Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Ohlhausen urges “regulatory humility” in addressing “Internet of Everything”, (Sep 22, 2015)

By Edward L. Puzzo, J.D.

Innovation likely to arise from an “Internet of Everything,” connecting consumers and businesses, should not be hampered by regulation that addresses speculative, instead of actual, consumer harm, according to FTC Commissioner Maureen K. Ohlhausen. Ohlhausen’s remarks were delivered on September 22 at a conference on “The Internet of Everything,” sponsored by the U.S. Chamber of Commerce.

Benefits and disruption. Ohlhausen described the Internet of Everything as a future where everything is connected to the Internet, from consumer applications such as self-driving cars to business-to-business applications, including factory and hospital operations impacted by improved logistics and navigation. She predicted that most businesses and consumers will benefit from the use of these innovations, but that it will also be unnerving and unsettling because it will likely disrupt traditional business models. Nevertheless, she predicted, the benefits of the Internet of Everything would far outweigh the costs and would greatly promote prosperity.

Regulatory humility. The Commissioner advocated that regulators approach new technologies and new business models with “regulatory humility,” her name for recognizing the inherent limitations of regulation and acting accordingly. She maintained that centralized regulation generally offered worse solutions compared to “distributed or emergent constraints such as social norms.”

Recognizing that consumers are sometimes harmed, she argued for regulators to focus on real, and not speculative, consumer harm. She noted that Section 5 of the FTC Act charged the agency with preventing deceptive or unfair acts if they are material—that is, when they actually harm consumers. She also asserted that “practices are only unfair if there is a substantial harm that consumers cannot avoid and that outweighs any benefits to consumers or competition.”

Dissent from certain FTC policies. Ohlhausen noted her dissent from some recent FTC pronouncements on the Internet of Things as too focused on speculative consumer harm. She pointed to an FTC report urging “data minimization,” which encourages companies to delete certain consumer data. She believes such data may be valuable and may have unanticipated beneficial uses, so she dissented from the staff report.

She also cited as misguided a recent FTC action involving Nomi Technologies, a business that analyzes, aggregates, and reports data about consumer traffic for retailers, such as how long customers spent in particular store departments, using publicly broadcast address information from consumer smartphones. Although Nomi’s privacy policy allowed consumers to opt out of data collection, its retailer clients did not permit this. Thus, Nomi’s privacy policy was partially inaccurate.

The majority of FTC Commissioners found Nomi’s privacy policy deceptive and imposed a long-term compliance order on the company. In Ohlhausen’s view, this action was unnecessary because there was no proven consumer harm. She, along with the U.S. Chamber of Commerce, opposed the FTC’s enforcement action as costly, stifling of innovation, and something that could dissuade other new companies from voluntarily adopting consumer privacy policies.

Appropriate tools. Finally, Ohlhausen urged regulators to use tools appropriate for the issues that do emerge. She lauded the FTC’s case-by-case enforcement process as preferable to APA-style rulemakings. She viewed an individual approach addressing specifically alleged harm, generally applicable only to the named parties in an enforcement action, as preferable to the potential unintended consequences of broader regulatory action.

News: ConsumerProtection FederalTradeCommissionNews