Federal Trade Commission

By Sarah W. Anderson

On November 1, 2018, Senator Ron Wyden, a democrat from the state of Oregon, introduced a bill that attempts to create a stronger consumer privacy act.[1] The draft legislation, referred to as the Consumer Data Protection Act, SIL18B29 (the “Bill”), amends and increases the powers of the Federal Trade Commission (“FTC”).[2]

According to Senator Wyden’s webpage, he drafted the Bill due to “[t]he explosive growth in the collection and sale of consumer information enabled by new technology poses unprecedented risks for Americans’ privacy,” which he believes the Federal Government continually fails to address. [3]  Therefore, Senator Wyden’s Bill both imposes greater security protection standards and sharpens the FTC’s teeth in terms of enforcement.

The Bill permits the FTC, as the “nation’s main privacy and data security regulator” to fine and yes, even jail, American executives for failure to protect consumer information. Specifically, the Bill proposes the following powers and tools for the FTC, which Senator Wyden hopes will give Americans greater privacy and control over their own personal data:

  1. Establish minimum privacy and cybersecurity standards.
  2. Issue steep fines (up to 4% of annual revenue), on the first offense for companies and 10-20 year criminal penalties for senior executives.
  3. Create a national Do Not Track system that lets consumers stop third-party companies from tracking them on the web by sharing data, selling data, or targeting advertisements based on their personal information. It permits companies to charge consumers who want to use their products and services, but don’t want their information monetized.
  4. Give consumers a way to review what personal information a company has about them, learn with whom it has been shared or sold, and to challenge inaccuracies in it.
  5. Hire 175 more staff to police the largely unregulated market for private data.
  6. Require companies to assess the algorithms that process consumer data to examine their impact on accuracy, fairness, bias, discrimination, privacy, and security.”[4]

Additionally, businesses with annual revenue exceeding $1 billion, which also store data of more than 50 million consumers, will have to submit an annual data protection report to the FTC detailing its compliance with relevant security regulations. What’s more, in proposed §1352(b), entitled “Failure of Corporate Officers to Certify Data Protection Reports,” Chief Executive Officers, Chief Information Security Officers, and Chief Privacy Officers may be jailed for failure to certify and file annual reports to the FTC that document company efforts to comply with the Bill.

An executive’s first offense of this section will result in a fine “not more than the greater of $1,000,000.00 or 5 percent of the largest amount of annual compensation the person received during the previous 3-year period…imprison[ment] not more than 10 years, or both[.]” The same section prescribes that “intentional[ly]” certifying false statements for annual reports will result in a fine of “not more than the greater of $5,000,000.00 or 25 percent of the largest amount of annual compensation the person received during the previous 3-year period” or imprisonment “not more than 20 years, or both[.]”[5]

If passed, the Bill would represent a massive overhaul and increase in the FTC’s powers and available punishments. Generally, the FTC currently only has privacy protection powers under theories of “unfair trade practices.”

*****************************************************

[1] https://www.wyden.senate.gov/news/press-releases/wyden-releases-discussion-draft-of-legislation-to-provide-real-protections-for-americans-privacy

[2] https://www.wyden.senate.gov/download/11012018-wyden-privacy-bill-discussion-draft

[3] https://www.wyden.senate.gov/news/press-releases/wyden-releases-discussion-draft-of-legislation-to-provide-real-protections-for-americans-privacy

[4] https://www.wyden.senate.gov/download/11012018-wyden-privacy-bill-one-pager

[5] https://www.wyden.senate.gov/download/11012018-wyden-privacy-bill-discussion-draft

dentist-tools-tooth

By Jennifer J. Thomas

On February 25, 2015, the Supreme Court of the United States issued an opinion against the North Carolina Board of Dental Examiners (the “NC Board”) finding that the NC Board had violated federal antitrust law by issuing cease and desist letters to non-dental licensed persons who performed teeth whitening services.  The case involved an administrative complaint filed by the Federal Trade Commission (“FTC”) against the NC Board alleging anti-competitive and unfair methods of competition under the Federal Trade Commission Act.  The FTC had ordered the NC Board to stop sending the cease and desist letters prohibiting non-dentists from offering teeth whitening services.   The Supreme Court affirmed the FTC order which could impact State licensing boards across the country.

The North Carolina Dental Practice Act provides that the NC Board is the agency of the State for the regulation of the practice of dentistry with the duty to create and enforce a licensing system for dentists.  The NC Board is composed of:   six licensed dentists engaged in the active practice of dentistry elected by licensed dentists in North Carolina; one dental hygienist elected by other licensed hygienists; and one consumer member appointed by the Governor.  When licensed dentists complained to the NC Board that non-dentists were providing teeth whitening services and charging lower fees, the Board sent cease and desist letters threatening the unlicensed persons with criminal liability if they continued to provide the service.  As a result of the NC Board’s actions, the non-dentists stopped offering teeth whitening services.

The FTC alleged that the NC Board’s concerted action to exclude non-dentists from the teeth whitening market constituted anticompetitive and unfair methods of competition.  The Board argued that, as a state agency, it was immune from any antitrust claims because it was acting in the sovereign capacity of the state.  However, the Supreme Court determined that “State agencies are not simply by their governmental character sovereign actors for the purpose of state-action immunity.”   The Supreme Court held that where active market participants regulate their own markets by deciding who can participate in the market “active supervision” is required by the State in order to invoke state-action antitrust immunity.

The Supreme Court identified the following requirements of active supervision:  the supervisor must review the substance of the anticompetitive decision, not merely that the procedures are followed to produce it; the supervisor must have the power to modify or veto the particular decisions to ensure they incorporate state policy; and the state supervisor may not itself be an active participant.  Active supervision of the NC Board was missing because there was no evidence of any decision by the State of North Carolina to initiate a review of and to concur with the NC Board’s actions against the non-dentists.  Further, North Carolina’s review mechanisms of the NC Board’s actions did not provide “realistic assurance” that the Board’s anticompetitive conduct promoted the State’s policy rather than the individuals’ interests.  As a result, the Supreme Court affirmed the FTC’s order to the NC Board to stop sending the cease and desist letters or other communications asserting that a non-dentist cannot offer teeth whitening services and products.

The decision against the NC Board could result in an increase in State supervision over licensing boards comprised of market participants.  The Supreme Court appears to suggest that the State must have an active oversight policy and procedure in place prior to a licensing board taking action against competitors in the marketplace.  State licensing boards may be required to seek direct State approval in order to avoid antitrust violations when making decisions impacting competitors.  Another consequence may be a change in the composition of licensing boards away from professionals regulating their own.   Many States currently compose the membership of a licensing board with persons practicing within the industry regulated by the board and rely on their professional expertise to protect the public interest.  However, to avoid any potential antitrust claims, the States may have to reconfigure board membership.  In any event, the Supreme Court’s decision will require each State to evaluate the current structure, policies and procedures of its respective licensing boards to ensure that the boards do not act violation of the antitrust laws.