Tag: Federal Trade Commission (FTC)

The Curse of Bigness

 

TIMEMagazine19Oct1925
A portrait of Louis Brandeis on the cover of Time magazine on October 19, 1925.

Before he was an associate justice on the Supreme Court of the United States from 1916 to 1939, Louis Brandeis was a progressive lawyer fighting the big monopolies, or trusts, of Gilded Age America. He termed the corrosive effect on democracy of unrestrained business practices “The Curse of Bigness”, and after he joined the Supreme Court he maintained his interest in restraining business interests from trampling the rights of ordinary citizens.

Now President Biden has appointed Lina Khan to the chair of the Federal Trade Commission, and her appointment signals a return to the principles of Louis Brandeis. Lina Khan is an antitrust lawyer and legal scholar who, as a student at Yale Law School in 2017, wrote an article called Amazon’s Antitrust Paradox. The article drew widespread attention for her ideas about how the conventional wisdom of the past 50 or so years regarding regulation of the marketplace based on consumer prices no longer applied in the age of Amazon, a company willing to engage in predatory pricing and use vertical integration in order to stifle competition and monopolize the marketplace.

A profile of Lina Khan in Time from October 17, 2019.

 

Prior to Ms. Khan’s appointment, another antitrust lawyer and legal scholar, Tim Wu, joined the Biden administration as a Special Assistant to the President for Technology and Competition Policy on the National Economic Council. Mr. Wu is known for helping to write the first network neutrality rules in work for the Federal Communications Commission in 2006. In 2018, he wrote The Curse of Bigness: Antitrust in the New Gilded Age, a book which paid homage to Louis Brandeis and his antitrust work of the Progressive Era.

Climate strike (49534187193)
A Climate Strike protester with an anti Bezos sign in London on February 14, 2020. Photo by Flickr user Socialist Appeal.

With these two people now in key positions in the federal government, perhaps efforts to rein in, or even bust up, big technology companies such as Amazon, Google, Apple, Facebook, and Microsoft, will finally be undertaken seriously and with persistence. In the past, these Big Five technology companies have largely escaped with slaps on the wrist after fitful investigations into their practices.


Supreme Court Justice Ruth Bader Ginsburg answered questions from Brandeis University students at an event in January 2016 commemorating the 100th anniversary of Louis Brandeis being nominated to the Supreme Court by President Woodrow Wilson.

 

As Louis Brandeis understood, and as is apparent from the writings of both Lina Khan and Tim Wu, setting regulatory boundaries for these behemoth businesses not only ensures they act fairly in the marketplace, but protects democracy from their tendency to squash individual liberties when they conflict with their self-interest. And the bigger and less competitive these companies become, the more their self-interest consumes everything in their vicinity, like a beast that can’t stop growing and must swallow anything in its way.
— Techly


An unofficial remix of the 2021 songs “Bezos I” and “Bezos II”, written and performed by Bo Burnham for his album and Netflix special, Bo Burnham:Inside. Warning: foul language.

 

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A Pitch Too High

 

In trying to specifically target their advertisements and therefore get a higher return per ad, companies like to know as much as possible about the consumer, and lately some of them have resorted to using ultrasonic beacons embedded in their ads. Say you are at your desktop computer reading a news story from the online version of your local newspaper, and nearby on your desk is your smartphone, which is on but currently idle, or so you would assume. Unknown to you, one of the ads on the webpage you are looking at emits an ultrasonic beacon lasting about 5 seconds through your computer’s speakers. Most likely also unknown to you (because like most people you probably don’t bother to read all the permissions you grant an application when you install it), one or more of the applications on your smartphone pick up that ultrasonic beacon through the phone’s microphone and, through various commercial agreements also done without your knowledge, relays the packet of information encapsulated in the beacon, along with information contributed from the smartphone application, back to the advertiser on the webpage as well as to anyone else who has an interest in information about you.

 

The more advertisers know about you, the better, as far as they are concerned. The problem here is how sneaky they are being about collecting information. It is even possible for advertisers to embed ultrasonic beacons in television advertisements, though so far there is no proof any of them have done that. The Federal Trade Commission (FTC), which regulates deceptive advertising practices, nonetheless recently warned 12 smartphone application developers about deceptively implying they were not monitoring users’ television viewing habits when in fact they were capable of doing so. Researchers recently discovered that as many as 234 Android applications are capable of using beacon technology. Unfortunately, it appears the FTC is reluctant to force the developers to divulge this capability to Android smartphone users. There is even less information available from Apple application developers.

 

Statue of Liberty, NY
The Statue of Liberty, also known as a beacon of freedom, on Liberty Island in New York Harbor; photo by William Warby.

 

This cross-device tracking, as it is known, is as invasive and sneaky as it gets, yet there seems to be little political will to either outlaw it or regulate it. A warning letter? That’s all? In the 1950s and 60s there was a public outcry about subliminal messages in print and television advertising. While the effectiveness of subliminal advertising has always been dubious, people were nevertheless upset they were being manipulated in such a sneaky, underhanded way. Because of the public outcry, the Federal Communications Commission (FCC) was moved to state it would revoke the license of any broadcaster who used subliminal messages in programming or advertising, and the FTC stated that it would prosecute advertisers under Sections 5 and 12 of the Federal Trade Commission Act of 1914, which governs deceptive practices.

 

Given the remarkable similarity of ultrasonic beacons in electronic devices to subliminal messaging, in practice if not in usage, it’s difficult to understand why the FCC and FTC have not come down harder on the commercial use of this technology. The practice is the same because both seek to take advantage of consumers without their knowledge, and certainly not with their explicit approval; the usage is different because subliminal advertisers cast a wide net to boost sales, while companies employing beacons gather information about users in order to more specifically target them, like fish in a barrel. Until federal regulators take stronger action against the use of ultrasonic beacons, people upset by the practice will apparently have to rely on the more acute hearing of their dogs to alert them.
― Techly
His Master's Voice
His Master’s Voice, an 1898 painting by English artist Francis Barraud (1856-1924) of his brother’s dog, Nipper. The Victor Talking Machine Company began using the painting in 1900, and in 1929 the painting became the symbol of the Radio Corporation of America (RCA), aka RCA Victor.

 

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We’ll Take That As a Yes

 

Last week the United States Congress voted to repeal new Federal Communications Commission rules which would have required that internet service providers (ISPs) notify their customers of the data they collect on them for their own commercial purposes unrelated to providing the service, and that customers had to specifically opt-in to the practice. The FCC voted 3 to 2 in favor of the new rules in October 2016, and they would have gone into effect on March 2 of this year had the FCC not stayed it on March 1 under new chairman Ajit Pai. Outgoing FCC chairman Tom Wheeler pushed for the new rules in order to spell out consumer privacy protections in relationship to ISPs, something which he and two of the other commissioners felt was inadequately addressed in Section 222 of the Telecommunications Act of 1996.

 

The Telecommunications Act goes back to 1934, when the original law went into effect creating the FCC and granting it the authority to regulate telecommunications companies as common carriers, which is to say the same as utilities. Section 222 of that law pertained to how the carriers could use their customers’ personal information, and it required them to keep the information confidential except as required by law or by consent of the customer. Congress has amended the Act periodically to reflect changes in technology, with the last major revision in 1996.

Common carrier or not is the logical puzzle in question. Substitute “Section 222” for Catch-22 to relish the flavor of the ISP regulatory mess.

 

Since the advent of widespread consumer internet service in the 1990s, there has been a regulatory battle over whether ISPs should be considered common carriers, and thus subject to oversight by the FCC under the Telecommunications Act. Since some providers, such as AT&T and Verizon, were also telephone companies, they were already partially subject to FCC oversight. It wasn’t until early 2015 with the FCC’s Open Internet Rules that all ISPs were brought under the same set of regulations as common carriers and bound by the consumer privacy protections of Section 222.

 

Previously the only regulatory oversight of some ISPs on behalf of consumer privacy came from the Federal Trade Commission, and it was limited to holding the companies accountable to the terms of their own privacy policies. The FTC does not regulate consumer privacy regarding the actions of common carriers. It does regulate consumer privacy regarding the actions of so-called edge providers that offer services by voluntary subscription, like Facebook, and of websites in general, but again only by holding them to their own privacy policies, as invasive as they may be. Since the implementation of the FCC’s Open Internet Rules in 2015, all ISPs must adhere to the more restrictive regulations applied to common carriers.

 


The 1970 film adaptation of Joseph Heller’s brilliant Catch-22 lays out a problem in logic. It does not attempt to explicate it, because that would be impossible and probably unhealthy.

 

Still, Chairman Wheeler and others felt that the language of Section 222 did not go far enough in spelling out consumer privacy protection in the internet age. Originally written in 1934 when the capacity of a common carrier to sweep up vast amounts of customer data was not even a pipe dream, and inadequately addressed in the major 1996 revision of the law, Section 222 did not explicitly deny ISPs the ability to sell customer data because the ISPs could interpret “with the approval of the customer” in Section (c)(1) to mean they could consider customers opted-in unless they stated otherwise. Being passive and silent rather than active and vocal has always been considered assent or approval, especially by sneaky people with an agenda, and it is a prevalent practice on the internet. That is a trick of the interactive internet age that no one foresaw in 1934, and apparently not even in 1996. In 2002, Democratic Senator Paul Wellstone of Minnesota introduced a bill which would have changed “the approval of the customer” to “the affirmative written consent of the customer.” The bill went nowhere.

 

Without legislation from Congress to clarify things in the new regulatory environment, Chairman Wheeler felt obliged to take up the slack by adopting Broadband Consumer Privacy Rules in October 2106. As already noted, the vote was 3 to 2. The 3 ayes came from Chairman Wheeler and the two other Democrats on the Commission board. The 2 nays came from the Republicans on the board, including Ajit Pai, now the new Chairman. When the new Republican Congress and President came to Washington, Chairman Pai stayed the new Privacy Rules before they could take effect, and Republican Senator Jeff Flake of Arizona introduced a bill to repeal the Rules and also prevent the FCC from making similar rules in the future.

That’s an android in the center, but it could just as well be you, an internet service customer, caught between government regulators and telecommunications providers.

 

The rest is history. We are returning to the regulatory environment of the past year and a half after the FCC ruled all ISPs were common carriers, but before it adopted new Privacy Rules to clarify the difference between “approval” and “consent” of customers. Now ISPs, though they are common carriers, have a gray area to navigate in Section 222 of the Telecommunications Act, and their claim that they will still be regulated by the FTC is disingenuous at best, considering the FTC does not regulate common carriers. It should be understandable now why ISPs lobbied to repeal the new Privacy Rules. Citing their own privacy policies in which they claim they never have and never will sell customer data, and which had been enforced by the FTC (they glide over the part about FTC regulation no longer applying to them as common carriers), they claimed the FCC was unnecessarily complicating the regulatory environment. They say they shouldn’t be held to stricter privacy standards than companies like Google and Facebook, thereby putting them at a competitive disadvantage. Except for the part about competitive disadvantage not being applicable to monopolistic utilities that are regulated in the public interest, that’s a fair point. Instead of raising the privacy bar for everyone, however, they and their mostly Republican allies in Congress and in the new FCC prefer to lower the bar, serving corporate interests instead of consumers. Trust us, they say. Uh-huh.
― Techly

 

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