As Congress flounders in Big Tech regulation push, the FTC isn’t waiting around

As the Senate continues to toil on a long-simmering road to tech legislation, the Federal Trade Commission isn’t waiting around.

A series of aggressive legal actions by the FTC in recent days signal a crackdown as Senate Majority Leader Chuck Schumer, D-N.Y., dawdles on antitrust bills targeting tech’s biggest names. Last week, the FTC announced an initiative at drafting rules to crack down on what it calls harmful commercial surveillance and lax data security, less than a month after the agency sued Facebook parent company Meta Platforms Inc.’s
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proposed acquisition of virtual-reality company Within Unlimited on anticompetitive grounds. The lawsuit, headed 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 have hammered out bills on climate change and healthcare 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 to laws such as the Digital Markets Act, which includes a ban on companies ranking their own products on their internet platforms ahead of rivals.

Barring Big Tech from preferencing their own products is a major element of one of the few bills introduced by Democrats in the past two years that seems to still have a chance to reach the floor with a month left to go in the session.

This week, a spokesperson for Schumer confirmed to MarketWatch that the Senate Majority Leader “is working with Sen. [Amy] Klobuchar and other supporters to gather the needed votes and plans to bring it up for a vote.”

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

For now, Big Tech officials don’t expect a vote on Sen. Klobuchar’s American Innovation and Choice Online Act — which would prevent large online platforms from the likes of Apple Inc.
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Amazon.com Inc.
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Google, Meta and possibly Microsoft Corp.
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from using their dominance in one field to give other products an unfair advantage — until at least the fall, which people familiar with discussions 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.]

More on the Klobuchar bill: After three years of promises, attempt to regulate tech comes down to a single bill

Those four companies did not publicly comment when contacted by MarketWatch, though they continue to lobby to stop Congress from passing laws to curb their market power. Meta only learned of the FTC lawsuit via tweet, people familiar with the situation told MarketWatch.

The alternative paths to reining in Big Tech offers a jarring, if not contradictory, path between aggressive regulators who are ratcheting up lawsuits and investigations and federal lawmakers who have not passed any significant tech laws in at least 20 years.

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

“For years now, we have been pushing for enforcement of existing law or new laws. It does not need to be an either/or proposition. We need to use all the tools available,” said Slaiman, who previously worked in the FTC’s anticompetitive practices division.

The FTC is plowing ahead without the benefit of a national data-privacy law, one of the bills stalled in Congress. What momentum there is among Americans and lawmakers for tech legislation — as well as Big Tech itself — could coalesce around a national data-privacy law, as the FTC has advocated. Sam Levine, the FTC’s consumer protection chief, said the agency’s rule-making decision is not a substitute for a law, such as the House’s American Data Protection and Privacy Act.

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

More on the data-privacy bill: The long-awaited U.S. data-privacy bill appears to be on track, again

“It’s safe to say the FTC is a little fed up with how data collection and monetization practices have evolved over recent years,” Avi Edery, senior vice president of marketplace for Verve Group, told MarketWatch. But he also warned the FTC’s “broad and sweeping” changes could have “unintended consequences” on developers and consumers, no matter how well intentioned.

But that doesn’t seem to cow FTC Chair Khan, who seems intent to press on, with or without Congress’ help.

“Firms now collect personal data on individuals at a massive scale and in a stunning array of contexts,” FTC Chair Khan said in an online news conference on Thursday. “Our goal today is to begin building a robust public record to inform whether the FTC should issue rules to address commercial 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 coincidental, the result of a confluence of events including the long-gestating appointment of a third Democratic vote to the FTC and a breakdown in negotiations between the Justice Department 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 lawyer Joel Mitnick doesn’t think enforcement agencies are “ratcheting up” investigations because legislative reform is lagging in Congress. “Investigations take a long time, especially against big, well-funded targets,” Mitnick told MarketWatch.

“Both current administrations at FTC and [the Justice Department] came to office with an aggressive agenda, and I think it is an apparent coincidence that some of these matters are moving toward possible fruition at a time when legislative antitrust reform may be stalling,” said Mitnick, who began his career as a trial lawyer at FTC.

The Justice Department is expected to sue Alphabet Inc.’s
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Google for antitrust violations over its online ad dominance as soon as September. In suing Meta to block its acquisition of VR company Within Unlimited in late July, FTC Bureau of Competition Deputy Director John Newman said, “Instead of competing on the merits, Meta is trying to buy its way to the top.” A Meta spokesperson told MarketWatch the FTC’s lawsuit is “based on ideology and speculation, not evidence.”

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

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

Such an approach runs risks, Chakravorti cautions. “When the lawsuit happens this early in the evolution of the [metaverse] industry, there is a very high chance that the government loses its case and that could undermine the FTC’s mission and credibility of this new approach,” he said. The FTC, he added, is “already overwhelmed with too many different industries to oversee and tech itself is a gigantic hairball in the middle of all that.”

Without new legislation, it could be hard for regulatory pushes to succeed. If passed, Klobuchar’s “self-preferencing” bill would stop Google placing its own products at the top of its search results and would bar Amazon from giving preferential treatment in its online store to sellers who can afford to pay for it.

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

See also: Hearing on data-privacy bill reveals contours of latest 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 perplexing” measures in its investigation of the company’s Prime subscription business. The FTC is asking both to testify.

The midterm elections are a wild card. If Democrats somehow hold on to the Senate, as some are increasingly predicting, votes on the bills could be punted until next year. If Republicans win control of the Senate and/or House, however, the bills are likely out of play.

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