Testifying on behalf of the Commission, FTC Chairman Joseph J. Simons and Commissioners Noah Joshua Phillips, Rohit Chopra, Rebecca Kelly Slaughter, and Christine S. Wilson noted that during fiscal year 2018, the FTC’s law enforcement actions led to more than $1.6 billion in refunds to consumers and collected more than $8.5 million for the Treasury. This includes $83.3 million in redress that the Commission returned to consumers, while FTC orders—including in the Volkswagen, Amazon, and NetSpend matters—required defendants to self-administer consumer refund programs worth more than $1.6 billion.
The FTC complements its enforcement efforts through policy and research work, and advocacy and education initiatives, the testimony noted. In September 2018, the Commission began holding its Hearings on Competition and Consumer Protection in the 21st Century to explore whether broad-based changes in the economy, evolving business practices, new technologies, or international developments might require adjustments to competition and consumer protection law, enforcement priorities, and policy. To date, the Commission has heard from more than 200 panelists and received over 700 public comments, according to the testimony. The FTC will continue to hold public hearings through early 2019.
Consumer privacy and data security remain important priorities for the FTC, and the Commission reiterated its commitment to use every tool at its disposal to protect consumers, according to the testimony. To date, the FTC has brought more than 60 data security cases alleging that companies failed to implement reasonable safeguards, as well as more than 60 general privacy cases.
The FTC has aggressively pursued privacy and data security cases in a variety of areas, the testimony explained. For example, the Commission recently gave final approval to an expanded settlement with the ride-sharing company Uber Technologies Inc. related to allegations that the company failed to reasonably secure sensitive consumer data stored in the cloud. Earlier this year, the Commission approved a settlement with PayPal, Inc. to resolve allegations that its Venmo peer-to-peer payment service misled consumers about their ability to control the privacy of their Venmo transactions and the extent to which their financial accounts were protected by “bank grade security systems.” In addition, the FTC has actively enforced the EU-U.S. Privacy Shield framework—a critical tool for protecting privacy and enabling cross-border data flows—and has brought four cases in the last two months, according to the testimony.
The testimony noted, however, that there are limitations to Section 5 of the FTC Act, which is the main statute enforced by the Commission. Section 5 does not provide for civil penalties, reducing the Commission’s deterrent capability. In addition, the Commission also lacks authority over non-profits and common carrier activity, as well as broad APA rulemaking authority for privacy and data security generally.
“The Commission has challenged numerous privacy and security practices under Section 5 of the FTC Act. Our program in these areas – which includes enforcement, as well as consumer and business education – has been highly successful within the limits of our authority,” Simons said in separate oral remarks before the subcommittee. “But Section 5 is an imperfect tool. In my view, we need more authority.”
The testimony reiterated the FTC’s longstanding bipartisan call for comprehensive data security legislation. The Commission also urged Congress to consider enacting privacy legislation that would be enforced by the FTC. While the agency remains committed to vigorously enforcing existing privacy-related statutes, Congress may be able to craft legislation that would more seamlessly address consumers’ legitimate concerns regarding the collection, use, and sharing of their data and provide greater clarity to businesses while retaining the flexibility required to foster competition and innovation, according to the testimony.
The testimony also outlined the FTC’s work to ensure that advertising is truthful and not misleading. This past year, the agency has continued to bring cases challenging false and unsubstantiated health claims, including those targeting students, older consumers, consumers affected by the opioid crisis, and consumers with serious medical conditions. The FTC has also challenged false claims in the financial area, according to the testimony. For example, the Commission recently announced a settlement with online student loan refinancer Social Finance over allegations that it made deceptive claims about the average savings members could achieve by refinancing their student loans.
Fighting fraud continues to be a major focus of the FTC’s law enforcement efforts, the testimony stated. The Commission’s anti-fraud program tracks down and stops some of the most egregious scams that prey on U.S. consumers—often, the most vulnerable consumers who can least afford to lose money. In September 2018, the Commission brought an action against Sunkey Publishing, alleging that the lead generation operation falsely claimed to be affiliated with the military and promised to use consumers’ information only for military recruitment purposes. Instead, the FTC alleged that Sunkey used the information it collected to make millions of illegal telemarketing calls and sold the information to post-secondary schools.
The testimony also focused on the FTC’s efforts to target companies that facilitate fraud. Earlier this month, MoneyGram International Inc., agreed to pay $125 million to settle allegations that the company failed to take steps required under a 2009 FTC order to crack down on fraudulent money transfers that cost U.S. consumers millions of dollars. The matter also resolved allegations that the company violated a 2012 deferred prosecution agreement with the U.S. Department of Justice.
Illegal robocalls remain a significant consumer protection problem and consumers’ top complaint to the FTC, which received more than 3.7 million robocall complaints in FY 2018, according to the testimony. The FTC has used many methods to fight these illegal calls, including 136 enforcement actions to date. Technological advances, however, have allowed bad actors to place millions or even billions of calls, often from abroad, at very low cost, and in ways that are difficult to trace. The testimony noted and reiterated the FTC’s prior testimony in favor of eliminating the common carrier exemption, stating that the exemption is outdated and unnecessary, and that it impedes the Commission’s work to tackle illegal robocalls.
The Commission testimony also detailed the FTC’s work to preserve and promote competition in many sectors of economy that directly affect consumers and their wallets, such as health care, consumer products and services, technology, manufacturing, and energy. Since the beginning of FY 2017, the FTC has challenged 45 mergers. While many of these matters were resolved through divestiture settlements, the Commission in FY 2018 voted to initiate litigation to block five mergers, according to the testimony. Three of these ended successfully when the parties abandoned their transactions, while the other two are still being litigated.
The testimony also discussed the FTC’s ongoing efforts to stop anticompetitive conduct. The FTC has focused in particular in the last two decades on anticompetitive practices by drug manufacturers. For example, the testimony noted, a federal court ruled earlier this year that the pharmaceutical company AbbVie Inc. used sham litigation to illegally maintain its monopoly over the testosterone replacement drug Androgel, and ordered $448 million in monetary relief to consumers.
The FTC also closely follows developments in the high-tech sector, from the growth of smart appliances and smart cars to artificial intelligence, the testimony stated. While these advances in technology may offer consumer benefits, they also raise complex competition issues. The FTC is working to track current and developing business models while also ensuring companies in this sector abide by the same rules of competitive markets that apply to others, according to the testimony.
The Commission vote approving the testimony and its inclusion in the formal record was 5-0.
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