As Congress wades into Big Tech regulation, the FTC doesn’t wait

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By Jon Swartz

Senate Majority Leader still seeks passage of self-preference bill as data privacy bill remains stalled, but Lina Khan’s FTC takes action even with no news laws

As the Senate continues to toil on a long, simmering road to tech legislation, the Federal Trade Commission is not waiting.

A series of aggressive legal actions by the FTC in recent days signal a crackdown as Senate Majority Leader Chuck Schumer, DN.Y., drags on antitrust bills targeting the biggest names of technology. The FTC last week announced a rule-drafting initiative aimed at cracking down on what it calls harmful commercial surveillance and lax data security, less than a month after the agency sued the parent company. of Facebook’s Meta Platforms Inc. (META) proposed the acquisition of virtual – reality television company Within Unlimited on anti-competitive grounds. The lawsuit, which is heading for a December showdown in court, is FTC Chair Lina Khan’s first against a tech heavyweight.

Conversely, it has been crickets in Congress. While members crafted bills on climate change and health care this summer, there has been no full vote on high-profile tech bills despite more than two years of hearings outlining their alleged monopolistic business practices. European lawmakers, meanwhile, are bracing for legal challenges from Big Tech against laws such as the Digital Markets Act, which prohibits companies from ranking their own products on their internet platforms ahead of their competitors.

Preventing Big Tech from prioritizing its own products is a major part of one of the few bills introduced by Democrats in the past two years that still seems to have a chance of hitting the bottom with a month to go in the future. session.

This week, a spokesperson for Schumer confirmed to MarketWatch that the Senate Majority Leader is “working with the senator. [Amy] Klobuchar and other supporters to muster the necessary votes and plan to put it to a vote.”

Whether that translates to a vote next month is a continuing board game of perplexity in Silicon Valley and on the Beltway after months of political rhetoric and vows for action.

For now, Big Tech officials aren’t expecting a vote on Senator Klobuchar’s U.S. Online Choice and Innovation Act, which would block Apple Inc.’s big online platforms ( AAPL), Amazon.com Inc. (AMZN), Google, Meta and possibly Microsoft Corp. (MSFT) from using their dominance in one area to give other products an unfair advantage — until at least the fall, which people familiar with talks of a Senate vote confirmed. [Ironically, Meta’s recent stock plunge, which has pushed the company’s valuation down to less than $450 billion, could spare it from the bill, which currently covers online platforms with either $550 billion or more in revenue or $550 billion or more in market capitalization. The market cap hinges on an average over 180 days.]

Learn more about the Klobuchar bill: After three years of promises, the attempt to regulate technology comes down to one bill

These four companies did not comment publicly when contacted by MarketWatch, although they continue to lobby to prevent Congress from passing laws to limit their market power.

Alternative paths to rein in Big Tech offer a divisive, if not contradictory, path between aggressive regulators who are ramping up lawsuits and investigations and federal lawmakers who have not passed major tech laws in at least 20 years.

“People are concerned about corporate power and making sure our markets work fairly and freely. This is very important to people, with very high inflation and markets not working properly,” Charlotte Slaiman, Director of competition policy at Public Knowledge, a campaign group that supports high-profile bills by Klobuchar and Richard Blumenthal, D-Conn., and Marsha Blackburn, R-Tenn., in the Senate, MarketWatch said. This latest bill, the Open App Markets Act, would prohibit Apple and Google from requiring developers to exclusively use their app payment systems, nor would these two companies be allowed to price and rank favorably their applications compared to competing brands.

“For years, we have been pushing for enforcement of existing law or new laws. It doesn’t have to be one proposal or the other. We have to use every tool available,” Slaiman said, who previously worked in the FTC’s anti-competition department. division of practices.

The FTC is moving forward without the benefit of a national data privacy law, one of the bills stalled in Congress. The momentum that exists among Americans and lawmakers for technology legislation — as well as Big Tech itself — could coalesce around a national data privacy law, as advocated by the FTC. FTC consumer protection chief Sam Levine said the agency’s rule-making decision does not override law, such as the US Data Protection and Privacy Act. from the room.

“The process we launched today is not a substitute for strong and comprehensive federal privacy legislation. Congress has stronger tools. Congress has broader tools,” Levine said.

Learn more about the data privacy bill: The long-awaited US data privacy bill seems to be on the right track, again

“It’s safe to say that the FTC is a bit fed up with the evolution of data collection and monetization practices over the past few years,” said Avi Edery, senior vice president of market for Verve Group, at MarketWatch. But he also warned that the FTC’s “broad and sweeping” changes could have “unintended consequences” for developers and consumers, no matter how well-intentioned.

But that doesn’t seem to deter FTC Chairman Khan, who seems determined to keep going, with or without help from Congress.

“Companies are now collecting personal data about individuals on a massive scale and in an impressive array of contexts,” FTC Chairman Khan said in an online news conference Thursday. “Our goal today is to begin to build a strong public case for whether the FTC should issue rules regarding business surveillance and data security practices, and what those rules should potentially look like.”

A confluence of events

Congressional inaction juxtaposed with recent federal regulatory actions could be interpreted as intentional or serendipitous, the result of a confluence of events including the long-term nomination of a third Democratic vote at the FTC and a breakdown in negotiations between the Department of Justice and Google to avoid a lawsuit. [Alvaro Bedoya, who joined the FTC in mid-May to give Khan a majority, co-wrote a 2016 report on the use of facial recognition by law enforcement and the risks that it poses to privacy, civil liberties, and civil rights.]

Antitrust attorney Joel Mitnick doesn’t think law enforcement is “rushing” investigations because legislative reform is lagging behind in Congress. “Investigations take a long time, especially against large, well-funded targets,” Mitnick told MarketWatch.

“The two current administrations of the FTC and [the Justice Department] came to power with an aggressive agenda, and I think it’s an apparent coincidence that some of these issues are moving towards eventual realization at a time when antitrust legislative reform may have stalled,” said Mitnick, who has began his career as a trial attorney at FTC.

The Justice Department is expected to sue Alphabet Inc.’s (GOOGL) Google (GOOGL) for violating antitrust laws over its dominance of online ads as early as September. In suing Meta to block its acquisition of virtual reality company Within Unlimited in late July, FTC Competition Bureau Deputy Director John Newman said, “Instead of competing on substance, Meta is trying to buy his way to the top.” A Meta spokesperson told MarketWatch that the FTC’s lawsuit was “based on ideology and speculation, not evidence.”

In depth: Facebook and Apple are at war, with the biggest battle yet on the horizon

Bhaskar Chakravorti, dean of global affairs at Tufts University’s Fletcher School, told MarketWatch that the FTC’s lawsuit against Meta is a signal of the “new approach to antitrust, one that I might call school antitrust ‘Minority Report’: Take action on dismantling a monopoly before it even happens.”

Such an approach carries risks, warns Chakravorti. “When the trial occurs so early in the evolution of the [metaverse] industry, there is a very strong chance that the government will lose its case and that could undermine the FTC’s mission and the credibility of this new approach,” he said. The FTC, he added, is “already overwhelmed with too many different industries to oversee and the technology itself is one gigantic ball of hair in the middle of it all.”

Without new legislation, it could be difficult for regulatory efforts to succeed. If passed, Klobuchar’s ‘self-preference’ bill would prevent Google from placing its own products at the top of its search results and prevent Amazon from giving preferential treatment in its online store to sellers who can afford to pay it.

Major tech legislation goes too far and would “fundamentally change the structure of the entire tech economy” and penalize consumers, said Matt Schruers, president of the Computer & Communications Industry Association, whose members include Amazon, Apple, Google and Meta, at MarketWatch. The organization has spent more than $10 million this year buying TV ads claiming Klobuchar’s bill would “break Prime” and “end the guaranteed two-day free delivery.”

See also: Data Privacy Bill Hearing Reveals Last Best Hope for Tech Regulation

Last week, Amazon accused FTC staff of harassing its executives, including executive chairman Jeff Bezos and CEO Andy Jassy, ​​by taking “unusual and confusing” steps in its investigation of Amazon activity. the company’s Prime membership. The FTC is asking both to testify.

The midterm elections are a wild card. If Democrats somehow hang on in the Senate, as some are increasingly predicting, votes on the bills could be delayed until next year. If Republicans take control of the Senate and/or House, however, the bills will likely be out of the game.

-Jon Swartz

 

(END) Dow Jones Newswire

08-27-22 1039ET

Copyright (c) 2022 Dow Jones & Company, Inc.

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