analyze a patient's blood or other fluid through
DNA sequencing. Illumina is the only provider of next-generation DNA
sequencing (``NGS'') platforms that are a viable option for Grail and
other MCED test developers in the United States. Grail and each of its
MCED test competitors must rely on Illumina's NGS platforms to
research, develop, launch, and sell their MCED tests successfully.
As the only viable supplier of an essential input, Illumina has
several tools that it could use to harm Grail's MCED test competitors.
For example, Illumina could raise prices charged to Grail competitors
for NGS instruments and consumables; impede Grail competitors' research
and development efforts; or refuse or delay executing licensing
agreements that all MCED test developers need to distribute their tests
to third-party laboratories.
The complaint alleges that the proposed acquisition would give
Illumina both the incentive and ability to disadvantage MCED test
developers that pose a significant competitive threat to Grail, and to
limit the competitiveness of any MCED product that it expects to
compete closely with Grail's MCED test. Because Grail's MCED test
rivals have no choice but to use Illumina's NGS platforms, they would
not be able to divert from Illumina if it raises their costs or
otherwise disadvantages them.
The complaint also alleges that even if a viable substitute to
Illumina's NGS platforms entered the market, it would take years for
MCED test developers to switch to a platform other than Illumina's
because they would have to reconfigure their tests to work with the new
NGS platform, and in some circumstances, conduct new clinical trials.
______
Response to Written Question Submitted by Hon. Shelley Moore Capito to
Hon. Rebecca Kelly Slaughter, Hon. Noah Joshua Phillips, Hon. Rohit
Chopra, and Hon. Christine Wilson
Question. As you may know, many states are adopting or considering
legislation as to how companies must communicate the ingredients that
make up their cleaning products. While the purpose of these efforts
make sense, I am concerned that a patchwork of regulation across the
country will cause confusion for consumers and create an unnecessary
burden on businesses.
How would a national standard on cleaning product's ingredient
communication benefit consumers in terms of the ability to access
clear, consistent information regardless of where they live or where
they purchase cleaning products?
Answer. The Environmental Protection Agency has particular
expertise on these issues and regulatory requirements related to these
products; therefore, we would defer to their opinion on the effects of
specific labeling or disclosure standards in this area. In the past,
FTC staff has provided assistance to EPA and other agencies on
developing consumer labels and would do so if needed in this area.
[all]