Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Ohlhausen urges “regulatory humility” in dealing with Internet of things, (Oct 21, 2013)

By Lynn Stanton,TR Daily

The FTC’s interest in the Internet of things “raises the question of what is the best approach for a government agency like the FTC to take with regard to technological and business innovation,” FTC Commissioner Maureen K. Ohlhausen said on October 18 at a nonpublic event hosted by the U.S. Chamber of Commerce.

The FTC plans to hold a workshop on the privacy and security implications of the Internet of things on Nov. 19.

According to the text of her speech released by the FTC, Commissioner Ohlhausen called for “regulatory humility” when dealing with new technologies, and said that if regulators determine that harms need addressing, they should “consider whether existing laws and regulations are sufficient to address them, before assuming that new rules are required.”

When dealing with new technology such as the Internet of things, the FTC should first use its “policy R&D function to get a better understanding of the technology itself; the new business models it may enable; any existing regulatory structures, including any self-regulation; market dynamics; and the nature and extent of likely consumer and competitive benefits and risks. Second, we should use this learning to educate consumers and businesses on how to avoid or minimize any risks that we may identify,” the commissioner said.

“Of course, the FTC is also an enforcement agency and it can and should use its traditional deception and unfairness authority to stop consumer harms that may arise from particular Internet-connected devices. This not only helps consumers but also benefits the companies involved in the Internet of Things by policing actors that may tarnish the technology itself. Likewise, the FTC should use its flexible and fact-intensive approach to antitrust enforcement to investigate and, where appropriate, challenge competitive harms occurring in the Internet sphere,” she continued.

Citing a recent FTC case against a company that failed to secure its Internet-connected security cameras from unauthorized access, Commissioner Ohlhausen said, “The type of consumer harm we saw in the TRENDnet case—surveillance in the home by unauthorized viewers—feeds concerns about the Internet of Things overall. It is thus crucial that companies offering these technologies take the necessary steps to safeguard the privacy of users to avoid giving the technology a bad name while it is still in its infancy.”

Ohlhausen said that “federal data security and breach notification legislation would also be beneficial to industry and consumers.” Inconsistent state laws create compliance burdens, she suggested.

Regarding the FTC’s inquiry into the data broker industry, the commissioner said, “It is vital that we have a good understanding of how data brokers operate because appropriate use of data can greatly benefit consumers through better services and convenience while inappropriate use or insecure maintenance of data could cause significant harm to consumers. We will carefully analyze the submissions from the companies and use the information to decide how to proceed in this area.”

Regarding the FCC’s open Internet rules, currently facing a challenge at the U.S. Court of Appeals for the District of Columbia Circuit, Commissioner Ohlhausen said, “The free market should decide how to distribute network resources, just as in any other industry. The government should instead focus on informed, flexible, and fact-based enforcement of existing competition and consumer protection laws, supplemented with private self-regulation of technical standards through consensus-based multi-stakeholder organizations of engineers, consumers, and business people. To the extent the government is involved, the FTC model of enforcement, advocacy, and industry education is the better model that will allow free markets and innovative technologies the breathing room they need to prosper.”

She added, “There have been relatively few disputes about vertical foreclosure on the Internet, which tells me that the design characteristics and changes to the network’s structure, along with increasing use of MSOs [multistakeholder organizations], together tend to mitigate the possibility of consumer harm or durable market power.”

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