Major business groups warned that provisions in the multi-trillion dollar “Build Back Better Act” would “constitute a major policy shift” in the enforcement authority of the Federal Trade Commission (FTC) “that unfairly erodes due process and will impose significant new costs on companies that are acting in good faith when serving consumers.”
The Insights Association and 84 other trade organizations joined the U.S. Chamber of Commerce in sending a letter to the U.S. Senate opposing “Sections 31501 and 31502 in H.R. 5376, (aka the “Build Back Better Act”), which would “create new policy – an unprecedented and unjustified broad civil penalty authority under Section 5 of the Federal Trade Commission (FTC) Act that does not presently exist in the law.” The civil penalty provisions would be in addition to the establishment of a new FTC Bureau of Privacy.
The letter pointed out that the “projected revenue from the FTC penalty provisions is based on unconstitutional presumptions of guilt” and that those revenues “should be considered ‘extraneous provisions’ because they are ‘merely incidental to the non-budgetary components of the provision’” which is one of the principal factors under the Byrd Rule for removing a provision from a reconciliation bill.
Most importantly, this “new civil penalty authority” has the potential to chill innovation. “The mere threat of being levied a very costly fine (up to $43,792 per violation per affected consumer) by the FTC in an alleged first instance of an FTC Act violation will significantly harm economic growth and competition because companies will operate under the constant pressure of potential arbitrary enforcement without sufficient due process by an agency that has not fairly given it prior notice as to what specific business conduct or practice constitutes a violation of the FTC Act in order for that business to avoid such a fine.” This could be especially complicated in issues of consumer privacy and data security, which are of paramount import to the insights industry.
The FTC’s “current enforcement regime” was “specifically balanced” in order to “prevent unfair enforcement under the FTC Act’s vague and broad prohibition on unfair and deceptive practices.” That is also why the Insights Association has regularly opposed granting the FTC extraordinary rulemaking authority under the Administrative Procedures Act (APA).
“At a time when the Commission has demonstrated willingness to exceed its authority, such a policy change would be highly detrimental to legitimate businesses because the FTC would become the lawmaker, prosecutor, judge, and jury all at once, where businesses may never know which of their practices may later be adjudged to be illegal. The threat will be particularly severe for smaller companies that lack the legal expertise and capital to hire outside counsel to contest the FTC’s proposed settlements backed by the threat of potentially bankrupting fines regardless of whether they believe their activities are completely lawful.”
The ”Build Back Better Act” has been shelved, for now, but Senate Democrats claim they will bring it up for a vote in the new year.