Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Commissioner Ohlhausen outlines principles to help balance regulation with innovation, (Mar 3, 2015)
By Dan Selcke, J.D.
Regulators who recognize the limitations of agency regulation, focus on identifying and addressing consumer harms, and use the proper regulatory tools will be able to carry out their duties while minimizing negative effects on innovation, FTC Commissioner Maureen Ohlhausen said during a March 2 speech at the Progressive Policy Institute in Washington, DC.
In her remarks, entitled “Three Regulatory Principles to Promote Innovation,” Ohlhausen said that regulators should avoid using their regulatory power to force complex phenomena into simple boxes. Rather, they should make every effort to tolerate complexity and develop institutions that can respond quickly in the face of change, particularly when it comes to the rapidly evolving world of technology. Ohlhausen acknowledged that there were many ways to go about this, but highlighted three guiding principles.
Embrace regulatory humility. First, Ohlhausen recommended that regulators approach new technologies and business models with a healthy dose of regulatory humility. That is, they must recognize that top-down regulatory solutions to problems can result in worse outcomes than more distributed decision-making. This is so because, according to Ohlhausen, while regulators are practiced at collecting information about any given industry, they simply cannot gather all the information relevant to every problem. For one thing, collecting that information is very time-consuming, as it is generally spread throughout the industry. For another, a lot of what makes an industry run smoothly involves softer, more tactile skills that can only be learned by doing. Finally, even when regulators manage to collect information, that information can quickly go out of date.
The notion that government regulation can be ineffective is not new, hence why so many regulators prefer to use a light touch. Still, Ohlhausen cautions that they must guard against the instinct to centralize problem solving in an age when they have access to more data than they ever have before, since data-driven decisions can still be wrong. Worse, they can be wrong while maintaining the appearance of being right, a challenge that is unique to regulators working at this point in time.
Focus on identifying and addressing real consumer harm. Next, Ohlhausen discussed how one of the best ways to ensure regulatory humility was for regulators to focus their attention on finding and addressing the most severe consumer harms. In addition to being mandated by the FTC’s statute, focusing on stopping existing or extremely likely harms, rather than trying to prevent speculative or insubstantial ones, was a good use of the agency’s limited resources.
To decide which harms are extremely likely and which are merely speculative, regulators should engage in diligent cost-benefit analysis. If some practice would result in both harms and benefits, or if the harms that could result from it are hypothetical in nature, regulators should be wary of imposing rules on the practice, since they might end up squelching innovation.
Use appropriate tools. Lastly, Ohlhausen recommended that regulators use tools that are nimble, transparent, and incremental to accomplish their goals. As an example, she noted the FTC’s practice of enforcing rules on a case-by-case basis, rather than crafting larger rules intended to apply to a multitude of situations. This approach limits the potential unintended consequences of regulatory action and ensures that the regulators looking at the individual cases only deal with small amounts of information at a time. It’s particularly well-suited to dealing with fast-developing areas of technology, Ohlhausen claimed, as it allows the law to evolve alongside the technology in an organic fashion.
In contrast, Ohlhausen pointed to the Federal Communication Commission’s recent decision to reclassify broadband service as a common carrier service under Title II of the Communications Act as an example of an agency using a tool that was not nimble or incremental. She then referred to the FTC’s recent settlement of a case with TracFone, a case that raised many of the same “net neutrality” concerns as FCC’s action, as an example of an agency addressing consumer harms without preemptively limiting innovation.
News: ConsumerProtection FederalTradeCommissionNews