Simons Says: The FTC Can Handle Net Neutrality
Friday, April 5, 2019
Simons Says: The FTC Can Handle Net Neutrality
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Round-Up for the Week of April 1-5, 2019
On March 26, 2019, Federal Trade Commission Chairman Joe Simons spoke before the Free State Foundation about how the FTC’s two missions -- competition and consumer protection -- apply to the internet ecosystem. Chairman Simon’s remarks help us understand the FTC’s ability to protect consumers online since the Federal Communications Commission repealed net neutrality rules and abdicated its role as what some have called the internet's “cop on the beat.” Simons says: The FTC can handle net neutrality just fine.
The FTC as the Internet Cop
The FCC’s December 2017 Restoring Internet Freedom Order transferred the authority to police broadband internet access service (BIAS) from the FCC to the FTC when the order reclassified BIAS as an information -- rather than telecommunications -- service. “By returning broadband service to its original classification as an information service, the Order returned antitrust and consumer protection jurisdiction to the FTC,” said Chairman Simons in his recent speech.
For review and clarity, here are some of the specific rules from the 2015 FCC Open Internet Order:
- A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not block lawful content, applications, services, or non-harmful devices, subject to reasonable network management.
- A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not impair or degrade lawful Internet traffic on the basis of Internet content, application, or service, or use of a non-harmful device, subject to reasonable network management.
- A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not engage in paid prioritization.
- Any person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not unreasonably interfere with or unreasonably disadvantage (i) end users’ ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of their choice, or (ii) edge providers’ ability to make lawful content, applications, services, or devices available to end users. Reasonable network management shall not be considered a violation of this rule.
Chairman Simon acknowledges that there are “key differences between conduct prohibited by the FCC’s Open Internet Order, and conduct that the FTC can reach now with our antitrust and consumer protection jurisdiction.” But, he says, "I intend to use [FTC] authority aggressivley to address violations of the laws we enforce."
So, despite these "key differences," the question remains: is there an adequate "cop on the beat" to police misconduct by BIAS providers? Simons says yes.
Addressing Providers’ Behavior Under Antitrust Law
“Antitrust law is sufficiently flexible and dynamic to cover a wide range of activities,” according to Chairman Simons. “However, the laws are limited to prohibiting conduct that is anticompetitive, not simply perceived to be unfair or discriminatory.”
Chairman Simons says that in the 2015 Open Internet Order, “the FCC prohibited certain ISP behavior, such as blocking, throttling, and paid prioritization on essentially a per se basis.”
Behavior prohibited on a per se (latin for "in and of itself" or "inherently") basis in the context of antitrust enforcement means rules enforced because the behaviors are so manifestly anticompetitve that they are illegal without looking into their specific economic effects.
But Chairman Simons says that blocking, throttling, or paid prioritization would not be per se antitrust violations under the FTC. Why? Because paid prioritization is a type of price discrimination which is “ubiquitous in the economy.” Chairman Simons notes that coupons, senior discounts, credit card rewards, movie matinees, and happy hour discounts are all forms of price discrimination but are permissible under antitrust law because they have a benign effect on consumers and competition.
Still, Chairman Simons acknowledges that certain behaviors by providers, including paid prioritization, can be anticompetitive. In those circumstances, Chairman Simons says the FTC is equipped to act. “Where an ISP excludes certain content, applications, or services, we would engage in a fact-specific analysis to see whether that foreclosure harmed competition through raising rivals’ costs or excluding competitors.”
Beyond going after anticompetitive behavior, Chairman Simons says the FTC can prosecute unfair or deceptive acts or practices. With respect to deceptive practices, the FTC is concerned about conduct that is likely to mislead reasonable consumers. He says the FTC has a strong interest in ensuring that companies stand by their promises to consumers.
For example, the FTC could take action against broadband internet access service providers if they block applications without adequately disclosing those practices or mislead consumers about what applications they block or how.
Chairman Simons says that the FTC’s consumer protection authority could also apply to throttling. Chairman Simon lays out a hypothetical for how the FTC would determine whether particular instances of throttling are deceptive:
[W]e would first evaluate what claims an ISP made to consumers about their services, and how those claims are supported. We would look closely at any relevant research and evaluate the study’s design, scope, and results, and consider how a study relates to a particular claim.
To evaluate whether a practice was unfair, we would consider whether the alleged throttling had countervailing benefits, and whether there were reasonable steps consumers could have taken to avoid it. We would also consider consumer injury, the number of consumers affected, and the need to prevent future misconduct.
Challenging Privacy Practices
By alleging that broadband service providers caused substantial consumer injury, the FTC can investigate privacy and security practices. Indeed, the FTC recently announced it is using its authority under section 6(b) of the FTC Act to study privacy practices.
But Chairman Simons also notes that the FTC needs help from Congress:
Despite the fact that we are using all the tools Congress has given us, I note that we could use additional authority in the privacy and data security area. I have urged Congress to enact legislation that would give the FTC three tools: (1) the authority to seek civil penalties for initial privacy and data security violations, which would create an important deterrent effect; (2) targeted [Administrative Procedure Act] rulemaking authority that would allow the FTC to keep up with technological developments; and (3) jurisdiction over nonprofits and common carriers. The process of enacting federal privacy legislation will involve difficult policy tradeoffs that I believe are appropriately left to Congress. Regardless of what Congress chooses to enact, I commit to using our extensive expertise and experience to enforce any new legislation vigorously and enthusiastically.
Supplementing the FTC’s enforcement work, Chairman Simons acknowledges the agency engages in research and policymaking efforts to keep up with privacy developments. In addition to the aforementioned section 6(b) study, Chairman Simons notes that the FTC will continue to hold hearings focused on these subjects.
And, in February, the FTC launched a Technology Task Force, a team of antitrust attorneys and a Technology Fellow charged with monitoring competition in U.S. technology markets, including the internet ecosystem.
American Enterprise Institute Visiting Fellow Daniel Lyons has praise for Chairman Simon’s speech. Lyons claims that by handling paid prioritization on a case-by-case manner, this “rule-of-reason” approach, “allows providers to experiment with innovative new business models while still providing a remedy to punish behavior that harms consumers or competition.”
Simons is correct that a case-by-case investigation of broadband provider practices is preferable to per se rules, which can be over- and underinclusive and could prevent new products and services that benefit consumers from reaching the market because of a fear of abuse. As with most government action, prohibitions should be fact-based and turn on actual or likely effects rather than agency speculation. Moreover, the chairman’s remarks highlight the value of placing this authority in the hands of a general antitrust authority rather than a sector-specific regulator. The FTC’s determination about alleged misconduct can be informed by its experience with similar conduct elsewhere in the economy, giving it a more holistic view that is less likely to be affected by the tunnel vision that a sector-specific authority may inadvertently develop.
But some in the public interest community believe that Chairman Simon’s speech does not assuage concerns of a possible “regulatory gap” between the FCC and FTC.
“Antitrust law is very different from communications law,” says Public Knowledge Senior Vice President Harold Feld. He says that antitrust law isn't “designed to further a national policy” or address “concerns about openness.”
Antitrust law is also not designed to “affirmatively promote competition rather than simply protect competition,” Feld says. The result, he says, is that the FTC lacks the FCC's authority to effectively outlaw blocking or throttling. [For more, see Feld’s article: No, the FTC CANNOT Have A Ban On All ISP Blocking.] “There is utterly no way under the FTC’s existing statute that the FTC could prevent all ISP blocking the way the 2015 rules do now,” he wrote. “Claims to the contrary are -- bluntly -- big fat lies."
Chairman Simons admits that enforcement of certain components of net neutrality will be different under the FTC. Still, he claims that the FTC can adequately protect users from anticompetitive and unfair or deceptive conduct by existing antitrust law, FTC consumer protection prosecution, privacy investigations, and FTC policymaking efforts. Nonetheless, some are still concerned that online consumers are unprotected from net neutrality violations in the aftermath of Chairman Pai’s order.
You can follow along with net neutrality rules and other broadband policy news by subscribing to Headlines.
Also this week: Save the Internet Act Moving Through the House
An amended version of the Save the Internet Act (HR 1644) was approved by the House Commerce Committee on a party-line vote. It now heads to the full House of Representatives.
The all-day markup was extended by a series of protracted roll call votes on a host of amendments floated by Republicans and shot down by the Democratic majority. Net neutrality activists had warned that Republicans would try to pepper the bill with amendments and that prediction proved out. Democrats were offering up a bill that Republicans advised, and some Democrats conceded, would almost certainly not pass the Senate, while Republicans were offering up amendments they knew Democrats would not approve.
You can read more about the act in our March 29 Weekly Digest.
- FCC Chairman: Net-Neutrality Supporters Saw ‘Political Advantage’ in Stirring ‘Fear’ (National Review)
- Net neutrality measure moves in Colorado (Daily Sentinel)
- Real net neutrality is bipartisan -- Save the Internet Act is not (Rep Greg Walden (R-OR) Op-Ed)
- Broadband Affordability Report: Nearly Half of US Population Lacks Access to a Low-Price Offering (telecompetitor)
- Why Broadband Should Be a Utility (Susan Crawford Op-Ed)
- FCC Seeks Nominations for New BDAC Job Skills Working Group (FCC)
- Prison-Phone Providers Call Off Merger (Wall Street Journal)
- The Internet needs new rules. Let’s start in these four areas. (Mark Zuckerberg Op-Ed)
Weekend Reads (resist tl;dr)
- Trump administration at war with itself over 5G airwaves (Politico)
- The Mounting Federal Investigations Into Facebook (New York Times)
- Why Losing Our Newspapers Is Breaking Our Politics (Scientific American)
- Here’s who owns everything in Big Media today (Vox)
- How Rupert Murdoch's Empire of Influence Remade the World (New York Times)
ICYMI from Benton
- National Digital Inclusion Alliance Names Casey Sorensen and Munirih Jester the 2019 Charles Benton Digital Equity Champions
- Presentation of the Fourth Annual Charles Benton Digital Equity Champion Awards, Adrianne Furniss
- Innovators in Digital Inclusion: E2D, Angela Siefer and Matthew Kopel
- Three Important Points on Broadband Competition, Jonathan Sallet
- Federal Broadband Policy Update, Robbie McBeath
Events Calendar for April 8-12, 2019
April 9 -- The FTC’s Approach to Consumer Privacy
April 10 -- Disability Advisory Committee, FCC
April 10 -- Broadband Mapping: Challenges and Solutions, Senate Commerce Committee hearing
April 12 -- Merger Retrospectives, FTC
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