Facebook and Google must answer to new cops on the beat — a group of five fresh Washington regulators at the Federal Trade Commission who have the power to punish Silicon Valley if it misbehaves.
“For a long time the FTC itself has been pointing out the gaps in its authority,” said Terrell McSweeny, a Democratic commissioner who concluded her four-year tenure last week. “What I find hopeful about this moment is that people are realizing the consequences of that and having a conversation about it.”
On Tuesday, the FTC gained its newest chairman, Joe Simons, and soon he'll be surrounded by a full complement of four other commissioners. They’ll be expected to monitor phenomena such as the fast-growing footprint of companies such as Amazon.com and the security practices of the entire tech industry.
Already they face their first high-profile test — an investigation into Facebook’s recent privacy mishaps. In March, the FTC announced it would scrutinize Facebook’s entanglement with Cambridge Analytica, a political consultancy that improperly accessed names, “likes” and other personal information about up to 87 million of the social site’s users. If the FTC finds that Facebook erred, it could result in massive fines — penalties that some experts say the agency must levy to send an early message that it is able and willing to police the country's tech behemoths.
“Will the new FTC have the will to take on today’s challenges aggressively?” asked Jessica Rich, the former director of the agency’s Bureau of Consumer Protection. “The FTC really is under-resourced. So if it steps up and takes on the challenges, it still will have a limited amount of resources to do that.”
The FTC’s purview is vast. It reviews hospital mergers, responds to consumer reports about robo-calls and ensures that products labeled as “Made in the USA” are manufactured here. That stems from its more-than-century-old mandate to promote competition and penalize those who engage in unfair or deceptive practices.
In recent years, though, the FTC has evolved into the U.S. government’s primary regulator of the tech industry. While the country may lack a single, federal online privacy law, the agency still has managed to tap its powers to punish tech giants such as Facebook, Google, Twitter and Uber for failing to protect the sensitive information they amass about their users.
Despite an expanding workload, the FTC’s authorities and resources haven’t changed much. Its budget this fiscal year is $306 million -- or about a third of 1 percent of the revenue that Google earned in 2017. With those limited funds the agency maintains a workforce of about 1,140 -- roughly 300 fewer workers than it had almost four decades earlier, according to FTC records, well before it had to police the Internet.
“One of the issues is the ability to hire technologists,” said Rich, who is now the vice president of consumer policy and mobilization at Consumer Reports. “The FTC simply can’t pay what many technologists make in not-even-the-top echelons of companies.”
During an interview before she departed, McSweeny praised the agency for its track record, saying it has achieved a “terrific return on taxpayer investment.” That includes major settlements with companies such as Volkswagen for allegedly defrauding drivers.
Still, Rich said the FTC faces major structural challenges -- issues that she and her predecessors long have highlighted without much success. The FTC is generally hamstrung in its ability to write new rules, for example, and it isn’t always able to fine tech companies for their first privacy or security offenses.
“It would be helpful to have Congress clarify the FTC's authority around privacy and data security,” she said. "It would be helpful to have civil penalty authority. I think it would be helpful for the agency to have regulatory authority."
Those strictures now fall to Simons, who officially assumed the title of FTC chairman Tuesday after serving as an antitrust litigator at the law firm Paul, Weiss, Rifkind, Wharton & Garrison for clients such as Microsoft and Sony. It’s not his first tour of duty in the federal government: Simons worked at the agency as director of the Bureau of Competition from 2001 to 2003. His office declined to make him available for an interview.
He’ll be aided by two fellow Republicans: Noah Phillips, who is a former top aide to Sen. John Cornyn (R-Tex.), and Christine Wilson, who was a top executive at Delta Air Lines. Opposite them will be two new Democratic commissioners: Rohit Chopra, a former regulator at the Consumer Financial Protection Bureau, and Rebecca Slaughter, previously a top adviser to Senate Minority Leader Charles E. Schumer (D-N.Y.). All but Wilson had been sworn in by this week.
To start, the agency is under pressure to penalize not only Facebook but also other tech companies that mishandle consumers’ data.
“The FTC largely failed during the Obama years to address the most pressing challenges,” said Marc Rotenberg, the executive director of the Electronic Privacy Information Center, which brought the complaint that led to the FTC’s settlement with Facebook in 2011. “The evidence of that is made clear every day.”
Others would like to see the FTC under its new leaders take a closer look at companies such as Amazon, Facebook and Google for potential antitrust concerns. Regulators around the world increasingly are fearful that big tech is too big -- especially in Europe, which is still probing Google’s business practices. In the United States, the FTC hasn’t brought such a major case since its own probe of Google — an investigation it closed in 2013 by leaving the company intact.
“We’re in an era in which we have massive consolidation happening throughout virtually every sector of the economy, and we’ve had over the last two decades the rise of the tech industry,” said Ganesh Sitaraman, co-founder of the nonprofit Great Democracy Initiative, a new policy group founded by two former aides to Sen. Elizabeth Warren (D-Mass.). “And in large part the FTC has not been doing its job sufficiently to enforce our antitrust laws.” The organization published research this week that calls for regulating the algorithms that power platforms such as Facebook’s News Feed to ensure they aren’t used in ways that may harm rival services.
In perhaps a sign of his approach, Simons told Congress earlier this year that the U.S. government may have been “too permissive in dealing with mergers and acquisitions.” He said the FTC needed to “devote substantial resources to determining whether its merger enforcement has been too lax.”
Yet the evolving nature of digital challenges could make it hard for the FTC to keep up. McSweeny pointed recently to the rise of online “disinformation” and “deepfakes” -- videos, in some cases, where politicians are edited to say things they never uttered. Both now register on the radar of an agency that is supposed to focus on deception.
“I think this is a very important moment,” McSweeny said. “People not just in America but around the world are engaging in a real moment of consideration around how these technologies work.”
Correction: McSweeny served four years as FTC commissioner. An earlier version of this report mistakenly said she had served three years.