The FTC Weaponizes Legitimate Concerns About Data Privacy

The Federal Trade Commission scored a PR victory with a report last week that accuses prominent social media and video streaming companies of lax privacy controls, especially in how they handle the data of children and teens.

There is much in this staff report worthy of attention, especially about how children’s privacy is treated online. The FTC and its Chair, Lina Khan, however, could not resist weaponizing legitimate issues in the service of progressive ideology. FTC instructs companies to destroy their successful business models, which would in effect leave the government in charge of social media content moderation.

In a departure from the FTC’s customary sober tone, the language of this report is lurid. “Monetization” is used as a slur word, as is “extremely profitable.” Targeted advertising “profoundly threatens” consumers and is “extremely harmful” to them. Such charges are not substantiated or intuitively obvious. If you like gourmet coffee, for example, and you see coffee ads in your Facebook feed, would you feel violated or validated?

These are just some of the points raised by Republican FTC Commissioners Andrew Ferguson and Melissa Holyoak in their concurring and dissenting statements. “If regulators and lawmakers attempt to ban or seriously curtail targeted advertising, they will be undoing the balance of the online economy,” Ferguson writes. If ever enacted, such a ban would destroy trillions of dollars of equity value in America’s leading companies, gut the portfolios of millions of retirees, and throw millions of people out of work. And what would we get in return? The FTC promises “quality” content presumably to be defined by the government.

What about the pregnant woman who receives ads for baby products before she has told her family she is pregnant? Or the grieving mother who receives an ad about buying school supplies?

“I am not obtuse to the fact that a targeted advertisement can remind someone of something tragic, embarrassing, or traumatic in their life,” Ferguson writes about the report’s focus on undefined “sensitive categories.” But any attempt to regulate content to this degree would undoubtedly further compromise consumer privacy, with a political overlay on defining what is or is not “sensitive.”

Worse, the FTC’s proposals would likely reduce competition and harm consumers, the exact opposite of the goals an antitrust enforcer is supposed to uphold. Holyoak writes that the FTC did not consider how eliminating targeted ads could harm the sales and revenues of small businesses, while perhaps advantaging national brands with household names.

“Have we considered what effects these recommendations will have on third parties—think of artists, influencers, educators, etc.—that may rely in part on a platform’s advertising revenues or offerings for their income?” Holyoak writes. “How will the report’s recommendations affect the economics for the content creators that make at least some money by developing and posting content? Will a plumber whose ‘do it yourself’ content earns money (directly or indirectly through advertising) still have incentive to invest as much time and effort developing and posting content if they earn less?”

Holyoak sees regressive harm for lower-income Americans who cannot afford a plumber, interior designer, car mechanic, or personal shopper but may be “willing to trade some of their privacy or their data for free content that helps them teach themselves in ways that fit their budget and improve their quality of life.” The fact that the FTC did not consider this is a sign of how far removed official Washington is from working Americans who struggle to pay bills.

The FTC suggests preemptive regulations for the use of AI generative systems. The report regards AI as only entrenching dominant firms when it holds the potential to wreck Big Tech empires. “A knee-jerk regulatory response will only squelch innovation, further entrench Big Tech incumbents, and ensure that AI innovators move to jurisdictions friendlier to them—but perhaps hostile to the United States,” Ferguson writes.

Both commissioners call out the FTC for offering highly prescriptive “advice” on how companies should operate. “It has become a pastime of sorts for administrative agencies to make an end-run around the Administrative Procedure Act to circumscribe private conduct,” Holyoak writes. “And here, in effect, the report even suggests readers should make no mistake about how a ‘failure to follow’ the report’s recommendations will be viewed by enforcement staff.”

Ferguson writes that the report “proposes a litany of things that firms ‘should’ and ‘should not’ do.” He cautions: “We are not moral philosophers, business ethicists, or social commentators. We are a law enforcement agency. We enforce specific statutory mandates and prohibitions.”

Noting the report offers no regulation that could be defended in court, Ferguson throws a dig at Lina Khan: “I understand why the majority does not want to do that; our rules have not fared well before the judiciary.”

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Robert H. Bork Jr. is the president of the Antitrust Education Project.