University of Tennessee College of Law University of Tennessee College of Law
Legal Scholarship Repository: A Service of the Joel A. Katz Law Legal Scholarship Repository: A Service of the Joel A. Katz Law
Library Library
Scholarly Works Faculty Scholarship
2023
Addressing Personal Data Collection as Unfair Methods of Addressing Personal Data Collection as Unfair Methods of
Competition Competition
Maurice E. Stucke
Follow this and additional works at: https://ir.law.utk.edu/utklaw_facpubs
Part of the Antitrust and Trade Regulation Commons, and the First Amendment Commons
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ADDRESSING PERSONAL DATA COLLECTION AS
UNFAIR METHODS OF COMPETITION
Maurice E. Stucke
†
ABSTRACT
Enforcers, policymakers, scholars, and the public are concerned about Google, Apple,
Meta, Amazon, and Microsoft and their influence. That influence comes in part from personal
data. The public sentiment is that a few companies, in possessing so much data, possess too
much power. Something is amiss. Cutting across political lines, many Americans think Big
Tech’s economic power is a problem facing the U.S. economy. So how can one protect one’s
privacy in the digital economy? Over the past few decades, the Federal Trade Commission has
prosecuted privacy and data protection offenses under its power to curb “unfair and deceptive
acts and practices” under § 5 of the FTC Act. Some urge the agency to go further and use its
authority under § 5’s “unfairness” prong to promulgate a “Data Minimization Rule.” While
that remains an option, that rulemaking path has several limitations. Instead, this Article takes
a different approach. This Article urges the FTC to challenge certain privacy-related
competition concerns as “unfair methods of competition” under the FTC Act. This Article
also addresses one key source of many problems in the surveillance economy—namely,
behavioral advertising.
As this Article concludes, the FTC cannot repair the surveillance economy with its
authority under the FTC Act. America still needs an omnibus privacy framework. But the FTC
can help close the regulatory gap by exercising the authority that Congress intended it to
exercise to help rein in the data-opolies.
TABLE OF CONTENTS
I. INTRODUCTION ............................................................................. 717
II. UNFAIR METHODS OF COMPETITION ..................................... 723
A. T
HE FEDERAL TRADE COMMISSION ACT .............................................. 723
B. T
HE FTC’S WITHDRAWAL ......................................................................... 725
C. A
NTITRUST RESURGENCE ......................................................................... 727
D. C
OMMON LAW ............................................................................................. 729
III. TAXONOMY OF UNFAIR METHODS OF COMPETITION ....... 731
DOI: https://doi.org/10.15779/Z38Q52FD98
© 2023 Maurice E. Stucke.
† Douglas A. Blaze Distinguished Professor of Law, University of Tennessee College
of Law. The authors would like to thank the Omidyar Network for its research grant.
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A. CONDUCT THAT VIOLATES FEDERAL OR STATE STATUTES,
INCLUDING THE FEDERAL ANTITRUST LAWS, AND COMMON
LAW OF UNFAIR COMPETITION .................................................... 733
B. I
NCIPIENT MENACES TO FREE COMPETITION ..................................... 734
C. M
ONOPOLISTIC BEHAVIOR ....................................................................... 740
D. C
ONDUCT THAT VIOLATES THE SPIRIT OF AN ANTITRUST LAW ...... 746
E. E
XPLOITATIVE BEHAVIOR ........................................................................ 749
IV. RACE TO THE BOTTOM IN THE SURVEILLANCE ECONOMY
............................................................................................................. 754
A. H
ISTORIC UNDERSTANDING OF INCENTIVES ....................................... 755
B. T
HE INCENTIVES OF BIG TECH: BEHAVIORAL ADVERTISING .......... 756
C. P
OSSIBLE FTC REFORMS ........................................................................... 761
V. POTENTIAL CONCERNS ............................................................... 762
A. C
AN THE FTC PROMULGATE RULES INVOLVING UNFAIR METHODS
OF
COMPETITION? ........................................................................... 763
B. W
OULD THE FTC’S RULEMAKING RUN AFOUL OF THE SUPREME
COURT’S “MAJOR QUESTIONS DOCTRINE”? .............................. 766
C. W
OULD AN FTC RULE BANNING BEHAVIORAL ADVERTISING
VIOLATE THE FIRST AMENDMENT? ............................................. 772
1. Is Surveillance “Speech” Under the First Amendment? ......................... 774
2. Even If Surveillance Constitutes Speech, Is It Protected Under the First
Amendment? ......................................................................................... 778
3. Is Surveillance Lawful Activity and Not Misleading? ............................ 779
4. What Standard Would the Court Apply to the Surveillance? ................ 781
5. Would the FTC’s Interest in Limiting the Collection and Use of Personal
Data Be Substantial?............................................................................
782
6. Would the FTC Regulation Directly Advance the Governmental Interests?
............................................................................................................. 784
7. Is the FTC Regulation More Extensive Than Necessary to Serve That
Interest? ................................................................................................ 784
D. E
VEN IF THE FTC CAN REGULATE, SHOULD CONGRESS ENACT
ANTITRUST AND PRIVACY LEGISLATION? .................................. 786
VI. CONCLUSION ................................................................................... 793
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I. INTRODUCTION
Consumer privacy has become a consumer crisis.
1
Enforcers, policymakers, scholars, and the public are all concerned about
the outsized influence of Google, Apple, Facebook, Amazon, and Microsoft.
That influence comes partly from their vast control over personal data.
2
These
companies are “data-opolies” in that they are powerful firms that control a lot
of personal data. The data comes from their vital ecosystems of interlocking
online platforms and services, which attract: users; sellers; advertisers; website
publishers; and software, app, and accessory developers.
3
The public sentiment is that a few companies, in possessing so much data,
have too much power. Something is amiss. In a 2020 survey, most Americans
were concerned about the amount of data online platforms store about them
(85%) and that platforms were collecting and holding this data about
consumers to build more comprehensive consumer profiles (81%).
4
But data is only part of the story. Data-opolies use the data to find better
ways to addict us and predict and manipulate our behavior.
Cutting across political lines, many Americans (65%) think Big Tech’s
economic power is a problem facing the U.S. economy.
5
While much has been
1. Letter from U.S. Sen. Richard Blumenthal et al. to FTC Chair Lina Khan (Sept. 20,
2021), https://www.blumenthal.senate.gov/imo/media/doc/2021.09.20%20-%20FTC%20-
%20Privacy%20Rulemaking.pdf.
2. Personal data, as used herein, means “any information relating to an identified or
identifiable individual (data subject).” See Secretariat of the Organization for Economic Co-
operation and Development (OECD), Consumer Data Rights and Competition, Background Note
¶ 16, DAF/COMP(2020)1 (Apr. 29, 2020), https://one.oecd.org/document/DAF/
COMP(2020)1/en/pdf [hereinafter OECD Consumer Data Rights and Competition].
3. H
OUSE OF COMMONS, STANDING COMM. ACCESS TO INFORMATION, PRIVACY AND
ETHICS, DEMOCRACY UNDER THREAT: RISKS AND SOLUTIONS IN THE ERA OF
DISINFORMATION AND DATA MONOPOLY (Dec. 2018), https://www.ourcommons.ca/
Content/Committee/421/ETHI/Reports/RP10242267/ethirp17/ethirp17-e.pdf; Maurice
E. Stucke, Should We Be Concerned About Data-opolies?, 2 G
EO. L. TECH. REV. 275 (2018);
Maurice E. Stucke, Here Are All the Reasons It’s a Bad Idea to Let a Few Tech Companies Monopolize
Our Data, H
ARV. BUS. REV. (Mar. 27, 2018), https://hbr.org/2018/03/here-are-all-the-
reasons-its-a-bad-idea-to-let-a-few-tech-companies-monopolize-our-data.
4. Press Release, Consumer Reports, Consumer Reports Survey Finds That Most
Americans Support Government Regulation of Online Platforms (Sept. 24, 2020), https://
advocacy.consumerreports.org/press_release/consumer-reports-survey-finds-that-most-
americans-support-government-regulation-of-online-platforms/.
5. See, e.g., European Commission’s proposed Digital Markets Act, https://
ec.europa.eu/info/strategy/priorities-2019-2024/europe-fit-digital-age/digital-markets-act-
ensuring-fair-and-open-digital-markets_en; Consumer Reports Survey, supra note 4
(explaining that 60% of those surveyed supported more government regulation of platforms
to deal with their growing power that may be hurting competition and consumers).
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written about these companies’ power, less has been said about how to rein
them in effectively. Contrary to some politicians’ ideology,
6
market forces have
not eroded their power. Several characteristics of the digital economy have led
to tipping and sustained market power. These include extreme scale
economies, strong network effects, data-driven advantages, lock-in effects, and
high switching costs.
7
So how can one protect one’s privacy and data security in the digital
economy? Many Americans (59%) support breaking up Big Tech.
8
Other
jurisdictions, including Europe, call for regulating these gatekeepers.
9
Europe
has a comprehensive privacy and data protection framework; the United States
does not. While Congress has proposed an omnibus privacy statute,
10
none, as
of late 2023, has been enacted. Europe is enacting additional measures to make
the digital economy fairer and more contestable. Meanwhile, the bipartisan
antitrust legislation to help rein in the data-opolies has stalled in the United
States, despite John Oliver, among others, pressing the Congressional
leadership to act.
11
In the interim, the Federal Trade Commission (FTC) is relying on a 1914
statute to protect our sensitive personal information in the digital economy.
12
Over the past few decades, the FTC has prosecuted privacy and data
6. “Rather than pursue even stronger antitrust laws, Congress should allow the free
market to thrive where consumers, not the government, decide how big a company should
be.” Ryan Tracy, Antitrust Bill Targeting Big Tech in Limbo as Congress Prepares to Recess, W
ALL ST.
J. (Aug. 9, 2022), https://www.wsj.com/articles/antitrust-bill-targeting-big-tech-in-limbo-as-
congress-prepares-to-recess-11659951180 (quoting Sen. Rand Paul (R., Ky.)).
7. For further analysis, see M
AURICE E. STUCKE, BREAKING AWAY: HOW TO REGAIN
CONTROL OVER OUR DATA, PRIVACY, AND AUTONOMY (2022); ARIEL EZRACHI & MAURICE
E. STUCKE, HOW BIG-TECH BARONS SMASH INNOVATION AND HOW TO STRIKE BACK
(2022); A
RIEL EZRACHI & MAURICE E. STUCKE, VIRTUAL COMPETITION: THE PROMISE AND
PERILS OF THE ALGORITHM-DRIVEN ECONOMY (2016); MAURICE E. STUCKE & ALLEN P.
GRUNES, BIG DATA AND COMPETITION POLICY (2016); see also Regulation (EU) 2022/1925
(Digital Markets Act), 2022 O.J. (L 265), ¶¶ 2–3, https://eur-lex.europa.eu/legal-content/
EN/TXT/PDF/?uri=CELEX:32022R1925 [hereinafter DMA].
8. Rani Molla, Poll: Most Americans Want to Break Up Big Tech, V
OX (Jan. 26, 2021),
https://www.vox.com/2021/1/26/22241053/antitrust-google-facebook-break-up-big-tech-
monopoly.
9. See, e.g., DMA, supra note 7.
10. See, e.g., American Data Privacy and Protection Act (ADPPA), H.R. 8152, 117th
Cong. (2d. Sess. 2022), https://www.govtrack.us/congress/bills/117/hr8152/text;
J
OHNATHAN M. GAFFNEY, ERIC N. HOLMES & CHRIS D. LINEBAUGH, CONG. RSCH. SERV.,
LSB10776, OVERVIEW OF THE AMERICAN DATA PRIVACY AND PROTECTION ACT, H.R. 8152
(June 30, 2022), https://crsreports.congress.gov/product/pdf/LSBLSB10776/1 (comparing
the ADPPA to other privacy bills from the 117th and 116th Congresses).
11. Tracy, supra note 6.
12. 15 U.S.C. § 45.
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protection offenses using its power to curb “unfair and deceptive acts and
practices” under § 5 of the FTC Act.
13
Some have urged the FTC to go further
and use its authority under § 5’s “unfairness” prong to promulgate a “Data
Minimization Rule.”
14
The FTC in 2023 is still exploring this option.
15
But that
provision limits the FTC’s authority. For example, to declare an act or practice
unfair, the FTC must show that “the act or practice causes or is likely to cause
substantial injury to consumers which is not reasonably avoidable by
consumers themselves and not outweighed by countervailing benefits to
consumers or to competition.”
16
But proving a substantial, cognizable injury
to consumers can be difficult. Courts may require a showing of economic
harm, which is often less relevant for privacy violations.
17
Where the plaintiff
makes no claims for economic harm, they may be out of luck. The FTC would
also have to show that the countervailing benefits to consumers or
competition do not outweigh those injuries. Again, this can be done.
18
But one
13. Privacy & Data Security Update, FED. TRADE COMM’N (2015), https://www.ftc.gov/
reports/privacy-data-security-update-2015.
14. C
ONSUMER REPORTS & ELECTRONIC PRIVACY INFORMATION CENTER (EPIC),
HOW THE FTC CAN MANDATE DATA MINIMIZATION THROUGH A SECTION 5 UNFAIRNESS
RULEMAKING (2022), https://epic.org/documents/how-the-ftc-can-mandate-data-
minimization-through-a-section-5-unfairness-rulemaking/ (urging the FTC “to prohibit all
secondary data uses with limited exceptions, ensuring that people can safely use apps and
online services without having to take additional action”) [hereinafter CR/E
PIC REPORT].
Consumer Reports and Epic, however, noted that “if the FTC decides it has a stronger case
to justify such rules under “‘unfair methods of competition,’” we would strongly support such
an effort.” See also Rebecca Kelly Slaughter, Commissioner, IAPP Closing Keynote 2021: Wait but
Why? Rethinking Assumptions About Surveillance Advertising, F
ED. TRADE COMM’N, (Oct. 22,
2021), https://www.ftc.gov/system/files/documents/public_statements/1597998/iapp_
psr_2021_102221_final2.pdf.
15. Trade Regulation Rule on Commercial Surveillance and Data Security, 87 Fed. Reg.
51273 (proposed Aug. 22, 2022).
16. FTC Act Amendments of 1994, Pub. L. No. 103–312, § 9, 108 Stat. 1691, 1695
(1994).
17. For example, an airline pilot claimed that the federal government violated the Privacy
Act in unlawfully disclosing his confidential medical records, including his HIV status, which
caused him “humiliation, embarrassment, mental anguish, fear of social ostracism, and other
severe emotional distress.” F.A.A. v. Cooper, 566 U.S. 284, 289 (2012). The district judge
found that “emotional injury” alone did not qualify and dismissed the lawsuit, which the
Supreme Court affirmed. Because the Privacy Act does not unequivocally authorize an award
of damages for mental or emotional distress, the federal statute does not waive the Federal
Government’s sovereign immunity from liability for such harms. Thus, as the dissent noted,
individuals can no longer recover under the Privacy Act the primary, and often only, damages
sustained because of an invasion of privacy, namely mental or emotional distress.
18. See S
TUCKE, supra note 7, at chapters 4 & 10; EZRACHI & STUCKE, supra note 7, at
101–39; Finn Myrsted & Oyvind H. Kaldestad, International Coalition Calls for Action Against
Surveillance Based Advertising, F
ORBRUKERRADET (June 2021), https://www.forbrukerradet.no/
side/new-report-details-threats-to-consumers-from-surveillance-based-advertising/.
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trap is that the court, in assessing the trade-off between privacy and
competition, may emphasize the cost savings from lower behavioral
advertising rates while discounting the harder-to-quantify privacy harms.
19
The FTC has frequently targeted data collection practices as deceptive, as
they involved “a material representation, omission or practice that is likely to
mislead a consumer acting reasonably in the circumstances.”
20
But the
rulemaking’s focus would be limited to making the privacy policies more
transparent about the data being collected. The rulemaking would not address
scenarios where the company does not have a privacy policy, or where the
company discloses its rapacious data collection. Moreover, improving
transparency will not necessarily improve privacy protection when consumers
face “take-it-or-leave-it” offers, whereby they must consent to the data-
opolies’ terms for accessing their data or they will not get the service.
21
What
19. See STUCKE, supra note 7, at chapters 8 & 10.
20. A Brief Overview of the Federal Trade Commission’s Investigative, Law Enforcement, and
Rulemaking Authority, F
ED. TRADE COMM’N (2021), https://www.ftc.gov/about-ftc/mission/
enforcement-authority; see, e.g., Facebook, Inc., FTC Docket No. C-4365 and Press Release,
Fed. Trade Comm’n, FTC Proposes Blanket Prohibition Preventing Facebook from
Monetizing Youth Data (May 3, 2023) (alleging in Order to Show Cause that Facebook
violated both the 2012 and 2020 FTC orders “by continuing to give app developers access to
users’ private information after promising in 2018 to cut off such access if users had not used
those apps in the previous 90 days” and that Meta “misled parents about their ability to control
with whom their children communicated through its Messenger Kids app, and misrepresented
the access it provided some app developers to private user data”); Press Release, Fed. Trade
Comm’n, Google Will Pay $22.5 Million to Settle FTC Charges it Misrepresented Privacy
Assurances to Users of Apple’s Safari Internet Browser (Aug. 9, 2012), https://www.ftc.gov/
news-events/news/press-releases/2012/08/google-will-pay-225-million-settle-ftc-charges-it-
misrepresented-privacy-assurances-users-apples (Google agreeing to pay a then record $22.5
million civil penalty to settle the FTC’s charges that “it misrepresented to users of Apple Inc.’s
Safari internet browser that it would not place tracking ‘cookies’ or serve targeted ads to those
users, violating an earlier privacy settlement between the company and the FTC.”).
21. In the aftermath of the Cambridge Analytica scandal, for example, Facebook users’
trust in the platform plummeted—with only 28% believing that the company is committed to
privacy, down from a high of 79% in 2017. Herb Weisbaum, Trust in Facebook Has Dropped by
66 Percent Since the Cambridge Analytica Scandal, NBC
NEWS (Apr. 18, 2018), https://
www.nbcnews.com/business/consumer/trust-facebook-has-dropped-51-percent-
cambridge-analytica-scandal-n867011. Despite the public outrage, the #DeleteFacebook
campaign, and other scandals, Facebook continued to grow. Between March 2018, when the
Cambridge Analytica news broke and March 2020, Facebook “added more than 400 million
monthly users—more than the entire population of the U[nited] S[tates].” Laura Forman,
Facebook’s Politics Aren’t Aging Well, W
ALL ST. J. (June 30, 2020), https://www. wsj.com/
articles/facebooks-politics-arent-aging-well-11593446127. This is not because Facebook users
are agnostic about privacy. Quite the contrary: 74% of surveyed users in 2018 were very or
somewhat concerned about Facebook’s invasion of their privacy (a 9-percentage point
increase from 2011). Jeffrey M. Jones, Facebook Users’ Privacy Concerns Up Since 2011, G
ALLUP
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if users are displeased with the company’s privacy violations? They cannot
readily switch to alternative networks unless they could easily port their data
and, when network effects are present, many others, including their friends,
also switched to the alternative platform. So, while the FTC can and should
promulgate rules to curb deceptive practices, these rules will be insufficient in
ecosystems (1) dominated by data-opolies and (2) where behavioral advertising
is the primary source of revenues.
Consequently, rather than rely primarily on the FTC’s power to regulate
unfair and deceptive practices, this Article takes a different approach. It
assesses whether the FTC can prohibit a variety of privacy-related competition
concerns as an “unfair method of competition” under the FTC Act.
22
This
might seem semantic. After all, what difference does it make whether the data-
opolies’ abuses are unfair practices or unfair methods of competition? The answer is
plenty. While the FTC can promulgate substantive regulations for both unfair
practices and unfair methods of competition, the former has more procedural
and substantive requirements.
23
Moreover, the FTC does not have to prove
that an unfair method of competition caused a substantial injury to
(Apr. 11, 2018), https://news.gallup.com/poll/232319/facebook-users-privacy-concerns-
2011.aspx.
22. At least one organization, Accountable Tech, has filed with the FTC a rulemaking
petition to ban surveillance advertising—the extractive business model whereby Big Tech
pervasively tracks and profiles people for the purpose of selling hyper-personalized ads—as
an “unfair method of competition.” Press Release, Accountable Tech, Accountable Tech
Petitions FTC to Ban Surveillance Advertising as an ‘Unfair Method of Competition’ (Sept.
28, 2021), https://accountabletech.org/media/accountable-tech-petitions-ftc-to-ban-
surveillance-advertising-as-an-unfair-method-of-competition/?cn-reloaded=1. The FTC has
left open this option. It has also invited comments “on the ways in which existing and
emergent commercial surveillance practices harm competition and on any new trade regulation
rules that would address such practices,” as “[s]uch rules could arise from the Commission’s
authority to protect against unfair methods of competition, so they may be proposed directly
without first being subject of an advance notice of proposed rulemaking.” Trade Regulation
Rule on Commercial Surveillance and Data Security, 87 Fed. Reg. 51273, 51276 n.47
(proposed Aug. 22, 2022).
23. The FTC’s ability to promulgate industry-wide rules prohibiting “unfair or deceptive
acts or practices” is limited under the Magnuson-Moss Warranty-Federal Trade Commission
Improvement Act and 1980 Federal Trade Commission Improvements Act, “which added
procedural requirements to rulemaking governed by Magnuson-Moss and stripped the FTC
of rulemaking authority on specific issues.” Rohit Chopra & Lina M. Khan, The Case for “Unfair
Methods of Competition” Rulemaking, 87 U.
CHI. L. REV. 357, 378–79 (2020). These procedures,
however, do not apply to the Commission’s “unfair methods of competition” rulemaking
authority. Id.; see also 15 U.S.C. § 57a (noting that the procedures under the Magnuson-Moss
Act “shall not affect any authority of the Commission to prescribe rules (including interpretive
rules), and general statements of policy, with respect to unfair methods of competition in or
affecting commerce”).
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consumers.
24
Plus, many of the unfair data collection and surveillance practices
that damage competition, consumer autonomy, and consumer privacy fit well
within the range of unfair methods of competition. Granted, as this Article
explores, some might challenge the FTC’s authority to challenge unfair data
collection and surveillance practices as unfair methods of competition. But this
Article argues that Americans need not wait for comprehensive privacy and
antitrust legislation to rein in the data-opolies and curb some of the excesses
of the surveillance economy. The FTC has the power under its rulemaking and
enforcement authority to punish, and hopefully deter, many of the abuses in
collecting and using our personal data as unfair methods of competition.
After Part II outlines the legislative aim of “unfair methods of
competition” and the FTC’s 2022 policy statement on this subject,
25
Part III
offers a taxonomy of unfair methods of competition and demonstrates how
many of the unfair data collection and surveillance practices that damage
competition, consumer autonomy, and consumer privacy fall within the
existing categories. But some surveillance practices do not fall within these
categories. That’s o.k. Congress did not want to “confine the forbidden
methods [of competition] to fixed and unyielding categories,”
26
so the FTC
can use its power to deter these privacy-related competition concerns as well.
Part IV addresses one key source of many problems in the surveillance
economy—namely, behavioral advertising. Part V examines several concerns
about such potential rulemaking, including whether it would run afoul of the
Supreme Court’s “major questions doctrine,” as recently outlined in West
Virginia v. EPA.
27
As this Article concludes, the FTC cannot repair the
surveillance economy with its authority under the FTC Act. Nevertheless, the
FTC absolutely can, and should, exercise the authority that Congress intended
it to exercise to help rein in the data-opolies. America still needs an omnibus
privacy framework, but the FTC can help close the regulatory gap.
24. In contrast, regulation under Magnuson-Moss would entail that, as well as projecting
the rule’s economic effects. Some argue that “rather than focus entirely on specific injuries
tied to the collection and use of data, the FTC should recognize that the unwanted observation,
through excessive data collection and use, is harmful in and of itself.” CR/Epic Report, supra
note 14, at 6. Whether courts would agree is a risk.
25. F
ED. TRADE COMM’N, POLICY STATEMENT REGARDING THE SCOPE OF UNFAIR
METHODS OF COMPETITION UNDER SECTION 5 OF THE FEDERAL TRADE COMMISSION ACT
(2022), https://www.ftc.gov/system/files/ftc_gov/pdf/p221202sec5enforcementpolicystate
ment_002.pdf [hereinafter 2022 FTC UMC Policy Statement].
26. F.T.C. v. R. F. Keppel & Bro., Inc., 291 U.S. 304, 310 (1934).
27. W. Virginia v. Env’t Prot. Agency, 142 S. Ct. 2587, 2616 (2022) (Gorsuch, J.,
concurring) (summarizing doctrine as to where “administrative agencies must be able to point
to ‘clear congressional authorization’ when they claim the power to make decisions of vast
‘economic and political significance.’”).
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II. UNFAIR METHODS OF COMPETITION
A. THE FEDERAL TRADE COMMISSION ACT
In creating the FTC in 1914, Congress wanted the new agency to define
and curb all “unfair methods of competition.”
28
In contrast to the term “unfair
competition,” which courts had often construed as passing off one’s business
or goods for another,
29
the term “unfair methods of competition” was
relatively new to US law.
30
Only two cases referred to “unfair methods of
competition” before 1914,
31
one of which was ironically the Supreme Court’s
Standard Oil decision, which prompted Congress to enact the FTC Act.
32
The unique term “unfair methods of competition,” as employed in the Act,
was meant to have a broader meaning than the common law of “unfair
competition.”
33
Congress purposely did not define this novel term. Why?
28. 15 U.S.C. § 45.
29. See, e.g., A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 531 (1935)
(noting that “unfair competition,” under the common law, was “a limited concept,” primarily,
and strictly, relating “to the palming off of one’s goods as those of a rival trader”).
30. Id. at 532 (noting that the FTC Act “introduced the expression ‘unfair methods of
competition,’” which “was an expression new in the law”).
31. Burrow v. Marceau, 109 N.Y.S. 105, 107 (N.Y. App. Div. 1908) (noting that “there
is no hard and fast rule” in determining when the court will “prevent what is practically a fraud
upon a person engaged in business by the unfair methods of competition”); Standard Oil Co.
of New Jersey v. United States, 221 U.S. 1, 42–43 (1911) (noting that Standard Oil had
monopolized and restrained interstate commerce in petroleum and its products, by engaging
in, inter alia, “unfair methods of competition, such as local price cutting at the points where
necessary to suppress competition”).
32. F
ED. TRADE COMM’N, STATEMENT OF CHAIR LINA M. KHAN JOINED BY
COMMISSIONER ROHIT CHOPRA AND COMMISSIONER REBECCA KELLY SLAUGHTER ON THE
WITHDRAWAL OF THE STATEMENT OF ENFORCEMENT PRINCIPLES REGARDING “UNFAIR
METHODS OF COMPETITION” UNDER SECTION 5 OF THE FTC ACT 2–3 (2021), https://
www.ftc.gov/system/files/documents/public_statements/1591498/final_statement_of_
chair_khan_joined_by_rc_and_rks_on_section_5_0.pdf [hereinafter FTC
WITHDRAWAL
STATEMENT] (“After the Supreme Court announced in Standard Oil that it would subject
restraints of trade to an open-ended ‘standard of reason’ under the Sherman Act, lawmakers
were concerned that this approach to antitrust delayed resolution of cases, delivered
inconsistent and unpredictable results, and yielded outsized and unchecked interpretive
authority to the courts.”); see also 2022 FTC
UMC POLICY STATEMENT, supra note 25, at 2.
33. See F.T.C. v. Sperry & Hutchinson Co., 405 U.S. 233, 239–40 (1972) (noting that
Congress in creating the FTC and charting its power and responsibility under § 5, “explicitly
considered, and rejected, the notion that it reduce the ambiguity of the phrase ‘unfair methods
of competition’ by tying the concept of unfairness to a common-law or statutory standard or
by enumerating the particular practices to which it was intended to apply”); F.T.C. v. Raladam
Co., 283 U.S. 643, 648 (1931) (noting that the legislative debate apparently convinced the
sponsors of the FTC Act that unfair competition, “which had a wellsettled meaning at
common law, were too narrow,” so Congress substituted it with “unfair methods of
competition”: “Undoubtedly the substituted phrase has a broader meaning, but how much
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Because any definition would be self-defeating. Congress recognized the
futility of attempting to define the many iterations of unfair methods of
competition:
It is impossible to frame definitions which embrace all unfair
practices. There is no limit to human inventiveness in this field. Even
if all known unfair practices were specifically defined and prohibited,
it would be at once necessary to begin over again.
34
As Congress observed, “[i]t is the illusive character of the trade practice that
makes it though condemned today appear in some other form tomorrow.”
35
Thus, Congress intended the term unfair methods of competition to be both far-
reaching and evolving. Rather than proposing a closed universe of forbidden
practices, Congress left it open-ended “so that it might include all devices
which would tend to deceive or take unfair advantage of the public and so that
it might not be confined within the narrow limits of existing law.”
36
The term encompasses, as we’ll see, conduct that violates the federal
antitrust laws (e.g., the Sherman and Clayton Acts) as well as conduct that
constituted unfair competition under the common law. Congress, dissatisfied
with the Supreme Court’s rule of reason legal standard announced in Standard
Oil, created the FTC to continually identify and deter unfair methods of
competition.
37
The key “takeaway is that Congress designed the term as a
broader has not been determined.”); 2022 FTC UMC POLICY STATEMENT, supra note 25, at 3;
Neil W. Averitt, The Meaning of “Unfair Methods of Competition” in Section 5 of the Federal Trade
Commission Act, 21 B.C.
L. REV. 227, 235 (1980) (citing legislative history).
34. F.T.C. v. R. F. Keppel & Bro., Inc., 291 U.S. 304, 310 n.1 (1934) (noting how the
committee carefully considered “whether it would attempt to define the many and variable
unfair practices which prevail in commerce,” and concluding that “there were too many unfair
practices to define, and after writing 20 of them into the law it would be quite possible to
invent others”); see also S. Rep. No. 597, 63rd Cong., 2d Sess., at 13 (1914); 2022
FTC UMC
POLICY STATEMENT, supra note 25, at 3.
35. Keppel, 291 U.S. at 311–12 n.1 (1934) (quoting S. Rep. No. 63-597, at 13).
36. Note, Unfair Competition at Common Law and under the Federal Trade Commission Source,
20 C
OLUM. L. REV. 328, 331 (1920).
37. Keppel, 291 U.S. at 314 (noting how the FTC “was created with the avowed purpose
of lodging the administrative functions committed to it in ‘a body specially competent to deal
with them by reason of information, experience and careful study of the business and
economic conditions of the industry affected,’ and it was organized in such a manner, with
respect to the length and expiration of the terms of office of its members, as would ‘give to
them an opportunity to acquire the expertness in dealing with these special questions
concerning industry that comes from experience.’” (quoting S. Rep. No. 63–597, 9–11 (1914));
Atl. Refin. Co. v. F.T.C., 381 U.S. 360, 367 (1965); see also Averitt, supra note 33, at 233 (noting
Congress’s displeasure with the Court’s rule-of-reason legal standard, and its attendant costs
of (i) delay in resolution; (ii) courts’ divergent results; and (iii) shift in control of antitrust policy
from Congress to the judiciary).
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‘flexible concept with evolving content,’” and “‘intentionally left [its]
development . . . to the Commission.’”
38
Or, as Judge Learned Hand wrote,
the FTC’s “duty is to bring trade into harmony with fair dealing”:
The Commission has a wide latitude in such matters; its powers are
not confined to such practices as would be unlawful before it acted;
they are more than procedural; its duty in part at any rate, is to
discover and make explicit those unexpressed standards of fair
dealing which the conscience of the community may progressively
develop.
39
Congress also intended to limit the courts’ function, as the Supreme Court
noted: “Where the Congress has provided that an administrative agency
initially apply a broad statutory term to a particular situation, our function is
limited to determining whether the Commission’s decision ‘has “warrant in the
record” and a reasonable basis in law.’”
40
B. THE FTC’S WITHDRAWAL
So, if Congress articulated, as Sandeep Vaheesan noted, “a grand
progressive-populist vision of antitrust,” and wanted “the FTC to police
‘unfair methods of competition’ that injure consumers, prevent rivals from
competing on the merits, and allow large corporations to dominate our
political system,”
41
then why hasn’t the FTC, until recently, used this power to
rein in the data-opolies? More notable are the FTC’s past policy miscues,
including vetoing its legal staff’s recommendation and not challenging
38. F.T.C. v. Wyndham Worldwide Corp., 799 F.3d 236, 243 (3d Cir. 2015) (quoting
F.T.C. v. Bunte Bros., 312 U.S. 349, 353 (1941) and Atl. Refin. Co., 381 U.S. at 367); see also
F.T.C. v. Indiana Fed’n of Dentists, 476 U.S. 447, 454 (1986) (noting how the standard of
“unfairness” under the FTC Act “is, by necessity, an elusive one, encompassing not only
practices that violate the Sherman Act and the other antitrust laws . . . but also practices that
the Commission determines are against public policy for other reasons”); F.T.C. v. Motion
Picture Advert. Serv. Co., 344 U.S. 392, 396 (1953) (“The point where a method of
competition becomes ‘unfair’ within the meaning of the Act will often turn on the exigencies
of a particular situation, trade practices, or the practical requirements of the business in
question.”).
39. F.T.C. v. Standard Educ. Soc., 86 F.2d 692, 695, 696 (2d Cir. 1936).
40. Atl. Refin., 381 U.S. at 367–68 (quoting National Labor Relations Board v. Hearst
Publications, Inc., 322 U.S. 111, 131 (1944)); see also Indiana Fed’n of Dentists, 476 U.S. at 455
(“Once the Commission has chosen a particular legal rationale for holding a practice to be
unfair, however, familiar principles of administrative law dictate that its decision must stand
or fall on that basis, and a reviewing court may not consider other reasons why the practice
might be deemed unfair.”).
41. Sandeep Vaheesan, Resurrecting “A Comprehensive Charter of Economic Liberty”: The Latent
Power of the Federal Trade Commission, 19 U.
PA. J. BUS. L. 645, 650 (2017).
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Google’s anticompetitive behavior,
42
and not challenging any of the data-
opolies’ acquisitions, including Google-DoubleClick.
43
The FTC on
competition matters was for many years hesitant: it “rarely used this expertise
to affirmatively identify what conduct or practices constitute an ‘unfair method
of competition’ and instead, sought to define ‘unfair methods of competition’
on a case-by-case basis.”
44
Instead of ferreting out the many unfair practices in the digital economy,
the FTC, in its 2015 Policy Statement, retreated to antitrust law’s convoluted
and criticized rule of reason legal standard.
45
The FTC would apply the very
42. The FTC Report on Google’s Business Practices, WALL ST. J. (Mar. 24, 2015), https://
graphics.wsj.com/google-ftc-report/.
43. Press Release, Fed. Trade Comm’n, Federal Trade Commission Closes Google/
DoubleClick Investigation: Proposed Acquisition Unlikely to Substantially Lessen
Competition (Dec. 20, 2007), https://www.ftc.gov/news-events/news/press-releases/2007/
12/federal-trade-commission-closes-googledoubleclick-investigation. Google in acquiring the
leading publisher ad server DoubleClick solidified its control over the online advertising
industry. As the federal and state antitrust enforcers alleged in their 2023 monopolization
complaint against Google, the “DoubleClick acquisition vaulted Google into a commanding
position over the tools publishers use to sell advertising opportunities,” and “set the stage for
Google’s later exclusionary conduct across the ad tech industry.” Complaint ¶ 16, United
States v. Google, No. 1:23-cv-00108 (E.D. Va. Jan. 24, 2023). The acquisition also harmed
privacy, when Google reversed its commitment to “not combine the data collected on internet
users via DoubleClick with the data collected throughout Google’s ecosystem” and
“subsequently combined DoubleClick data with personal information collected through other
Google services—effectively combining information from a user’s personal identity with their
location on Google Maps, information from Gmail, and their search history, along with
information from numerous other Google products.” S
TAFF OF H. COMM. ON THE
JUDICIARY, SUBCOMM. ON ANTITRUST, COMMERCIAL AND ADMINISTRATIVE LAW, 117TH
CONG., REP. AND RECOMMENDATIONS: INVESTIGATION OF COMPETITION IN DIGITAL
MARKETS 210–11 (2020), https://permanent.fdlp.gov/gpo145949/competitionindigitalmark
ets.pdf [hereinafter House Report].
44. Chopra & Khan, supra note 23, at 365.
45. F
ED. TRADE COMM’N, STATEMENT OF ENFORCEMENT PRINCIPLES REGARDING
“UNFAIR METHODS OF COMPETITION” UNDER SECTION 5 OF THE FTC ACT (2015), https://
www.ftc.gov/system/files/documents/public_statements/735201/150813section5enforcem
ent.pdf (hereinafter FTC 2015 Statement) (stating that an “act or practice will be evaluated
under a framework similar to the rule of reason, that is, an act or practice challenged by the
Commission must cause, or be likely to cause, harm to competition or the competitive process,
taking into account any associated cognizable efficiencies and business justifications”);
Vaheesan, supra note 41, at 650–51 (“In articulating this narrow interpretation of Section 5,
the FTC contradicted Congress’s political economic vision in 1914, which sought to prevent
not only short-term injuries to consumers, but also exclusionary practices by large businesses
and the accumulation of private political power. And in making the rule of reason the
centerpiece of its analytical framework, the FTC adopted a convoluted test that cannot
advance the Congressional vision underlying Section 5.”). For criticisms of the Court’s rule of
reason standard, see Maurice E. Stucke, Does the Rule of Reason Violate the Rule of Law?, 42 U.C.
DAVIS L. REV. 1375 (2009) (collecting criticisms).
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standard—rule of reason—that Congress rebuked in setting up the agency.
Moreover, the Commission said it would “be guided by the public policy
underlying the antitrust laws, namely, the promotion of consumer welfare.”
46
As Part IV examines, the highly questionable consumer welfare standard never
came from Congress, but from the Court, and has been under attack by
scholars and enforcers. As the new FTC Chair Lina Khan noted, the FTC’s
2015 Statement “doubled down on the agency’s longstanding failure to
investigate and pursue ‘unfair methods of competition.’”
47
While the
Commission could have engaged in rule-making to delineate “unfair methods
of competition” in the digital economy, it failed to do so.
48
Rather, the 2015
Statement, observed several Commissioners, “contravene[d] the text,
structure, and history of Section 5 and largely [wrote] the FTC’s standalone
authority out of existence.”
49
C. ANTITRUST RESURGENCE
By the late 2010s, the FTC, along with other competition agencies around
the world, changed course. The evidence compiled by competition authorities
in Europe, Australia, and Japan all pointed to the unfairness and lack of
contestability plaguing the digital economy.
50
The DOJ and FTC (along with a
bipartisan coalition of state attorneys general) brought the first
monopolization cases against the data-opolies since the 1990s case against
Microsoft.
51
In 2021, the Biden administration issued its Executive Order on
Promoting Competition in the American Economy. The Order noted how “a
small number of dominant internet platforms use their power to exclude
46. FTC 2015 Statement, supra note 45.
47. F
ED. TRADE COMM’N, REMARKS OF CHAIR LINA M. KHAN ON THE WITHDRAWAL
OF THE
STATEMENT OF ENFORCEMENT PRINCIPLES REGARDING “UNFAIR METHODS OF
COMPETITION” UNDER SECTION 5 OF THE FTC ACT (2021), https://www.ftc.gov/system/
files/documents/public_statements/1591506/remarks_of_chair_khan_on_the_withdrawal_
of_the_statement_of_enforcement_principles_re_umc_under.pdf [hereinafter Khan 2021
Remarks on the Withdrawal of FTC Statement].
48. Chopra & Khan, supra note 23, at 366, 366 n.39 (noting the FTC’s power to engage
in rulemaking under the Administrative Procedure Act and citing other scholars encouraging
the FTC to do so).
49. FTC
WITHDRAWAL STATEMENT, supra note 32, at 1.
50. S
TUCKE & GRUNES, supra note 7, at 32–75.
51. See Complaint, United States v. Google, 1:23-cv-00108 (E.D. Va. Jan. 24, 2023);
Complaint, United States v. Google, No. 1:20-cv-03010 (D.D.C. Oct. 20, 2020)) [hereinafter
Google Compl.]; Complaint, F.T.C. v. Facebook, No. 1:20-cv-03590-CRC (D.D.C. Dec. 9,
2020); Complaint, New York v. Facebook, No. 1:20-cv-03589-JEB (D.D.C., Dec. 9, 2020),
[hereinafter States Facebook Compl.]; Complaint, Colorado v. Google, No. 1:20-cv-03715-
APM (D.D.C. Dec. 17, 2020) [hereinafter Colo. Google Compl.]; Texas v. Google, No. 4:20-
cv-957 (E.D. Tex. Dec. 16, 2020).
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728 BERKELEY TECHNOLOGY LAW JOURNAL [Vol. 38:715
market entrants, to extract monopoly profits, and to gather intimate personal
information that they can exploit for their own advantage.”
52
The Biden
administration promised:
to enforce the antitrust laws to meet the challenges posed by new
industries and technologies, including the rise of the dominant
Internet platforms, especially as they stem from serial mergers, the
acquisition of nascent competitors, the aggregation of data, unfair
competition in attention markets, the surveillance of users, and the
presence of network effects.
53
To address these “persistent and recurrent practices that inhibit competition,”
the executive order encouraged the FTC to exercise its statutory rulemaking
authority, as appropriate and consistent with applicable law, in areas including
“unfair data collection and surveillance practices that may damage
competition, consumer autonomy, and consumer privacy.”
54
Toward that end, in 2021 the FTC withdrew its 2015 guidelines on unfair
methods of competition. As the new FTC Chair, Khan promised “to clarify
the meaning of Section 5 and apply it to today’s markets[,]” thereby fulfilling
“Congress’s directive to prohibit unfair methods of competition.”
55
In late 2021, the Commission announced possible rulemaking under § 18
of the FTC Act “to curb lax security practices, limit privacy abuses, and ensure
that algorithmic decision-making does not result in unlawful discrimination.”
56
In its 2021 report to Congress, the FTC said it should deploy all its tools to
protect Americans’ privacy “[g]iven the serious harms stemming from
surveillance practices and the absence of federal legislation.”
57
Among the
tools was its rule-making authority to prohibit unfair methods of competition.
In 2022, the FTC released the “Policy Statement Regarding the Scope of
Unfair Methods of Competition Under Section 5 of the Federal Trade
Commission Act.”
58
Relying “on the text, structure, legislative history of
52. Executive Order on Promoting Competition in the American Economy, 86 Fed.
Reg. 36987 (July 9, 2021), https://www.whitehouse.gov/briefing-room/presidential-actions/
2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/
[hereinafter Biden Executive Order].
53. Id.
54. Id.
55. Khan 2021 Remarks on the Withdrawal of FTC Statement, supra note 47, at 1–2.
56. Trade Regulation Rule on Commercial Surveillance, O
FFICE OF INFORMATION AND
REGULATORY AFFAIRS (2021), https://www.reginfo.gov/public/do/eAgendaViewRule?
pubId=202110&RIN=3084-AB69.
57. Fed. Trade Comm’n, FTC Report to Congress on Privacy and Security, 2021 WL
4698008, at *6 (F.T.C. Sept. 13, 2021).
58. 2022
FTC UMC POLICY STATEMENT, supra note 25, at 1.
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Section 5, precedent, and the FTC’s experience applying the law,” the updated
policy statement describes the “key principles” of whether conduct is an unfair
method of competition.
59
For conduct to run afoul of § 5, it must (1) implicate
competition (whether directly or indirectly); and (2) be unfair. Conduct is
unfair if it “goes beyond competition on the merits,” which the FTC
determines using the following two criteria: whether the conduct (1) is
“coercive, exploitative, collusive, abusive, deceptive, predatory, or involve[s]
the use of economic power of a similar nature,” or is otherwise restrictive or
exclusionary, depending on the circumstances; and (2) tends “to negatively
affect competitive conditions” (e.g., “conduct that tends to foreclose or impair
the opportunities of market participants, reduce competition between rivals,
limit choice, or otherwise harm consumers”).
60
Consequently, the FTC appears poised to use its Congressional authority
to tackle the many unfair data collection and surveillance practices that have
bedeviled the digital economy. Rather than rely on a “case-by-case approach”
to “unfair methods of competition,” which “often fails to deliver clear
guidance,” the Commission may also adopt “rules to clarify the legal limits that
apply to market participants.”
61
D. COMMON LAW
Congress intended that the term unfair methods of competition be broader than
the common law’s unfair competition. However, the common law is not static
either. Indeed, the Restatement of the Law (Third) of Unfair Competition
echoes several of the Congressional themes of the FTC Act.
First, the Restatement notes how it is “impossible to state a definitive test
for determining which methods of competition will be deemed unfair” in
addition to those well-established forms, such as deceptive marketing,
infringement of trademarks, and appropriation of intangible trade values,
including trade secrets and the right of publicity.
62
59. Id. at 1.
60. Id. at 8, 9.
61. FTC
WITHDRAWAL STATEMENT, supra note 32, at 7; see also FED. TRADE COMM’N,
STATEMENT OF COMMISSIONER ALVARO M. BEDOYA REGARDING THE COMMERCIAL
SURVEILLANCE DATA SECURITY ADVANCE NOTICE OF PROPOSED RULEMAKING (2022),
https://www.ftc.gov/system/files/ftc_gov/pdf/Bedoya%20ANPR%20Statement%20
08112022.pdf; F
ED. TRADE COMM’N, STATEMENT OF CHAIR LINA M. KHAN REGARDING
THE
COMMERCIAL SURVEILLANCE AND DATA SECURITY ADVANCE NOTICE OF PROPOSED
RULEMAKING COMMISSION (2022), https://www.ftc.gov/system/files/ftc_gov/pdf/
Statement%20of%20Chair%20Lina%20M.%20Khan%20on%20Commercial%20
Surveillance%20ANPR%2008112022.pdf.
62. RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 1, cmt. g, at 4 (AM. L. INST.
1995).
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Second, the Restatement recognizes that new types of unfair competition
will always emerge and that the courts must “continue to evaluate competitive
practices against generalized standards of fairness and social utility.”
63
Thus,
over the past few decades, neither the Restatement nor courts have limited the
term unfair competition to specific fixed categories. As the Restatement states,
“[a] primary purpose of the law of unfair competition is the identification and
redress of business practices that hinder rather than promote the efficient
operation of the market.”
64
Third, like the FTC Act, the Restatement’s discussion of the common law
of unfair practices “contemplates a fluid, ‘residual rule of liability’ for unfair
practices that defies a definitive test.”
65
Thus, both sets of law are open-ended,
rather than closed, legal frameworks. Courts recognize a residual catch-all
category of unfair competition, where it can strike down an act or practice that
“substantially interferes with the ability of others to compete on the merits of
their products or otherwise conflicts with accepted principles of public policy
recognized by statute or common law.”
66
As one Pennsylvania state court noted,
Those in business need to be assured that competitors will not be
permitted to engage in conduct which falls below the minimum
standard of fair dealing. Thus, the doctrine of unfair competition
63. Id.
64. Id.; see also Paccar Inc. v. Elliot Wilson Capitol Trucks LLC, 905 F. Supp. 2d 675, 692
(D. Md. 2012) (noting “the general view of the necessarily flexible contour of the unfair
competition tort in changing business environment”); Warner Lambert Co. v. Purepac Pharm.
Co., No. CIV.A. 00-02053(JCL), 2000 WL 34213890, at *10 (D.N.J. Dec. 22, 2000) (rejecting
the argument that the state’s caselaw narrows the scope of unfair competition claims, and
noting how “The Restatement (Third) of Unfair Competition suggests a broad range of unfair
competition claims”).
65. Synthes, Inc. v. Emerge Med., Inc., No. CIV.A. 11-1566, 2014 WL 2616824, at *25
(E.D. Pa. June 11, 2014) (quoting Envtl. Tectonics Corp. v. Walt Disney World Co., No.
Civ.A. 05–6412, 2008 WL 821065, at *16 (E.D. Pa. Mar. 26, 2008)).
66. R
ESTATEMENT (THIRD) OF UNFAIR COMPETITION § 1, cmt. g, at 4 (AM. LAW. INST.
1995). See, e.g., Energy Consumption Auditing Servs., LLC v. Brightergy, LLC, 49 F. Supp. 3d
890, 899 (D. Kan. 2014) (quoting Restatement § 1 cmt. g); New Mexico Oncology &
Hematology Consultants, Ltd. v. Presbyterian Healthcare Servs., 54 F. Supp. 3d 1189, 1233
(D.N.M. 2014); Sales Res., Inc. v. All. Foods, Inc., No. 4:08CV0732 TCM, 2009 WL 2382365,
at *7 (E.D. Mo. July 30, 2009) (denying motion to dismiss and leaving it to the fact-finder “to
determine if [Alliance’s] behavior violated society’s notions of fair play and fundamental
fairness”); ID Sec. Sys. Canada, Inc. v. Checkpoint Sys., Inc., 249 F. Supp. 2d 622, 688 (E.D.
Pa.), amended, 268 F. Supp. 2d 448 (E.D. Pa. 2003); Tension Envelope Corp. v. JBM Envelope
Co., No. 14-567-CV-W-FJG, 2015 WL 893242, at *10 (W.D. Mo. Mar. 3, 2015) (finding that
complaint’s allegations, while not precisely fitting into any of the traditional categories of
liability for unfair methods of competition, could fit into the Restatement’s residual category),
aff’d, 876 F.3d 1112 (8th Cir. 2017).
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provides the legal basis for business competitors to insist on fair play
in the market in which they are involved . . . What constitutes unfair
competition as opposed to fair competition is predicated in the
balance to be struck between the public’s interest in free competition
and the protectable interests of the business person and the
purchaser. The question of unfairness in competition is primarily a
question of fact.
67
As the Restatement notes, “courts have generally been reluctant to
interfere in the competitive process.”
68
Yet, courts will interfere when the act
or practice “substantially interferes with the ability of others to compete on
the merits of their products or otherwise conflicts with accepted principles of
public policy recognized by statute or common law.”
69
Consequently, both the common law and FTC Act recognize the futility
of stating a definitive test for determining all unfair practices or confining
unfair methods to a few well-established categories. Invariably new forms of
unfair practices will emerge that may not violate the existing standard but
offend general principles of “honesty and fair dealing, rules of fair play and
good conscience, and the morality of the marketplace.”
70
Thus, the common
law can provide another important avenue, besides the FTC Act, to target
unfair data collection and surveillance practices that harm our privacy,
autonomy, and well-being.
III. TAXONOMY OF UNFAIR METHODS OF COMPETITION
As we saw, Biden’s executive order encouraged the FTC to exercise its
statutory rulemaking authority to target “unfair data collection and surveillance
practices that may damage competition, consumer autonomy, and consumer
privacy.”
71
The order also encourages the FTC to exercise its rulemaking
authority “as appropriate and consistent with applicable law.”
72
So, where does
the FTC begin? One approach is to consider whether any of the “unfair data
collection and surveillance practices” fall within the existing categories of
unfair methods of competition. For example, does the data-opolies’ use of
dark patterns fall within any established category? How about the collection of
too much data beyond what is necessary to provide the requested service?
67. Lakeview Ambulance & Med. Servs., Inc. v. Gold Cross Ambulance & Med. Servs.,
Inc., No. 1994-2166, 1995 WL 842000, at *2 (Pa. Com. Pl. Oct. 18, 1995).
68. R
ESTATEMENT (THIRD) OF UNFAIR COMPETITION § 1, cmt. g, at 4 (AM. LAW. INST.
1995).
69. Id.
70. Id.
71. Biden Executive Order, supra note 52, at § 5(h).
72. Id.
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What about when the data-opoly acquires a nascent competitive threat that
provides better privacy protection, such as Facebook’s acquisition of
WhatsApp?
Given the discussion in Part II, it may seem fruitless and self-defeating to
provide a taxonomy of all unfair methods of competition, especially when
Congress never intended to “confine the forbidden methods to fixed and
unyielding categories.” How can one classify something which, beyond a very
broad level, is not classifiable? Nor will any taxonomy ever be definitive, as
new forms and categories of unfair methods will inevitably arise.
Another risk is that any taxonomy, besides being underinclusive, can also
be overinclusive. As Congress noted,
It is also practically impossible to define unfair practices so that the
definition will fit business of every sort in every part of this country.
Whether competition is unfair or not generally depends upon the
surrounding circumstances of the particular case. What is harmful
under certain circumstances may be beneficial under different
circumstances.
73
So, should one forget about taxonomies, and simply ask whether particular
data collection practices and surveillance techniques are unfair methods of
competition? After all, the digital economy presents unique challenges, and
jurisdictions like the European Union, United Kingdom, Australia, South
Korea, and Germany are updating their competition and privacy laws to deter
these practices.
Although one can start afresh, the aim of both the common law and FTC
Act is to deter recurring, objectionable practices, while being sufficiently
supple to reach new forms of conduct that violate generalized standards of
unfairness, social utility, and the unexpressed standards of fair dealing which
the conscience of the community may progressively develop. Thus, there is
some utility in providing a taxonomy of the types of business practices that
will likely (but not always) be deemed unfair, while acknowledging the need to
continuously develop new categories to capture humans’ ingenuity to devise
new forms of competitive behavior that run counter to the public interest.
With these important limitations in mind, this Part assesses whether any
of the unfair data collection and surveillance practices fall within five of the
more well-established categories of unfair methods of competition. As there
are many different types of unfair data collection and surveillance practices,
not all of them will fall neatly into these existing five categories. But that is to
73. F.T.C. v. R. F. Keppel & Bro., Inc., 291 U.S. 304, 312 n.2 (1934) (quoting H. Rep.
No. 1142, 63d Congress, 2d Sess., at 19 (1914)).
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be expected. Where there are matches, however, the enforcement or
rulemaking should be more straightforward, as prohibiting those practices is
well within the FTC’s authority.
A. CONDUCT THAT VIOLATES FEDERAL OR STATE STATUTES,
INCLUDING THE FEDERAL ANTITRUST LAWS, AND COMMON LAW OF
UNFAIR COMPETITION
It is axiomatic that companies cannot gain market power by resorting to
otherwise illegal conduct. The law specifically puts these methods of
competition off-limits. Moreover, Congress intended that unfair methods of
competition include, but are not limited to, violations of common law unfair
practices and the Sherman and Clayton Acts.
74
Thus, if a competitor harms the
commercial relations of a rival by engaging in practices that violate federal or
state statutes, it has engaged in unfair competition.
75
This includes otherwise
intentional tortious conduct, such as threats of violence, product
disparagement, bribery, and commercial defamation. The courts also
recognized several specific categories of commercial behavior that give rise to
a claim of unfair competition under common law, including (1) infringement
of trademark and other protectable intellectual property rights and (2)
misappropriation of trade secrets and other intangible trade values.
76
Companies that resort to these practices to gain market power violate § 5’s
unfair methods of competition. Moreover, if the conduct is illegal under the
Sherman or Clayton Act, it also constitutes an unfair method of competition.
77
Consequently, the FTC could prohibit all unfair data collection and
surveillance practices that otherwise violate federal antitrust laws. One
problem is that the Supreme Court has gradually displaced its per se illegal
standard with its more fact-intensive legal standard, namely the rule of
reason.
78
Thus, it is hard to identify which unfair data collection and
surveillance practices violate the federal antitrust laws without engaging in the
rule of reason inquiry that the rulemaking seeks to avoid. Indeed, it would
74. F.T.C. v. Motion Picture Advert. Serv. Co., 344 U.S. 392, 394 (1953) (noting how
unfair methods of competition, which are condemned by § 5(a) of the FTC Act, “are not
confined to those that were illegal at common law or that were condemned by the Sherman
Act”); 2022 FTC UMC Policy Statement, supra note 25, at 3.
75. R
ESTATEMENT (THIRD) OF UNFAIR COMPETITION § 1, cmt. g, at 4 (AM. LAW. INST.
1995).
76. Synthes (U.S.A.) v. Globus Med., Inc., No. CIV.A. 04-CV-1235, 2005 WL 2233441,
at *8 (E.D. Pa. Sept. 14, 2005) (citing R
ESTATEMENT (THIRD) OF UNFAIR COMPETITION § 1,
cmt. g, at § 1 (A
M. LAW INST. 1995)).
77. F.T.C. v. Cement Inst., 333 U.S. 683, 690 (1948); 2022
FTC UMC POLICY
STATEMENT, supra note 25, at 12; Averitt, supra note 33, at 238–42.
78. See Stucke, Rule of Reason, supra note 45.
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require applying the legal standard that Congress sought to avoid in creating
the FTC.
One area subject to rulemaking is where companies collude on privacy
protections. Just as price fixing remains per se illegal,
79
so too would
agreements among rivals on other important non-price parameters of
competition, such as privacy protections. Arguably, companies might need to
agree on privacy protection to promote interoperability and the flow of data.
But if companies agree to degrade privacy protections, even when the
companies are in no position to control the market, that should be prohibited.
B. INCIPIENT MENACES TO FREE COMPETITION
Unfair methods of competition extend well beyond otherwise illegal
conduct. So, the next group of practices is “against public policy because of
their dangerous tendency unduly to hinder competition or create a
monopoly.”
80
Thus, one major purpose of the FTC Act was to enable the FTC
“to restrain practices as ‘unfair’ which, although not yet having grown into
Sherman Act dimensions would . . . most likely do so if left unrestrained.”
81
The FTC was expected “to stop at the threshold” any practice, which “if left
alone, ‘destroys competition and establishes monopoly.’”
82
The chief sponsor
of the FTC Act said § 5 would “have such an elastic character that it [would]
meet every new condition and every new practice that may be invented with a
view to gradually bringing about monopoly through unfair competition.”
83
Congress left it to the FTC and courts “to determine what conduct, even
though it might then be short of a Sherman Act violation, was an ‘unfair
method of competition.’”
84
Senator Newlands noted how “[t]here are
numerous practices tending toward monopoly that may not come within the
provisions of the antitrust law and amount to a monopoly or to
monopolization. We want to check monopoly in the embryo.”
85
79. United States v. Socony-Vacuum Oil Co. Inc., 310 U.S. 150, 221 (1940).
80. Cement Inst., 333 U.S. at 690 (quoting F.T.C. v. Gratz, 253 U.S. 421, 427 (1920)); see
also F.T.C. v. Motion Picture Advert. Serv. Co., 344 U.S. 392, 394–95 (1953) (noting that the
FTC Act “was designed to supplement and bolster the Sherman Act and the Clayton Act . . .
to stop in their incipiency acts and practices which, when full blown, would violate those
Acts”).
81. Cement Inst., 333 U.S. at 708.
82. Id. at 720 (quoting F.T.C. v. Raladam Co., 283 U.S. 643, 647 (1931)).
83. Chopra & Khan, supra note 23, at 379 (quoting Federal Trade Commission Act, 63d
Cong, 2d Sess. In 51 Cong. Rec. 12024 (July 13, 1914)).
84. Cement Inst., 333 U.S. at 708.
85. Gilbert Holland Montague, Unfair Methods of Competition, 25 Y
ALE L.J. 20, 21 (1915);
51 C
ONG. REC. 13111.
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Digital markets can lead to durable oligopolies and monopolies because of
multiple network effects, the extreme scale economies, and the importance of
data. Europe’s Digital Markets Act (DMA) seeks to deter powerful companies
from tipping digital markets through unfair business practices:
A particular subset of rules should apply to those undertakings
providing core platform services for which it is foreseeable that they
will enjoy an entrenched and durable position in the near future. The
same specific features of core platform services make them prone to
tipping: once an undertaking providing the service has obtained a
certain advantage over rivals or potential challengers in terms of
scale or intermediation power, its position could become
unassailable and the situation could evolve to the point that it is likely
to become durable and entrenched in the near future. Undertakings
can try to induce this tipping and emerge as gatekeeper by using
some of the unfair conditions and practices regulated under this
Regulation. In such a situation, it appears appropriate to intervene
before the market tips irreversibly.
86
Thus, both the DMA and FTC Act contain an incipiency standard that seeks
to check monopoly in its infancy. It makes no sense to require the FTC to wait
for markets in the digital economy to tip when Congress empowered the
agency to reach unfair methods of competition before these practices
hampered competition and enabled the leading platforms to capture the
market.
87
One interesting aspect is how the FTC Act would arrest incipient
violations of the Clayton Act, which contains an incipiency standard.
88
As Neil
W. Averitt
observed, the FTC Act would permit “a theory of ‘incipient
incipiency.’”
89
86. DMA, supra note 7, ¶ 26.
87. F.T.C. v. Motion Picture Advert. Serv. Co., 344 U.S. 392, 394–95 (1953) (noting that
enforcement of the FTC Act was “designed to supplement and bolster the Sherman Act and
the Clayton Act . . .to stop in their incipiency acts and practices which, when full blown, would
violate those Acts . . . as well as to condemn as ‘unfair method of competition’ existing
violations of them”); Averitt, supra note 33, at 242 (noting the legislative history in support of
this goal); 2022
FTC UMC POLICY STATEMENT, supra note 25, at 4, 9.
88. See, e.g., Clayton Antitrust Act of 1914 § 3, 15 U.S.C. § 14 (prohibiting the sale of
goods on the condition that the purchaser thereof shall not use or deal in the goods of a
competitor where the effect of such restraint “may be to substantially lessen competition or
tend to create a monopoly in any line of commerce”); Clayton Antitrust Act of 1914 § 7, 15
U.S.C. § 18 (prohibiting mergers and acquisitions that may substantially lessen competition, or
tend to create a monopoly).
89. Averitt, supra note 33, at 246.
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The Supreme Court recognized this incipient incipiency in F.T.C. v. Brown
Shoe Co., Inc.
90
Brown Shoe, the second-largest shoe manufacturer in the United
States, paid hundreds of retail shoe stores to contractually promise to deal
primarily with Brown and not purchase conflicting lines of shoes from
Brown’s competitors. The Court held that the FTC “acted well within its
authority in declaring the Brown franchise program unfair whether it was
completely full blown or not.”
91
The FTC did not have to prove that Brown’s
franchise program violated the Clayton Act (namely, that the program’s effect
“may be to substantially lessen competition or tend to create a monopoly”).
As the Court noted, the FTC has the power under § 5 to arrest trade restraints
in their incipiency without having to prove that the restraints violate the
Clayton Act or other antitrust laws.
92
Europe’s Digital Markets Act identifies many anticompetitive actions that
the leading platforms may use to tip the markets in their favor. Once
entrenched, the powerful gatekeeper may still rely on some of these
anticompetitive practices to maintain their dominance or leverage it to other
markets. Thus, the Act seeks to complement the E.U. antitrust laws to
promote contestable and fair digital markets.
The United States has several bills that will impose some of these
obligations on these gatekeepers, as well as more stringent requirements.
93
But
90. 384 U.S. 316, 320 (1966).
91. Id. at 322.
92. Id.; see also 2022
FTC UMC POLICY STATEMENT, supra note 25, at 9–10 (“Because the
Section 5 analysis is purposely focused on incipient threats to competitive conditions, this
inquiry does not turn to whether the conduct directly caused actual harm in the specific
instance at issue. Instead, the second part of the principle examines whether the respondent’s
conduct has a tendency to generate negative consequences . . .”).
93. These include (i) the Augmenting Compatibility and Competition by Enabling
Service Switching (ACCESS) Act of 2021, H.R. 3849 (which gives the FTC new authority and
enforcement tools to establish pro-competitive rules for interoperability and data portability
online); (ii) the Platform Competition and Opportunity Act of 2021, H.R. 3849 (which
prohibits the largest online platforms from engaging in mergers that would eliminate
competitors, or potential competitors, or that would serve to enhance or reinforce monopoly
power) (the Senate introduced its own similar version of Platform Competition and
Opportunity Act of 2021); (iii) the American Choice and Innovation Online Act, H.R. 3816
(which seeks to restores competition online and ensures that digital markets are fair and open
by preventing dominant online platforms from using their market power to pick winners and
losers, favor their own products, or otherwise distort the marketplace through abusive conduct
online) (the Senate introduced a slightly different version of its American Innovation and
Choice Online Act, with different categories of offenses and defenses); (iv) the Ending
Platform Monopolies Act, H.R. 3825 (which authorizes the FTC and DOJ to take action
prevent dominant online platforms from leveraging their monopoly power to distort or
destroy competition in markets that rely on that platform); (v) Prohibiting Anti-competitive
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the FTC can also use its enforcement and rulemaking authority to impose
obligations—similar to those in Articles 5 and 6 of the Digital Markets Act—
to prevent firms from resorting to these anticompetitive practices.
Here the data-opolies’ anticompetitive actions to willfully attain or
maintain their monopolies can harm individuals’ privacy. For example, the
Colorado-led states allege in their monopolization complaint against Google
that “[i]n a more competitive market, Google’s search-related monopolies
could be challenged or even replaced by new forms of information discovery,”
including rival general search engines offering “improved privacy” and
“advertising-free search.”
94
However, Google’s exclusionary anticompetitive
practices foreclosed these privacy-friendly rivals and helped Google maintain
its dominance (and ability to extract even more personal data).
Another example is what we call the nowcasting radar.
95
A lot of data flows
through the data-opolies’ ecosystems, including: (1) commercially sensitive
data from app developers, merchants, and businesses who advertise on their
platforms; and (2) our personal data, such as our activity on apps and the
products and services we buy online. From this data, data-opolies can see how
and where we spend our time, identify trends, and target any potential threats
to their business model or power early on. The internal corporate documents
uncovered by Congress in its investigation of Big Tech show how these data-
opolies use this data to provide themselves multiple competitive advantages.
96
To check monopoly at the door, the FTC can challenge as unfair methods
of competition both the use of this nowcasting radar and actions taken as a
result.
Mergers Act of 2022 (which both the House and Senate introduced versions); and (vi) the
Open App Markets Act (where both the House and Senate have introduced similar versions).
94. Colo. Google Compl., supra note 51, ¶ 16.
95. S
TUCKE & GRUNES, supra note 7, at 285–87; EZRACHI & STUCKE, supra note 7, at
43–44.
96. S
TUCKE, supra note 7, at 33–37. One way is the data-opoly’s use of its business users’
non-public data to compete against them, such as Amazon’s use of non-public data of its
third-party sellers to compete against them (by, among other things, cloning their products).
To deter that, Article 6(1) of the Digital Markets Act provides that gatekeepers “shall not use,
in competition with business users, any data that is not publicly available that is generated or
provided by those business users in the context of their use of the relevant core platform
services or of the services provided together with, or in support of, the relevant core platform
services, including data generated or provided by the end users of those business users.” This
is also an unfair trade practice under the common law. See R
ESTATEMENT (THIRD) OF UNFAIR
COMPETITION § 1, cmt. g, at 10 (AM. LAW INST. 1995) (noting how “[a] competitor who
diverts business from another . . . through the wrongful use of confidential information” may
be liable even if its conduct is not deceptive or the information is not a trade secret).
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One way the data-opolies attain, maintain, and extend their power is
through acquisitions. The acquisition strategy helps the data-opoly maintain its
dominance in at least five ways:
First, it extinguishes the competitive threat and widens the protective
moat around the data-opoly.
97
Second, in acquiring a maverick, the data-opoly keeps these threats
“out of the hands of other firms that are well-positioned to use them
to compete,” including another data-opoly.
98
Third, the acquisition prevents competitors or potential competitors
“from having access to next generation technology that might
threaten” the data-opoly.
99
Fourth, the acquisitions can create “kill zones” by chilling other firms’
incentives to enter or invest in that particular space.
100
Fifth, the acquisitions enable data-opolies to use network effects
offensively and deprive rivals of gaining scale.
101
97. HOUSE REPORT, supra note 43, at 150 (noting how Facebook’s “internal documents
indicate that the company acquired firms it viewed as competitive threats to protect and
expand its dominance in the social networking market” and how “Facebook’s senior
executives described the company’s mergers and acquisitions strategy in 2014 as a ‘land grab’
to ‘shore up our position’”).
98. States Facebook Compl., supra note 51, ¶ 185.
99. Id.
100. E
ZRACHI & STUCKE, supra note 7, at 86–90; HOUSE REPORT, supra note 43, at 49
(noting study “that in the wake of an acquisition by Facebook or Google, investments in
startups in the same space ‘drop by over 40% and the number of deals falls by over 20% in
the three years following an acquisition’”) (quoting Raghuram Rajan, Sai Krishna Kamepalli,
& Luigi Zingales, Kill Zone, U
NIV. CHI. BECKER FRIEDMAN INST. ECON., WORKING PAPER
NO. 2020-19, https://ssrn.com/abstract=3555915); see also Ufuk Akcigit, Wenjie Chen,
Federico J. Díez, Romain Duval, Philipp Engler, Jiayue Fan, Chiara Maggi, Marina M. Tavares,
Daniel Schwarz, Ippei Shibata & Carolina Villegas-Sánchez, Rising Corporate Market Power:
Emerging Policy Issues, 2021
INT’L MONETARY FUND STAFF DISCUSSION NOTE 1, 7 (Mar. 2021),
https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2021/03/10/Rising-
Corporate-Market-Power-Emerging-Policy-Issues-48619 (“M&As by dominant firms are
associated with lower business dynamism at the industry level, with acquiring firms increasing
their market power following the transaction and competitors’ growth and research and
development taking a hit.”).
101. H
OUSE REPORT, supra note 43, at 144. Facebook’s CEO told the company’s Chief
Financial Officer in 2012 that network effects and winner-take-all markets were a motivating
factor in acquiring competitive threats like Instagram and stressed the competitive significance
of having a first-mover advantage in terms of network effects in acquiring WhatsApp. In the
context of market strategies for competing with the then independent startup WhatsApp, Mr.
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Privacy can also suffer when a data-opoly acquires a nascent competitive
threat that offers better privacy protections, such as Facebook’s acquisition of
WhatsApp. The FTC can challenge these acquisitions under the Sherman and
Clayton Acts and as an unfair method of competition.
102
However, it has been
very challenging for the antitrust agencies to prove that these data-driven
mergers violate their country’s merger law. Every jurisdiction that has studied
these digital platform markets has called for greater antitrust scrutiny of these
data-driven and platform-related mergers and acquisitions. The problem is that
some courts expect the competition agencies to prove these mergers’ harm
with high degrees of precision.
103
As a result, policymakers have proposed
legislative changes to the legal standard for reviewing these mergers.
104
The
DOJ and FTC in 2023 released for public comment their draft merger
guidelines, which included presumptions that certain transactions are
anticompetitive, threats to potential and nascent competition, and the unique
characteristics of digital markets.
105
The FTC could try to prevent the data-opolies from using the data flowing
through their ecosystem to identify nascent competitive threats, which they
then acquire. But enforcing this restriction can be difficult. Facebook could
still use its nowcasting radar to identify the next WhatsApp but offer a more
innocuous justification for its acquisition.
Zuckerberg told the company’s growth and product management teams that “being first is
how you build a brand and a network effect.” Id.
102. See, e.g., Amended Complaint at ¶ 241, F.T.C. v. Facebook, Case 1:20-cv-03590-JEB
(D.D.C. Aug. 19, 2021) (challenging Facebook’s anticompetitive acquisitions of Instagram and
WhatsApp as violations “of Section 2 of the Sherman Act, 15 U.S.C. § 2, and thus unfair
methods of competition in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a)”).
103. See E
ZRACHI & STUCKE, supra note 7, at 161–80.
104. See, e.g., The Platform Competition and Opportunity Act of 2021, H.R. 3826, 117th
Cong. (1st Sess. 2021) (prohibiting the largest online platforms from engaging in mergers that
would eliminate competitors, or potential competitors, or that would serve to enhance or
reinforce monopoly power); The Competition and Antitrust Law Enforcement Reform Act
of 2021, S. 225, 117th Cong. (1st Sess. 2021); H
OUSE REPORT, supra note 43, at 396–97
(recommending that “Congress explore presumptions involving vertical mergers, such as a
presumption that vertical mergers are anticompetitive when either of the merging parties is a
dominant firm operating in a concentrated market, or presumptions relating to input
foreclosure and customer foreclosure”); F
ED. TRADE COMM’N, STATEMENT OF CHAIR LINA
M. KHAN, COMMISSIONER ROHIT CHOPRA, AND COMMISSIONER REBECCA KELLY
SLAUGHTER ON THE WITHDRAWAL OF THE VERTICAL MERGER GUIDELINES (2021), https://
www.ftc.gov/system/files/documents/public_statements/1596396/statement_of_chair_
lina_m_khan_commissioner_rohit_chopra_and_commissioner_rebecca_kelly_slaughter_
on.pdf.
105. DOJ & FTC, Draft Merger Guidelines (July 19, 2023), https://www.justice.gov/atr/
d9/2023-draft-merger-guidelines.
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To prevent this circumvention, the FTC could create a presumption
against acquisitions by dominant firms of: (1) startups, particularly those that
“serve as direct competitors, as well as those operating in adjacent or related
markets”;
106
and (2) data-driven mergers, where the data may help the firm
attain, maintain, or leverage its significant market power. Fundamentally, “any
acquisition by a dominant platform would be presumed anticompetitive unless
the merging parties could show that the transaction was necessary for serving
the public interest and that similar benefits could not be achieved through
internal growth and expansion.”
107
This presumption would fit well within the broader incipiency standard for
unfair methods of competition. The FTC could also limit the data-opolies
from using the “near-perfect market intelligence” offensively (to favor their
products, services, and apps, and to disadvantage competing products and
services) and defensively (to identify and acquire potential nascent competitive
threats).
Here, the regulations would improve privacy both directly and indirectly:
directly, by preventing data-driven mergers, where the data-opoly learns even
more about individuals (such as when Google acquired the smartwatch
manufacturer Fitbit); and indirectly, by improving the survival odds of nascent
competitive threats that offer better privacy protections (such as WhatsApp).
Data-opolies could no longer acquire these threats; nor could they kill these
threats as easily as now when the FTC imposes obligations similar to those
under the DMA on these powerful gatekeepers.
C. MONOPOLISTIC BEHAVIOR
As the Supreme Court noted, “[e]ver since Congress overwhelmingly
passed and President Benjamin Harrison signed the Sherman Act in 1890,
protecting consumers from monopoly prices has been the central concern of
antitrust.”
108
So Apple could be liable under the Sherman Act for using its
monopoly power over the retail apps market to charge individuals higher-than-
competitive prices.
109
Yet in other cases, the Court opined that charging
monopolistic prices is legal under the Sherman Act.
110
Regardless, the FTC
106. See HOUSE REPORT, supra note 43, at 396.
107. See id. at 389.
108. Apple Inc. v. Pepper, 139 S. Ct. 1514, 1525 (2019) (internal quotation omitted).
109. Id.
110. Pac. Bell Tel. Co. v. linkLine Comm’ns, Inc., 555 U.S. 438, 454 (2009) (“[A]ntitrust
law does not prohibit lawfully obtained monopolies from charging monopoly prices.”); see also
Verizon Comm’ns Inc. v. L. Offs. of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004) (“The
mere possession of monopoly power, and the concomitant charging of monopoly prices, is
not only not unlawful; it is an important element of the free-market system.”).
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could challenge under the broader “unfair method of competition” the
excessive extraction of data itself.
111
One issue is when a data-opoly exploits its dominance by collecting too
much data. When a data-opoly’s business model depends on harvesting and
exploiting personal data, its incentives change. It will reduce privacy
protections below competitive levels and collect personal data above
competitive levels.
112
Consequently, policymakers increasingly recognize that
companies can compete on privacy and protecting data.
113
The collection of
111. See, e.g., 2022 FTC UMC POLICY STATEMENT, supra note 25, at 9 (unfair methods of
competition reach, inter alia, coercive, exploitative, and abusive conduct).
112. H
OUSE REPORT, supra note 43, at 18 (noting that “in the absence of adequate privacy
guardrails in the United States, the persistent collection and misuse of consumer data is an
indicator of market power online” and “[i]n the absence of genuine competitive threats,
dominant firms offer fewer privacy protections than they otherwise would, and the quality of
these services has deteriorated over time”); id. at 51 (noting how the “best evidence of platform
market power” is “not prices charged but rather the degree to which platforms have eroded
consumer privacy without prompting a response from the market”); UK
COMPETITION &
MARKETS AUTHORITY, ONLINE PLATFORMS AND DIGITAL ADVERTISING MARKET STUDY:
MARKET STUDY FINAL REPORT ¶¶ 2.84, 3.151 (July 1, 2020), https://assets.publishing.
service.gov.uk/media/5fa557668fa8f5788db46efc/Final_report_Digital_ALT_TEXT.pdf
[hereinafter CMA
FINAL REPORT]; see also AUSTRALIAN COMPETITION AND CONSUMER
COMMISSION, DIGITAL PLATFORMS INQUIRY—FINAL REPORT 374 (2019), https://www.
accc.gov.au/publications/digital-platforms-inquiry-final-report [hereinafter ACCC
FINAL
REPORT]; Google Compl., supra note 51, ¶ 167 (alleging that by “restricting competition in
general search services, Google’s conduct has harmed consumers by reducing the quality of
general search services (including dimensions such as privacy, data protection, and use of
consumer data”)); Colo. Google Compl., supra note 51, ¶ 98 (alleging that “Google collects
more personal data about more consumers than it would in a more competitive market as a
result of its exclusionary conduct, thereby artificially increasing barriers to expansion and
entry”); States Facebook Compl., supra note 51, ¶¶ 127, 177, 180 (alleging Facebook’s
degradation in privacy protection after acquiring Instagram and WhatsApp).
113. OECD Consumer Data Rights and Competition, supra note 2, ¶¶ 69, 99, 100. See, e.g.,
OECD Consumer Data Rights and Competition – Note by the European Union, ¶ 51, OECD
Doc. DAF/COMP/WD(2020)40 (June 3, 2020), https://one.oecd.org/document/DAF/
COMP/WD(2020)40/en/pdf (“Market investigations in specific cases, such as Microsoft/
LinkedIn, have further supported the view that data protection standards can be an important
parameter of competition, particularly in markets characterised by zero-price platform services
where the undertaking has an incentive to collect as much data as possible in order to better
monetise it on the other side of the platform.”); Comm’n Decision No. M.8124
(Microsoft/LinkedIn), C(2016) 8404 final, ¶ 350 (Dec. 6, 2016), https://ec.europa.eu/
competition/mergers/cases/decisions/m8124_1349_5.pdf (finding that privacy is an
important parameter of competition and driver of customer choice in the market for
professional social networks, and that Microsoft, after acquiring LinkedIn, could marginalize
competitors that offered “a greater degree of privacy protection to users than LinkedIn (or
make the entry of any such competitor more difficult)” and thus “restrict consumer choice in
relation to this important parameter of competition”); see also D
IGITAL COMPETITION EXPERT
PANEL, UNLOCKING DIGITAL COMPETITION 49 (2019), https://www.gov.uk/government/
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too much personal data can be the equivalent of charging an excessive price.
114
As the U.K. competition agency noted, “The collection and use of personal
data by Google and Facebook for personalised advertising, in many cases with
no or limited controls available to consumers, is another indication that these
platforms do not face a strong enough competitive constraint.”
115
Thus, data-
opolies exploit their market power by extracting personal data from
consumers.
Indeed, this exploitation can be far worse than when a monopoly charges
higher prices. When a monopoly demands an excessive price, consumers are
aware of this abuse of dominance. One might grumble, as many did, for
example, about Comcast’s exorbitant fee for internet access.
116
But monopoly
pricing might attract entrants eager to serve the monopoly’s dissatisfied
customers.
With a data-opoly, however, customers are typically unaware of how steep
a price they are paying in terms of the amount of data being collected and the
publications/unlocking-digital-competition-report-of-the-digital-competition-expert-panel
[hereinafter F
URMAN REPORT]; OECD Consumer Data Rights and Competition – Note by
the UK, ¶ 25 OECD Doc. DAF/COMP/WD(2020)51 (June 2, 2020), https://one.oecd.org/
document/DAF/COMP/WD(2020)51/en/pdf (noting how privacy and data protection
rights “may constitute an aspect of service quality on which firms can differentiate themselves
from their competitors” and a merger’s reduction in “privacy protection may be interpreted
as a reduction in quality”) (internal quotation and citations omitted).
114. OECD, Consumer Data Rights and Competition, supra note 113, ¶ 100; CMA
FINAL
REPORT, supra note 112, ¶ 11 (noting that “competition problems result in consumers
receiving inadequate compensation for their attention and the use of their personal data by
online platforms”); OECD, Big Data: Bringing Competition Policy to the Digital Era, Background
Note by the Secretariat, at 16–17 (OECD Doc. DAF/COMP(2016)14) (Oct. 27, 2016),
https://one.oecd.org/document/DAF/COMP(2016)14/en/pdf (“[M]arket power may be
exerted through non-price dimensions of competition, allowing companies to supply products
or services of reduced quality, to impose large amounts of advertising or even to collect,
analyze or sell excessive data from consumers”); Eleonora Ocello, Cristina Sjödin, & Anatoly
,
What’s Up with Merger Control from the Digital Sector? Lessons from the Facebook/WhatsApp
EU merger case, Competition Merger Brief,
EUROPEAN COMM’N 6 (Feb. 2015), https://
ec.europa.eu/competition/publications/cmb/2015/cmb2015_001_en.pdf (observing if a
website, post-merger, “would start requiring more personal data from users or supplying such
data to third parties as a condition for delivering its ‘free’ product” then this “could be seen as
either increasing its price or as degrading the quality of its product”).
115. CMA
FINAL REPORT, supra note 112, ¶ 6.31.
116. Bob Fernandez, Comcast Customer Gripes About Internet Surpass Those for Cable TV,
P
HILA. INQUIRER (Aug. 3, 2017), https://www.inquirer.com/philly/business/comcast/
comcast-customer-gripes-for-the-internet-surpass-those-on-tv-20170803.html (reporting that
between November 2014 and the first week of May 2017, Comcast consumers lodged 41,760
internet complaints with the FCC with 21,388 complaints regarding internet billing issues,
followed by 8,664 complaints involving downed internet or lack of availability, and 4,853
complaints about speed).
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toll it has on their privacy and well-being.
117
We simply don’t know the price.
In addition to all the other entry barriers in the digital economy (such as
network effects, data access, etc.), consumers are unaware of the extent to
which they are being exploited.
In Europe, extracting too much data, like charging an excessive price, can
be struck down as an abuse of dominance. Germany’s Bundeskartellamt, for
example, found that Facebook abused its dominant position by “collect[ing]
an almost unlimited amount of any type of user data from third party sources,
allocat[ing] these to the users’ Facebook accounts and us[ing] them for
numerous data processing processes.”
118
But successfully prosecuting this type of case in the European Union is
significantly harder than other abuse of dominance cases. It is hard to prove
when prices are excessive. Proving that the amount of data being collected is
excessive is even harder. Indeed, the challenges that Germany faced in bringing
the Facebook case led that country to update its competition laws to make it
easier to challenge dominant firms’ excessive data collection.
119
It also led
Europe to revise its Digital Markets Act to limit the collection of data against
the individual’s wishes. A gatekeeper, under the Act, cannot, without the
individual’s consent:
117. ACCC FINAL REPORT, supra note 112, at 2–3; see also FURMAN REPORT, supra note
113, at 22 (finding that many platforms operating in the attention market “provide valued
services in exchange for their users’ time and attention, while selling access to this time to
companies for targeted advertising,” but many consumers “are typically not consciously
participating in this exchange, or do not appreciate the value of the attention they are
providing”) & 23 (noting that many consumers “are not aware of the extent or value of their
data which they are providing nor do they usually read terms and conditions for online
platforms”); CMA
FINAL REPORT, supra note 112, ¶¶ 4.61–62.
118. See, e.g., Press Release, Bundeskartellamt, Bundeskartellamt prohibits Facebook from
combining user data from different sources (Feb. 7, 2019), https://www.bundeskartellamt.de/
SharedDocs/Publikation/EN/Pressemitteilungen/2019/07_02_2019_Facebook.pdf?__blob
=publicationFile&v=2.
119. See Section 19a of the German Competition Act, Gesetz zur Änderung des Gesetzes
gegen Wettbewerbsbeschränkungen für ein fokussiertes, proaktives und digitales
Wettbewerbsrecht 4.0 und anderer Bestimmungen [10th amendment to the German Act
against Restraints of Competition] (Jan. 18, 2021), https://www.bgbl.de/xaver/bgbl/
start.xav#__bgbl__%2F%2F*%5B%40attr_id%3D%27bgbl121s0002.pdf%27%5D__16806
47993821. The German competition authority applied this new power to challenge Google’s
data collection policies. See Bundeskartellamt, Press Release, Statement of Objections Issued
Against Google’s Data Processing Terms (Jan. 11, 2023), https://www.bundeskartellamt.de/
SharedDocs/Meldung/EN/Pressemitteilungen/2023/11_01_2023_Google_Data_
Processing_Terms.html.
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(a) process, for the purpose of providing online advertising services,
personal data of end users using services of third-parties that make
use of core platform services of the gatekeeper;
(b) combine personal data from the relevant core platform service
with personal data from other core platform services or from any
other services provided by the gatekeeper or with personal data from
third-party services;
(c) cross-use personal data from the relevant core platform service
in other services provided separately by the gatekeeper, including
other core platform services, and vice-versa; and
(d) sign in end users to other services of the gatekeeper in order to
combine personal data.
120
Why this amendment to the DMA? As the European Union stated, besides
degrading Europeans’ privacy, the above four practices can also give the data-
opoly an unfair competitive advantage by raising entry barriers and further
reducing the contestability of digital markets.
121
For example, requiring
individuals and business users to subscribe to, or register with, any of the
gatekeeper’s core services in order to use it, can lock-in these users, while
gathering more data from them.
122
These concerns relate to one historical
concern of unfair methods of competition, namely being “against public policy
because of their dangerous tendency unduly to hinder competition or create
monopoly.”
123
Thus, the FTC, like Germany and the European Commission, can target
these gatekeepers’ abusive data strategies, including combining personal data
across their ecosystem and from third-party sources and collecting more
personal data than what is reasonably necessary to provide the service. Not
only is the excessive data collection abusive, but it can also hinder competition.
The data-opoly can leverage the data internally to give itself an unfair
advantage over rivals. As one review of the economic literature noted, the data-
opolies can use data’s non-rivalrous nature to give themselves an additional
competitive advantage by leveraging the data internally across their many
120. DMA, supra note 7, art. 5(2).
121. Id. at ¶ 59.
122. Id. at ¶ 44 (noting how the practice enables the gatekeeper to capture and lock-in new
business users and end users “for their core platform services by ensuring that business users
cannot access one core platform service without also at least registering or creating an account
for the purposes of receiving a second core platform service,” and gives gatekeepers a potential
advantage in terms of accumulating data; since this conduct is liable to raise barriers to entry,
the Digital Markets Act prohibits it).
123. F.T.C. v. Gratz, 253 U.S. 421, 427 (1920).
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products and services, thereby increasing entry barriers.
124
Thus, leveraging the
excessive data a data-opoly collects in one market to destroy competition in
other markets qualifies as an unfair method of competition.
125
The FTC can target the following four data collection and surveillance
practices as unfair methods of competition: When the data-opoly—
(1) extracts data when individuals visit third-party apps and websites,
126
(2) extracts more data than what is reasonably necessary to provide the
product or service,
(3) uses the data for purposes unrelated to providing the immediate
service,
127
and
124. Yan Carrière-Swallow & Vikram Haksar, The Economics and Implications of Data: An
Integrated Perspective 22, I
NTERNATIONAL MONETARY FUND POLICY PAPER No. 19/16, Sept.
2019:
[W]here data appears as one of the factors of production, nonrivalry of data
gives rise to increasing returns to scale when data is combined with other
inputs. The intuition is that each unit of data can be used by all units of
other inputs simultaneously. A larger stock of complementary labor or
capital allows each unit of data to be better exploited, raising the average
product of data. An implication is that access to the same nonrival data
results in larger firms with more complementary inputs being more
productive than those with fewer inputs. This will tend to increase average
firm size in the economy and can potentially stifle competition by
representing a barrier to entry for smaller, data-poor firms.
125. See Atl. Refin. Co. v. F.T.C, 381 U.S. 360, 361 (1965) (upholding as an unfair method
of competition a sales-commission plan which was a classic example of using economic power
in one market to destroy competition in another market).
126. For example, even if we could avoid Facebook and its advertising network, Facebook
still tracks us whenever we visit the millions of websites and apps with a Facebook “Like”
button or that use “Facebook Analytics” services. Data is transmitted to Facebook when we
visit that third-party website or app, even before we see the “Like” button. The amount of
data Facebook receives is staggering. Facebook received approximately one billion events per
day from health apps alone on users, such as when someone opened the app, clicked, swiped,
or viewed certain pages, and placed items into a checkout. With all that data, Facebook
compiles some 200 “traits” attached to its 2.8 billion users’ profiles. S
TUCKE, supra note 7, at
16–17; see also Natasha Singer, GoodRx Leaked User Health Data to Facebook and Google, F.T.C.
Says, N.Y.
TIMES (Feb. 1, 2023), https://www.nytimes.com/2023/02/01/business/goodrx-
user-data-facebook-google.html.
127. See generally Press Release, European Data Protection Board, Facebook and Instagram
decisions: “Important impact on use of personal data for behavioural advertising” (Jan. 12,
2023), https://edpb.europa.eu/news/news/2023/facebook-and-instagram-decisions-
important-impact-use-personal-data-behavioural (deciding that Meta unlawfully processed
personal data for behavioral advertising and that such advertising is not necessary for the
performance of an alleged contract with Facebook and Instagram users); see also Sam
Schechner, Meta’s Targeted Ad Model Faces Restrictions in Europe: EU Privacy Regulators Say Facebook
and Instagram Shouldn’t Use Their Terms of Service to Require Users to Accept Ads Based on Their Digital
Activity, W
ALL ST. J. (Dec. 6, 2022), https://www.wsj.com/articles/metas-targeted-ad-model-
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(4) uses that data to unfairly gain a competitive position for other services
or products.
128
For example, Google Maps can collect users’ geolocation data to accurately
reflect current traffic conditions. But Google could not use the geolocation
data for behavioral advertising. Nor could Google use the personal data to
improve its other products and services, which are also subject to network
effects, like providing more relevant search results and prompting users to
review local restaurants, when such data leveraging: (1) puts data-poorer rivals,
like Yelp and TripAdvisor, at an even greater competitive disadvantage; and
(2) helps tip these other markets in the data-opolies’ favor.
D. CONDUCT THAT VIOLATES THE SPIRIT OF AN ANTITRUST LAW
Besides conduct that violates or threatens to violate the antitrust laws, the
term “unfair methods of competition” encompasses “trade practices which
conflict with the basic policies of the Sherman and Clayton Acts even though
such practices may not actually violate these laws.”
129
One example is when firms pay to be the default at critical access points
in the digital economy. Knowing that individuals generally stick with the
default option, the firm pays to be the default option to attain scale and tip the
market in its favor. For example, Google paid Apple billions of dollars over 15
years to be the default search engine on Apple products. To secure these
defaults, Google pays Apple on a “revenue share basis.”
130
This is worse than
Apple receiving a fixed sum for allowing Google to be the default. Why?
faces-restrictions-in-europe-11670335772?mod=hp_lead_pos1 (discussing the European
Union privacy ruling that Facebook Platforms Inc. shouldn’t require users to agree to
personalized ads based on their online activity).
128. For example, a dominant French electricity provider used the personal data it
collected as a regulated monopoly to compete in other unregulated markets. The competition
agency found that the monopoly improperly used its customer data “to facilitate customer
switching from regulated to unregulated offers, and to ‘win back’ customers who had switched
to competing unregulated offers.” The regulated monopoly had an unfair competitive
advantage, the competition authority found, “since no database exists that would allow
competitors to precisely locate gas consumers and know their consumption level, in order to
propose them offers that are better suited to their profile.” Press Release, Autorité de la
Concurrence, Gas Market (Sept. 9, 2014), http://www.autoritedelaconcurrence.fr/user/
standard.php?id_rub=592&id_article=2420.
129. F.T.C. v. Brown Shoe, 384 U.S. 316, 321 (1966); Fashion Originators’ Guild Of Am.
v. F.T.C., 312 U.S. 457, 463 (1941) (noting that if the purpose and practice of the defendant’s
action “runs counter to the public policy declared in the Sherman and Clayton Acts, the
Federal Trade Commission has the power to suppress it as an unfair method of competition”);
2022
FTC UMC POLICY STATEMENT, supra note 25, at 13.
130. CMA
FINAL REPORT, supra note 112, ¶ 3.107 n.132; see also Google Compl., supra
note 51, ¶¶ 47, 175, 182.
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Because the revenue sharing agreement aligns Apple’s and Google’s
incentives.
131
Under this arrangement, if you search for something on your
Safari browser, you probably use Google’s search engine. And Apple gets a
significant percentage of Google’s monopoly revenues from search
advertising. Therefore, the more people use Siri, Spotlight, or Google on the
1.4 billion Apple devices worldwide, the more personal data that Google
collects, the more advertising revenue that this data helps generates, and the
more money Apple receives as a result. And the monopoly profits are in the
billions. In 2019, Google reportedly paid Apple $12 billion under this revenue
sharing agreement, which is significant by itself and relative to Apple’s 2019
net income of $55.256 billion.
132
By 2021, the amount Google paid Apple
climbed to an estimated $15 billion.
133
Being the default on one’s mobile phone
can be more powerful since consumers are less likely to bypass the default
when dealing with a small screen.
The default deprives rivals of access to users, data, economies of scale, and
network effects. As a result, smaller, more privacy-friendly search engines
cannot grow. To see why, as more people stick with the default search engine,
the algorithm has more opportunities to learn: “[t]he greater the number of
queries a general search service receives, the quicker it is able to detect a change
in user behaviour patterns and update and improve its relevance.”
134
Its more
131. Google Compl., supra note 51, ¶ 122 (“[B]y paying Apple a portion of the monopoly
rents extracted from advertisers, Google has aligned Apple’s financial incentives with its
own.”).
132. ACCC
FINAL REPORT, supra note 113, at 10, 30 (recommending changes to search
engine and internet browser defaults so that Google provides Australian users of Android
devices with the same options being rolled out to existing Android users in Europe: the ability
to choose their default search engine and default internet browser from a number of options);
CMA
FINAL REPORT, supra note 112, ¶¶ 3.106, 89, (finding that in 2019 Google paid Apple
£1.2 billion for default positions in the United Kingdom alone, which represented over 17%
of Google’s total annual search revenues in the United Kingdom); Apple Inc., Annual Report
(Form 10-K) (Oct. 30, 2019), https://s2.q4cdn.com/470004039/files/doc_financials/2019/
ar/_10-K-2019-(As-Filed).pdf.
133. Johan Moreno, Google Estimated to Be Paying $15 Billion to Remain Default Search Engine
on Safari, F
ORBES (Aug. 27, 2021), https://www.forbes.com/sites/johanmoreno/2021/08/
27/google-estimated-to-be-paying-15-billion-to-remain-default-search-engine-on-safari/?sh=
59151e56669.
134. ICN
UNILATERAL CONDUCT WORKING GROUP, REPORT ON THE RESULTS OF THE
ICN SURVEY ON DOMINANCE/SUBSTANTIAL MARKET POWER IN DIGITAL MARKETS 28
(2020), https://www.internationalcompetitionnetwork.org/wp-content/uploads/2020/07/
UCWG-Report-on-dominance-in-digital-markets.pdf [hereinafter ICN
STUDY]; Digital
Markets Act, at ¶ 2 (among the characteristics of the core platform services are “extreme scale
economies, which often result from nearly zero marginal costs to add business users or end
users”); Comm’n Decision of 27.6.2017 (AT.39740 - Google Search (Shopping)), C(2017) 4444 final,
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relevant search results will attract others to the search engine, and the positive
feedback will continue.
This network effect is less pronounced for objective queries (such as what
is the capital of Hungary), to which DuckDuckGo or Bing can respond.
Rather, this network effect favors the dominant search engine on less common
(or tail) inquiries.
135
About 15 to 20% of queries that search engines typically
see daily are common (what search engines call “head” queries), and about 25
to 30% of the queries are uncommon (“tail”) queries.
136
As we judge a search
engine’s performance on both common and uncommon queries, the more data
a general search engine collects for rare tail queries, “the more users will
perceive it as providing them the more relevant results for all types of
queries.”
137
With more users and more tail queries, the dominant search engine
benefits from seeing what links its users click for these tail inquiries. Plus, with
other personal data on the users, including their location, the algorithm can
further improve the search results. Thus, as the U.K. competition authority
found, the smaller search engines’ “lack of comparable scale in click-and-query
data is likely to be a key factor that limits [their] ability . . . to compete with
Google.”
138
Google’s and Apple’s behavior conflicts with several basic policies of the
Sherman and Clayton Acts, which sought to preserve economic freedom and
the freedom for each business “to compete—to assert with vigor, imagination,
devotion, and ingenuity whatever economic muscle it can muster.”
139
Consequently, Google and Apple’s agreement violates the spirit, if not the
letter, of the Sherman and Clayton Acts in “completely shut[ting] out
competitors, not only from trade in which they are already engaged, but from
the opportunities to build up trade in any community where these great and
powerful combinations are operating under this system and practice.”
140
¶ 287 (June 27, 2017) , https://ec.europa.eu/competition/antitrust/cases/dec_docs/39740/
39740_14996_3.pdf [hereinafter Google Shopping case].
135. Google Shopping case, supra note 134, ¶ 288; CMA
FINAL REPORT, supra note 112,
¶ 3.27; H
OUSE REPORT, supra note 43, at 180 (noting how “in 2010, one Google employee
observed, ‘Google leads competitors. This is our bread-and-butter. Our long-tail precision is
why users continue to come to Google. Users may try the bells and whistles of Bing and other
competitors, but Google still produces the best results.’”); Colo. Google Compl., supra note
51, ¶ 91.
136. CMA
FINAL REPORT, supra note 112, ¶ 3.68.
137. ICN
STUDY, supra note 134, at 28.
138. CMA
FINAL REPORT, supra note 112, ¶ 3.79.
139. United States v. Topco Assocs., Inc., 405 U.S. 596, 610 (1972).
140. Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 10 n.15 (1984) (quoting H.R.
Rep. No. 63-627, at 13 (1914)), abrogated by Illinois Tool Works Inc. v. Indep. Ink, Inc., 547
U.S. 28, (2006).
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To promote economic freedom and make the digital economy more
contestable, the FTC could enforce or regulate along the lines of the Digital
Markets Act. To comply with § 5, the data-opoly must:
first, allow users to easily change default settings on the gatekeeper’s
operating system, virtual assistant, and web browser;
second, prompt users, when they first use that service to choose, from a
list of the service providers available; and
third, not make it unnecessarily complicated to unsubscribe from its
service.
141
Thus, individuals, not the data-opoly, would choose which search engine
would be their default.
Moreover, the FTC can promulgate regulations to promote
interoperability and data-portability to enable individuals to switch to rivals or
multi-home easily.
142
Here, the benefits to individual privacy would be indirect
but consequential in allowing more privacy-friendly alternatives to gain scale
and compete.
E. EXPLOITATIVE BEHAVIOR
As our book Competition Overdose discusses, competition, at times, can be
toxic.
143
One form of toxic competition is where companies seek to exploit,
rather than help, customers.
Our book begins with the premise that consumers are not rational profit-
maximizers with perfect willpower.
144
Many consumers rely on intuition rather
than deliberative reasoning. They succumb to the temptations of instant
gratification, misjudge the strength of their willpower, and overestimate their
ability to detect manipulation and exploitation. As anyone who has ever
overeaten, overspent, or otherwise succumbed to temptation (despite having
141. Digital Markets Act, art. 6 & ¶ 63.
142. See, e.g., Digital Markets Act ¶ 59 (to promote switching and multi-homing, requiring
gatekeepers to allow end users, as well as third parties authorized by an end user, “effective
and immediate access to the data they provided or that was generated through their activity
on the relevant core platform services of the gatekeeper,” requiring that the data “be received
in a format that can be immediately and effectively accessed and used by the end user or the
relevant third party authorized by the end user to which the data is ported,” and requiring
gatekeepers to use appropriate and high quality technical measures, such as application
programming interfaces, so that end users can freely port their data continuously and in real
time).
143. See generally M
AURICE E. STUCKE & ARIEL EZRACHI, COMPETITION OVERDOSE:
HOW FREE MARKET MYTHOLOGY TRANSFORMED US FROM CITIZEN KINGS TO MARKET
SERVANTS (2020) (identifying when competition can turn toxic, who is pushing this toxic
competition, and what we can do to minimize or avoid this toxic competition).
144. Id. at 73–74.
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the best intentions to the contrary) can confirm, few of us have the willpower
or the rationality we think we do. As a result, competition can turn toxic when:
Firms know how to identify and exploit their customers’ weaknesses;
competitors can tap into these “irrational moments” and exploit them
to their benefit.
Savvier consumers, who might know how to avoid the traps set for
them, do not protect the weaker customers (for example, when savvier
consumers benefit, to some extent, from the exploitation).
Firms profit more from exploiting their customers’ weaknesses than
from helping them.
In these markets, few, if any, “angelic” companies may come to our aid
because there is no advantage to their doing so. It may be too costly to educate
the naive customers, and even if the firms succeed, there is no assurance that
these customers, once educated, will stick with them and use their products.
Eventually, competition encourages even once-angelic companies to exploit
us.
145
Companies or managers who resist will lose business to those without
moral qualms. Rather than a race to the top, companies compete in devising
ever cleverer ways to exploit consumers’ shortcomings—the result being that
increasing competition delivers ever worse products and services to us.
Although the field of consumer protection law has developed over the past
sixty years to curb this exploitation, these practices historically were
condemned as unfair methods of competition. An early example is when candy
manufacturers encouraged gambling among children.
146
To induce purchases,
over forty candy manufacturers concealed in the wrapper the actual price for
the candy (ranging from full price to free) and other prizes. Enticed by this
element of chance, children switched away from those candy manufacturers
who did not resort to this exploitative practice to those who did.
The defendant candy manufacturers argued in the resulting lawsuit, and
the lower court agreed, that enticing children with gambling was not unfair
because rivals could always resort to the same sales method.
147
Here, any candy
manufacturer could maintain its competitive position simply by adopting this
practice.
148
Indeed, the manufacturer might benefit as gambling would likely
induce children to buy even more candy. Nor was the practice deceptive, nor
145. Id. at 78–87 (discussing drip pricing, and how Caesars Entertainment gave up on its
efforts to warn consumers of suspect resort fees and joined the race to exploit).
146. F.T.C. v. R. F. Keppel & Bro., Inc., 291 U.S. 304, 308 (1934).
147. Id.
148. F.T.C. v. Sperry & Hutchinson Co., 405 U.S. 233, 243 (1972) (noting that in Keppel it
“had no difficulty in sustaining the FTC’s conclusion that the practice was ‘unfair,’ though any
competitor could maintain his position simply by adopting the challenged practice”).
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was there any showing that any of the forty firms would monopolize the
market. Thus, the defendants argued, and the lower court concluded, that the
exploitative practice was not an unfair method of competition.
The Supreme Court disagreed. Unfair methods of competition included
practices that tend to “take unfair advantage of the public.”
149
The Court had
little difficulty condemning this practice, which was “shown to exploit
consumers, children, who [were] unable to protect themselves.”
150
As the
Court noted, a “method of competition which casts upon one’s competitors
the burden of the loss of business unless they will descend to a practice which
they are under a powerful moral compulsion not to adopt, even though it is
not criminal, was thought to involve the kind of unfairness at which the statute
was aimed.”
151
Thus, using its authority under § 5, the FTC can place guardrails on data-
collection practices that exploit consumers’ behavioral weaknesses. One area
to regulate is what’s known as dark patterns.
A dark pattern is when a company manipulates, subverts, or impairs our
autonomy, decision-making, or choices, often through our behavioral
weaknesses.
152
The subject is a hot topic among policymakers. In 2021, the
FTC brought together “researchers, legal experts, consumer advocates, and
industry professionals to examine what dark patterns are and how they might
affect consumers and the marketplace.”
153
Among the topics discussed were
“what laws, rules, and norms regulate the use of dark patterns” and “whether
additional rules, standards, or enforcement efforts are needed to protect
consumers.”
154
In late 2021, the FTC issued “a new enforcement policy
statement warning companies against deploying illegal dark patterns that trick
or trap consumers into subscription services.”
155
The policy statement focused
149. Unfair Competition at Common Law and Under the Federal Trade Commission, supra note 36,
at 331.
150. Keppel, 291 U.S. at 313.
151. Id. (emphasis added).
152. Digital Services Act, at ¶ 67 (defining dark patterns as “practices that materially
distort or impair, either on purpose or in effect, the ability of recipients of the service to make
autonomous and informed choices or decisions. Those practices can be used to persuade the
recipients of the service to engage in unwanted behaviours or into undesired decisions which
have negative consequences for them”).
153. Dark Patterns Workshop, F
ED. TRADE COMM’N (2021), https://www.ftc.gov/media/
73487.
154. FTC to Hold Virtual Workshop Exploring Digital Dark Patterns, 2021 WL 717222
(F.T.C. Feb. 24, 2021).
155. Press Release, Fed. Trade Comm’n, FTC to Ramp up Enforcement against Illegal
Dark Patterns that Trick or Trap Consumers into Subscriptions (Oct. 28, 2021), https://
www.ftc.gov/news-events/news/press-releases/2021/10/ftc-ramp-enforcement-against-
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on negative options, where companies use a consumer’s silence or inaction as
acceptance of an offer. So, a consumer, enticed by a free trial offer of animal
kingdom cards for their children, might find boxes of cards accumulating
outside their door with a hefty bill attached.
One area for the FTC to regulate is the use of dark patterns to steer
individuals away from privacy-friendly options to collect more of their data.
156
In its 2018 review, the Norwegian Consumer Council investigated how
Facebook, Microsoft, and Google deliberately manipulated privacy settings to
deter individuals from protecting their privacy.
157
These data-opolies give users
the illusion of control while making it harder for them to protect their privacy.
As the Australian Competition & Consumer Commission (ACCC) likewise
found, digital platforms “tend to understate to consumers the extent of their
data collection practices while overstating the level of consumer control over
their personal user data.”
158
Why? When we have the illusion of control, we
paradoxically are likelier to undertake greater risks in sharing our private
information. As the Norwegian Consumer Council noted, “[t]he combination
of privacy intrusive defaults and the use of dark patterns, nudge users of
Facebook and Google, and to a lesser degree Windows 10, toward the least
privacy friendly options to a degree that we consider unethical.”
159
Consumer Reports and Epic provide another example of dark patterns.
After California’s 2018 privacy statute went into effect, Californians had the
right to opt-out of the sale of their data. In response,
many companies have developed complicated and onerous opt-out
processes. Some companies ask consumers to go through several
different steps to opt out. In some cases, the opt outs are so
complicated that they have actually prevented consumers from
stopping the sale of their information.
160
illegal-dark-patterns-trick-or-trap-consumers-subscriptions; FED. TRADE COMM’N,
ENFORCEMENT POLICY STATEMENT REGARDING NEGATIVE OPTION MARKETING (2021),
https://www.ftc.gov/system/files/documents/public_statements/1598063/negative_
option_policy_statement-10-22-2021-tobureau.pdf.
156. Fact Sheet on the FTC’s Commercial Surveillance and Data Security Rulemaking, F
ED. TRADE
COMM’N (2022), https://www.ftc.gov/legal-library/browse/federal-register-notices/
commercial-surveillance-data-security-rulemaking (noting how companies are “increasingly
employ[ing] dark patterns or marketing to influence or coerce consumers into choices they
would otherwise not make, including purchases or sharing personal information”).
157. Deceived by Design, N
ORWEGIAN CONSUMER COUNCIL (Jun. 27, 2018), https://
fil.forbrukerradet.no/wp-content/uploads/2018/06/2018-06-27-deceived-by-design-
final.pdf.
158. ACCC
FINAL REPORT, supra note 112, at 23.
159. N
ORWEGIAN CONSUMER COUNCIL, supra note 157, at 3.
160. CR/Epic Report, supra note 14, at 23.
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Thus, companies seek an advantage over rivals by designing privacy out of
their system and nudging us “to make privacy-intrusive selections by appealing
to certain psychological or behavioural biases, using design features such as
privacy-intrusive defaults or pre-selections.”
161
As the influential House Report
on the digital economy noted, “[t]here appears to be a substantial market
failure where dark patterns are concerned—what is good for e-commerce
profits is bad for consumers.”
162
Some policymakers have already taken steps to prevent these exploitative
practices. In a first for any statute, the California Privacy Rights Act of 2020
states that any agreement “obtained through the use of dark patterns does not
constitute consent.”
163
California also promulgated regulations prohibiting
businesses from using “a method that is designed with the purpose or has the
substantial effect of subverting or impairing a consumer’s choice to opt-
out.”
164
Europe’s Digital Markets Act obligates gatekeepers not to “design,
organise or operate their online interfaces in a way that deceives, manipulates
or otherwise materially distorts or impairs the ability of end users to freely give
consent.”
165
Likewise, Europe’s Digital Services Act prohibits the dominant
online platforms and interfaces from using these “dark patterns.”
166
There are
also bills in Congress to crack down on dark patterns.
167
Dark patterns do not benefit society. They are by design exploitative,
seeking to use the insights of behavioral economics to manipulate our
decisions and behavior in ways that undermine our well-being. Accordingly,
through rulemaking and enforcement, the FTC should void any consent for
161. ACCC FINAL REPORT, supra note 112, at 374; see also CMA FINAL REPORT, supra note
112, ¶ 4.173 (finding that the platforms’ choice architectures rather than remediate biases are
more likely to exacerbate biases).
162. H
OUSE REPORT, supra note 43, at 53.
163. C
AL. CIV. CODE § 1798.140(h); see also The Colorado Privacy Act (COLO. REV. STAT.
§ 6-1-1303(5)(c) (agreement obtained through dark patterns do not constitute consent); C
AL.
CIV. CODE §§ 56.18–56.186 (California Genetic Information Privacy); Connecticut Act
Concerning Personal Data Privacy and Online Monitoring, Public Act No. 22-15, § 1(1)(6)
(2022) (same).
164. C
AL. CODE REGS. tit. 11, § 999.315(h) (2021).
165. Digital Markets Act ¶ 37.
166. Regulation (EU) 2022/2065 of the European Parliament and of the Council of 19
October 2022 on a Single Market for Digital Services and amending Directive 2000/31/EC
(Digital Services Act), O.J. (L 277) 1 EU, at ¶ 67 (prohibiting providers of intermediary
services “from deceiving or nudging recipients of the service and from distorting or impairing
the autonomy, decision-making, or choice of the recipients of the service via the structure,
design or functionalities of an online interface or a part thereof”).
167. See, e.g., Online Privacy Act of 2021, H.R. 6027, 117th Cong. § 209 (1st Sess. 2021)
(prohibiting a covered entity from intentionally using dark patterns in providing notice,
obtaining consent, or maintaining a privacy policy as required by the proposed statute).
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data obtained through dark patterns and prohibit companies from using these
dark patterns to obtain or use our data. This would include exploitative design
choices to direct individuals to the less privacy-friendly option, which primarily
benefits the company, such as giving the non-privacy option far more
prominence (such as a large box for “I consent,” while hiding the privacy-
friendly option in small print) or making the privacy-friendly option more
cumbersome or time-consuming (such as requiring the individuals to click
through multiple links to opt-out of collecting their data).
As we have seen from this Part, the existing categories of unfair methods
of competition can address many unfair data collection and surveillance
practices that damage competition, consumer autonomy, and privacy. But the
last category involving exploitative behavior marks a significant shift in
thinking: it reflects the understanding that more competition, absent the
regulatory guardrails, would not necessarily curb the exploitative practice.
Companies use dark patterns to extract our data because if they don’t, they are
at a competitive disadvantage to those who do. If anything, more competition
would likely lead to more ingenuous ways to manipulate our behavior. Thus,
the government has a responsibility to prevent exploitative practices like dark
patterns.
As the next Part explores, a more effective way to prevent exploitative,
deceptive, and other unfair methods of competition is to eliminate the
economic incentive to engage in that behavior. And that requires the FTC to
tackle the primary source of this privacy degradation in the digital economy,
namely behavioral advertising.
IV. RACE TO THE BOTTOM IN THE SURVEILLANCE
ECONOMY
The problem with data-opolies is more than just their power. It is also
about their incentives. They engage in intrusive surveillance and extract too
much data to better predict and manipulate our behavior and emotions. The
prevailing belief is that increasing competition will limit the data-opolies’ ability
to extract our data and exploit us. We can see this belief in Europe’s Digital
Markets Act. To combat the gatekeepers’ collecting and accumulating large
amounts of data from end users, the DMA seeks to promote “an adequate
level of transparency of profiling practices employed by gatekeepers.”
168
The
168. Digital Markets Act, at ¶ 72.
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belief is that more transparency will increase competition,
169
which would
improve privacy.
170
But is this true? Instead of imposing all these obligations on the data-
opolies, suppose antitrust enforcers just broke them up. Just like the United
States did with the Standard Oil and AT&T monopolies. Would our privacy
improve? Probably not.
Another category of toxic competition addressed in Competition Overdose is
the race to the bottom.
171
To distinguish between good and bad competition,
between races to the top and races to the bottom, one must ask whether the
competitors’ individual and collective interests are aligned. If all the
competitors do the same thing, do they (and society) end up collectively better
off—or worse off?
A. HISTORIC UNDERSTANDING OF INCENTIVES
One of our book’s examples involves a hockey player who foregoes
wearing a helmet for a slight competitive advantage. Other players will go
helmetless, and in the end, none would enjoy a competitive advantage. Instead,
they would be collectively worse off (with a greater risk of head trauma).
172
So,
when a rival seeks an edge over its competitors by employing a particular
method of competition, one must consider what would happen if others
followed the rival’s lead and took similar measures. If everyone ends up worse
off, with no advantage going to anyone, they are in a race to the bottom.
Accordingly, the method of competition is unfair.
The FTC Act sought to deter these “innumerable schemes whereby they
took unfair advantage of their rivals, and the courts were forced to realize the
necessity of protecting a man’s business from the sharp practices of his
competitor.”
173
One example is deceptive conduct. As the Restatement notes, courts may
deem it unfair when firms gain a competitive advantage by failing “to disclose
to prospective consumers particular information that is crucial to an intelligent
169. Id. (increasing transparency will put “external pressure on gatekeepers not to make
deep consumer profiling the industry standard, given that potential entrants or startups cannot
access data to the same extent and depth, and at a similar scale”).
170. Id. (by shining a light at the data-opolies’ data hoarding and profiling, rivals can
“differentiate themselves better through the use of superior privacy guarantees”).
171. S
TUCKE & EZRACHI, supra note 143, at 3–40.
172. Id. at 4–5.
173. Unfair Competition at Common Law and Under the Federal Trade Commission Source, supra
note 37, at 328.
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purchasing decision.”
174
Consider a manufacturer that labeled its underwear as
wool, including Merino Wool, when the clothing actually contained little
wool.
175
This constituted an unfair method of competition because it was
calculated to deceive the public and disadvantage the truthful sellers.
176
The
honest manufacturers, Justice Brandeis observed, might also resort to
deceptive labels or be forced out.
177
Once most of the sellers resort to fraud,
none of them benefit, and a lemon market results.
178
Antitrust scholar Robert Steiner, the former president of the Kenner
Products toy company, described his concerns about the industry self-
regulation of toy commercials in the 1960s and 1970s.
179
Originally favoring
industry self-policing, he feared the toxic consequences of deceptive
advertising. Absent regulation, some toy manufacturers would air deceptive
ads, which would pull down the toy industry. Unless his company matched
“the exaggerations and sometimes the outright deceptions of certain
competitors, our commercials might not be exciting enough to move our toys
off the shelves.”
180
He foresaw bad commercials driving out the good ones,
rendering TV advertising relatively ineffective. Consequently, it is
uncontroversial that the FTC Act, common law, and many other laws
prohibiting deceptive conduct, seek to halt this race to the bottom. Essentially,
the law imposes guardrails to channel the competition into a race to the top.
Now, if others followed the rival’s lead (say, nondeceptive advertising), the
competitors and society would be better off.
B. THE INCENTIVES OF BIG TECH: BEHAVIORAL ADVERTISING
The FTC already targets deceptive privacy statements, most notably the $5
billion fine imposed on the recidivist Facebook. But, as the dissenting
Commissioners observed, the penalty and corporate reshuffling required
174. RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 1, cmt. g, at 10 (AM. LAW. INST.
1995).
175. F.T.C. v. Winsted Hosiery Co., 258 U.S. 483, 490 (1922).
176. Id. at 493.
177. Id.
178. Id. at 494 (“The honest manufacturer’s business may suffer, not merely through a
competitor’s deceiving his direct customer, the retailer, but also through the competitor’s
putting into the hands of the retailer an unlawful instrument, which enables the retailer to
increase his own sales of the dishonest goods, thereby lessening the market for the honest
product.”); George A. Akerlof, The Market for “Lemons”: Quality Uncertainty and the Market
Mechanism, 84 Q.J.
ECON. 488, 495 (1970) (noting that the cost of dishonesty includes “loss
incurred from driving legitimate business out of existence”).
179. Robert L. Steiner, Double Standards in the Regulation of Toy Advertising, 56 C
INCINNATI
L. REV. 1259, 1264 (1988).
180. Id.
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under the consent decree did not change the company’s incentives. The
settlement failed to address the underlying cause of Facebook’s exploitative
behavior, namely, its behavioral advertising-dependent business model. This
failure, for the two dissenting FTC commissioners, was a deal-breaker.
Commissioner Rebecca Kelly Slaughter could not “view the order as
adequately deterrent without both meaningful limitations on how Facebook
collects, uses, and shares data and public transparency regarding Facebook’s
data use and order compliance.”
181
As Commissioner Rohit Chopra noted,
“Facebook’s violations were a direct result of the company’s behavioral
advertising business model,” and the FTC’s settlement did “little to change
[Facebook’s] business model or practices that led to the recidivism.”
182
But for
three FTC commissioners, any substantive data and privacy protections were
beyond the agency’s power: “Our 100-year-old statute does not give us free
rein to impose these restrictions.”
183
Of course, no statute can (or should) give an administrative agency free
rein to do whatever it desires. However, the majority in Facebook never
explained why the FTC could not curb the race to the bottom engendered by
behavioral advertising as an “unfair method of competition.”
So, while the FTC could try to regulate all the manipulative means to
attract, addict, and extract value from individuals, the better route, as Breaking
Away examines, is to examine incentives.
184
Advertising generally skews incentives, as the founders of Google
recognized. In 1998, when their search engine was not dependent on
advertising revenues, Google’s founders Sergey Brin and Lawrence Page
predicted that “advertising funded search engines will be inherently biased
towards the advertisers and away from the needs of the consumers.”
185
They
laid out how advertising can distort a search engine’s incentives and warned of
181. FED. TRADE COMM’N, DISSENTING STATEMENT OF COMMISSIONER REBECCA
KELLY SLAUGHTER 2 (2019), https://www.ftc.gov/system/files/documents/public_
statements/1536918/182_3109_slaughter_statement_on_facebook_7-24-19.pdf.
182. F
ED. TRADE COMM’N, DISSENTING STATEMENT OF COMMISSIONER ROHIT
CHOPRA 1 (2019), https://www.ftc.gov/system/files/documents/public_statements/
1536911/chopra_dissenting_statement_on_facebook_7-24-19.pdf [hereinafter Chopra
Facebook Dissent].
183. F
ED. TRADE COMM’N, STATEMENT OF CHAIRMAN JOE SIMONS AND
COMMISSIONERS NOAH JOSHUA PHILIPS AND CHRISTINE S. WILSON 6 (2019), https://
www.ftc.gov/system/files/documents/public_statements/1536946/092_3184_facebook_
majority_statement_7-24-19.pdf.
184. S
TUCKE, supra note 7, at 192–96; see also EZRACHI & STUCKE, supra note 7, at 203–4
(exploring importance of incentives in the path of innovation).
185. Sergey Brin & Lawrence Page, The Anatomy of a Large-Scale Hypertextual Web Search
Engine, 30 C
OMPUT. NETWORKS & ISDN SYS. 107, Appendix A (1998).
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the “insidiousness” of the resulting search bias. Given these risks, the young
entrepreneurs believed “that it is crucial to have a competitive search engine
that is transparent and in the academic realm.”
186
As Breaking Away explores, behavioral adverting skews incentives even
more. Data is collected about us, but not for us. Behavioral advertising has
evolved beyond predicting what each of us wants into manipulating our
behavior. In using emotional marketing to trigger our desires—whether to buy
a particular product, endorse it to friends, or create a community around the
brand—we are not the customer but the target.
Emotional marketing is a game-changer for advertising. As the Facebook
investor and advisor Roger McNamee noted, Google and Facebook help
advertisers “to exploit the emotions of users in ways that increase the
likelihood that they purchase a specific model of car or vote in a certain
way.”
187
As Facebook’s patented “emotion detection” tools suggest, the
ultimate aim is to detect and appeal to our fears and anger; to pinpoint our
children and us when we feel “worthless,” “insecure,” “defeated,” “anxious,”
“silly,” “useless,” “stupid,” “overwhelmed,” “stressed,” and “a failure.”
188
Essentially, we are the lab rats as we enter a marketplace of behavioral
discrimination: companies compete to decipher our personality; to find
whether we have an internal/external locus of control, our willingness to pay,
and our impulsivity.
As WhatsApp’s founders, quoting the movie Fight Club, explained:
“Advertising has us chasing cars and clothes, working jobs we hate
so we can buy shit we don’t need.”
. . .
Advertising isn’t just the disruption of aesthetics, the insults to your
intelligence and the interruption of your train of thought. At every
company that sells ads, a significant portion of their engineering
team spends their day tuning data mining, writing better code to
collect all your personal data, upgrading the servers that hold all the
186. Id.
187. R
OGER MCNAMEE, ZUCKED: WAKING UP TO THE FACEBOOK CATASTROPHE 69
(2019).
188. Michael Reilly, Is Facebook Targeting Ads at Sad Teens?, MIT
TECH. REV. (May 1, 2017);
McNamee, supra note 187, at 69; Sam Levin, Facebook Told Advertisers It Can Identify Teens Feeling
“Insecure” and “Worthless,” G
UARDIAN (May 1, 2017), https://www.theguardian.com/
technology/2017/may/01/facebook-advertising-data-insecure-teens.
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data and making sure it’s all being logged and collated and sliced and
packaged and shipped out.
189
FTC Commissioner Chopra noted how Facebook’s behavioral advertising
business model is the root cause of its widespread and systemic privacy
problems: “Behavioral advertising generates profits by turning users into
products, their activity into assets, their communities into targets, and social
media platforms into weapons of mass manipulation. We need to recognize
the dangerous threat that this business model can pose to our democracy and
economy.”
190
In this arms race, where the data-opolies control most of the data and reap
most of the profits, many websites and apps cannot unilaterally opt-out. Many
websites and apps are ostensibly free. To monetize their efforts, they must
attract and sustain our attention while gathering data to manipulate and target
us with behavioral ads. Consequently, as Breaking Away explores, the ethical
websites and apps face a Hobson’s choice—(1) opt-out of behavioral
advertising and watch their ad revenues plummet—on average by 70%, which
can effectively kill their business;
191
(2) change to a freemium subscription
model (which puts them at a significant competitive disadvantage to the free
apps and websites); or (3) stick with behavioral advertising revenues until
enough dedicated followers are willing to pay for their app or service. Most
cannot afford to opt-out of this toxic competition. They must continue finding
ways to profile us, surveil us, and manipulate our behavior. To attract and drive
up the bidding for their advertising space, they effectively sell us (and our
ability to be manipulated).
Advertisers recognize that most of us do not want this intrusive
surveillance.
192
To realize better value from their campaigns and outcompete
rivals, however, advertisers are encouraged to rely on emotion analytics and
facial coding, where algorithms process our facial expressions and voice to
189. HOUSE REPORT, supra note 43, at 157 (quoting Why We Don’t Sell Ads, WHATSAPP
(June 18, 2012), https://blog.whatsapp.com/why-we-don-t-sell-ads).
190. Chopra Facebook Dissent, supra note 182, at 2.
191. CMA
FINAL REPORT, supra note 112, ¶ 5.326 (estimating that U.K. publishers
“earned around 70% less revenue when they were unable to sell personalised advertising but
competed with others who could”); see also F
ED. TRADE COMM’N, DISSENTING STATEMENT
OF
COMMISSIONER REBECCA KELLY SLAUGHTER IN THE MATTER OF GOOGLE LLC AND
YOUTUBE LLC 2–3 (2019) (noting how both YouTube and the channels have a strong
financial incentive to use behavioral advertising, so while “YouTube has long allowed channel
owners to turn off default behavioral advertising and serve instead contextual advertising that
does not track viewers . . . vanishingly few content creators would elect to do so, in no small
part because they receive warnings [from Google] that disabling behavioral advertising can
‘significantly reduce your channel’s revenue’”).
192. CMA
FINAL REPORT, supra note 112, ¶ 4.68.
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manipulate our behavior.
193
Even if the ethical advertiser finds this surveillance
and manipulation morally repugnant, many cannot afford to opt-out, and a
race to the bottom ensues.
The disturbing realization is that this toxic competition would exist even
without the data-opolies. Millions of free websites and apps compete to attract
millions of advertisers to target billions of users every minute of every day with
behavioral ads. To succeed in this competition, websites and apps need
detailed, up-to-date data about us, which in turn increases the demand to track
us online and offline.
Because behavioral advertising skews the market participants’ incentives,
we have a market failure. As two officials from the International Monetary
Fund explained, “An implication is that a market for data lacking sufficient
user control rights—where data collectors do as they please with the data they
collect—is likely to lead to excessive data collection and too little privacy.”
194
Without adequate privacy protections, even robustly competitive markets will
not function in ways to promote our privacy. As the IMF officials add,
To the extent that privacy is not internalized in the economic
decisions of data collectors and processors, the market will tend
toward the collection of excessive personal data and insufficient
protection of privacy. For the market for data to internalize this
externality, the rights of data subjects must be adequately
attributed.
195
Therefore, laws are ultimately needed to correct the fundamental misalignment
of incentives caused by behavioral advertising. This is more challenging than
one might think. As Alastair Mactaggart, one of the drivers of California’s two
recent privacy statutes, observed:
If you think about our other fundamental rights as a country, no one
is spending millions and millions of dollars trying to undermine the
First Amendment or the freedom of religion. But people are actually
spending hundreds of millions of dollars trying to undermine privacy
because there’s so much money in it for corporations.
196
193. SHOSHANA ZUBOFF, THE AGE OF SURVEILLANCE CAPITALISM 284 (2019); see also
Sophie Kleber, Three Ways AI Is Getting More Emotional,
in ARTIFICIAL INTELLIGENCE: THE
INSIGHTS YOU NEED FROM HARVARD BUSINESS REVIEW 142 (Thomas H. Davenport et al.,
eds. 2019); E
ZRACHI & STUCKE, supra note 7, at 101–22.
194. Carrière-Swallow & Haksar, supra note 124, at 5.
195. Id. at 14.
196. Natasha Singer, The Week in Tech: Why Californians Have Better Privacy Protections, N.Y.
TIMES (Sept. 27, 2019), https://www.nytimes.com/2019/09/27/technology/the-week-in-
tech-why-californians-have-better-privacy-protections.html.
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That is especially true when the data-opolies, including Apple through its deal
with Google, reap billions of dollars from behavioral advertising each
quarter.
197
C. POSSIBLE FTC REFORMS
The FTC can help realign the incentives by curbing behavioral advertising
(by at least requiring users to opt into personalized advertising). The FTC is
not regulating the content of advertising per se, but the use of personal data
to profile individuals and manipulate behavior to maximize engagement and
advertising revenues.
So, the FTC regulation would implement data minimization policies,
where personal data can be collected and used only when it is necessary to
provide the product and service (which would not include behavioral
advertising purposes). Companies can continue to advertise, as they have done
for centuries, including contextual advertising, but not use personal data for
psychographic profiles to predict and manipulate behavior.
The FTC already limits behavioral advertising under the Children’s Online
Privacy Protection Act (COPPA). In 2012, the FTC amended the definition of
personal information to include “persistent identifiers,” which can be used to
recognize users over time and across different websites or online services. As
a result, under COPPA, parental notice and consent are required before an
operator uses a persistent identifier for behavioral advertising.
198
197. For example, for the first six months of 2022, $110.949 billion of Google’s $137.7
billion in revenues came from advertising, which generated most of the company’s $32 billion
in profits for that period. See Alphabet Inc., Quarterly Report for the Quarterly Period Ended
June 30, 2022 (Form 10-Q) (July 26, 2022), at 11, 41, https://abc.xyz/investor/static/pdf/
20220726_alphabet_10Q.pdf?cache=de538c8. For that same period, nearly all of Meta’s $56.7
billion in revenues and $14 billion in profits came from advertising. Meta Platforms, Inc.,
Quarterly Report for the Quarterly Period Ended June 30, 2022 (Form 10-Q) (July 27, 2022),
at 14, https://d18rn0p25nwr6d.cloudfront.net/CIK-0001326801/f657a197-fe9f-4414-81d3-
b56c02701886.pdf. Likewise, for that same period, Amazon made over $16 billion in sales
relating to its advertising services. The company did not break out its net profits from its
advertising business. See Amazon.com Inc., Quarterly Report for the Quarterly Period Ended
June 30, 2022 (Form 10-Q) (July 28, 2022), at 20, https://www.sec.gov/Archives/edgar/data/
1018724/000101872422000019/amzn-20220630.htm. For the three months ending March
31, 2022, Microsoft’s search and news advertising revenues exceeded $2.9 billion. See
Microsoft Corp., Quarterly Report for the Quarterly Period Ended March 31, 2022 (Form 10-
Q) (Apr. 26, 2022), at 31, https://www.sec.gov/Archives/edgar/data/789019/
000156459022015675/msft-10q_20220331.htm.
198. Press Release, Fed. Trade Comm’n, FTC Strengthens Kids’ Privacy, Gives Parents
Greater Control Over Their Information by Amending Childrens Online Privacy Protection
Rule (Dec. 19, 2012), https://www.ftc.gov/news-events/news/press-releases/2012/12/ftc-
strengthens-kids-privacy-gives-parents-greater-control-over-their-information-amending-
childrens.
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However, the surveillance apparatus is not used solely to get us to buy
things we don’t need at the highest price we are willing to pay. Competition in
the digital economy is also for attention. Under the guise of personalizing and
improving their services, firms will continue to design their apps and products
like slot machines to attract and addict us.
199
Thus, limiting behavioral
advertising, by itself, would be inadequate. Gaming apps and firms left with
contextual advertising would still have the incentive to appeal to our emotions
to addict us.
Policymakers cannot afford to ignore attention markets. But regulating
attention markets has significant implications for free speech and public
discourse. The aim of any engrossing book, movie, podcast, play, or opera,
after all, is to engage us.
Consequently, the FTC enforcement and regulations could entail both: (1)
a data minimization component, which would limit companies’ ability to
collect and use personal data to that which is necessary to provide the product
and service, and behavioral advertising would not be deemed a necessary
purpose; and (2) providing individuals the right to avoid being profiled, having
their data amalgamated with other data collected elsewhere by the company or
third-parties, and receiving personalized recommendations if they so choose.
For example, an individual can opt-out of YouTube recommending videos
based on the personal data Google has collected about that person. Both
components would give individuals the right, without being penalized, to limit
at the onset what data is collected about them and for what purpose. Indeed,
the data minimization rule is less intrusive than attempting to regulate all the
techniques to manipulate us. Companies might still design their apps as slot
machines, but they could not design the perfect slot machine to addict you in
particular.
As Breaking Away discusses in depth the pros and cons of this proposal,
Part V will address several additional concerns if the FTC sought to curb, if
not extinguish, the surveillance economy through its rulemaking authority.
V. POTENTIAL CONCERNS
The data-opolies have spent millions of dollars lobbying against privacy
and antitrust reform,
200
and as of late 2023, they were winning in the United
199. See EZRACHI & STUCKE, supra note 7, at 101–20.
200. See, e.g., Anna Edgerton & Emily Birnbaum, Big Tech’s $95 Million Spending Spree Leaves
Antitrust Bill on Brink of Defeat, B
LOOMBERG LAW (Sept. 6, 2022), https://www.bloomberg.
com/news/articles/2022-09-06/tech-giants-spree-leaves-antitrust-bill-on-brink-of-defeat?
leadSource=uverify%20wall (reporting how Google, Apple, Amazon.com, and Meta and their
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States. They will likely challenge any FTC regulation to curb unfair data
collection and surveillance practices that damage competition, consumer
autonomy, and consumer privacy. Although they could challenge any of the
proposed rules outlined in Part IV, they would have the greatest incentive to
challenge any rules that prohibit (or require consumers to opt into) behavioral
advertising. There is simply too much money at stake. Moreover, restricting
behavioral advertising may not neatly fall within any of the existing categories
of unfair methods of competition. So, the FTC restrictions on behavioral
advertising may be more vulnerable to attack. This Part addresses four issues:
(1) whether the FTC has authority to promulgate rules involving unfair
methods of competition, (2) whether an FTC rule banning (or require
consumers to opt into) behavioral advertising would run afoul of the Supreme
Court’s “major questions doctrine,” as recently outlined in West Virginia v.
EPA, (3) whether an FTC rule restricting behavioral advertising would run
afoul of the First Amendment, and (4) whether the FTC should defer to
Congress for policies that would affect a multi-billion dollar economy.
A. CAN THE FTC PROMULGATE RULES INVOLVING UNFAIR METHODS
OF COMPETITION?
Opponents to the FTC regulations might argue that the agency has
exercised its authority over unfair methods of competition through litigation
rather than rulemaking. It would be hard to fathom why Congress imposed
multiple hurdles for regulating unfair and deceptive acts and practices if the
FTC could circumvent them through rulemaking under unfair methods of
competition.
While the Commission has been more active in promulgating rules to
prohibit deceptive and otherwise fraudulent practices, as Judge Richard Posner
observed, it did promulgate one rule in 1967 to prohibit an antitrust violation:
And that rule was of the simplest kind; it forbade the discriminatory
provision of advertising allowances. See section 2(d) of the Clayton
Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(d); 16
C.F.R. Part 412 (Trade Regulation Rule Against Discriminatory
Practices in Men’s and Boys’ Tailored Clothing Industry); 16 C.F.R.
Ch. 1, at pp. 4–5 (table of contents of Subchapter D, Trade
Regulation Rules). Although the Commission has long been urged
to do more in the way of antitrust rulemaking, see, e.g., Elman,
Rulemaking Procedures in the FTC’s Enforcement of the Merger Law, 78
trade groups have poured almost $95 million into lobbying since 2021 to derail the American
Innovation and Choice Online Act).
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Harv. L. Rev. 385 (1964), the urgings have fallen largely on deaf
ears.
201
The year after that rule was promulgated, the Supreme Court decided the case
of F.T.C. v. Fred Meyer, Inc.
202
Notably, the Court did not question the FTC’s
ability to regulate unfair methods of competition. “In that opinion,” the FTC
noted, “the Court suggested that the Commission might wish to expand on
earlier guidance and issue detailed guidelines to promotional allowances”
under the Robinson-Patman Act.
203
The FTC accepted this invitation by
publishing the “Fred Meyer Guides,” which “set out general standards for
promotional allowances, applicable to all industries.”
204
These Fred Meyer
Guides were “revised as needed to keep them current, most recently in
1990.”
205
Next, in 1973, the D.C. Circuit in National Petroleum Refiners Association v.
F.T.C., affirmed the Commission’s authority to regulate. The language of § 6(g)
of the FTC Act “is as clear as it is unlimited”: “The Commission shall also
have power . . . to make rules and regulations for the purpose of carrying out
the provisions of [§ 5].”
206
The court noted that the Commission “is a creation
of Congress, not a creation of judges’ contemporary notions of what is wise
policy”; thus, the “extent of [the FTC’s] powers can be decided only by
considering the powers Congress specifically granted it in the light of the
statutory language and background.”
207
Since the FTC Act was clear, the D.C.
Circuit’s conclusion was “not disturbed by the fact that the agency itself did
not assert the power to promulgate substantive rules until 1962 and indeed
indicated intermittently before that time that it lacked such power.”
208
The
FTC could use its rulemaking “to carry out what the Congress agreed was
among its central purposes: expedited administrative enforcement of the
201. United Air Lines, Inc. v. C.A.B., 766 F.2d 1107, 1118 (7th Cir. 1985).
202. 390 U.S. 341 (1968).
203. Trade Regulation Rule: Discriminatory Practices in Men’s and Boys’ Tailored
Clothing Industry, 16 C.F.R. § 412 (1967); see also Fred Meyer, 390 U.S. at 358 (“Nothing we
have said bars a supplier, consistently with other provisions of the antitrust laws, from utilizing
his wholesalers to distribute payments or administer a promotional program, so long as the
supplier takes responsibility, under rules and guides promulgated by the Commission for the
regulation of such practices, for seeing that the allowances are made available to all who
compete in the resale of his product.”).
204. Trade Regulation Rule: Discriminatory Practices in Men’s and Boys’ Tailored
Clothing Industry, 16 C.F.R. § 412 (1967).
205. The FTC in 1994 repealed its antitrust rule, as it was unnecessary with its Fred Meyer
Guides in place. Id.
206. 482 F.2d 672, 693 (D.C. Cir. 1973).
207. Nat’l Petroleum Refiners, 482 F.2d at 674.
208. Id. at 693.
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national policy against monopolies and unfair business practices.”
209
Since
§ 6(g) plainly authorizes substantive rulemaking by the FTC for unfair methods
of competition, “and nothing in the statute or in its legislative history precludes
its use for this purpose,” the D.C. Circuit upheld the Commission’s rule-
making authority.
210
Thereafter, when adding the rulemaking procedures in Magnuson-Moss,
Congress specifically noted the rule at issue in National Petroleum Refiners,
211
and
recognized the FTC’s power to promulgate it.
212
Moreover, Congress noted
that its Magnuson-Moss procedures “shall not affect any authority of the
Commission to prescribe rules (including interpretive rules), and general
statements of policy, with respect to unfair methods of competition in or
affecting commerce.”
213
This was a deliberate choice.
214
Consequently, both
Congress and the courts have affirmed the FTC’s substantive rulemaking
authority for unfair methods of competition.
215
209. Id.
210. Id.
211. Namely the Commission’s rule declaring that failure to post octane rating numbers
on gasoline pumps at service stations was an unfair method of competition and an unfair or
deceptive act or practice. Nat’l Petroleum Refiners, 482 F.2d at 674.
212. S.
REP. NO. 93-1408 at 7763–64 (1974) (Conf. Rep.):
In an otherwise valid trade regulation rule the Commission may specify
what must be done in order to avoid engaging in an unfair or deceptive
practice. For example, in the present Commission rule relating to “octane
rating,” the Commission required that certain testing procedures be
followed in order to determine what octane rating should be posted on
gasoline pumps. The conferees intend that the Commission may continue
to specify such matters in rules which are otherwise valid under Section 18.
It should be noted, however, that inasmuch as such requirements are a part
of the rule, they are subject to judicial review in the same manner as is the
portion of the rule which defines the specific act or practice which is unfair
or deceptive.
213. 15 U.S.C. § 57a.
214. S.
REP. NO. 93-1408, at 7763–64 (1974) (Conf. Rep.) (noting that the conference
added “a new section 18 to the Federal Trade Commission Act which would codify the
Commission’s authority to make substantive rules for unfair or deceptive acts or practices in
or affecting commerce” but that the conference substitute did “not affect any authority of the
FTC under existing law to prescribe rules with respect to unfair methods of competition in or
affecting commerce”).
215. Justin (Gus) Hurwitz, Chevron and the Limits of Administrative Antitrust, 76 U.
PITT. L.
REV. 209, 235 (2014); see also Chopra & Khan, supra note 23, at 375–79.
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Regardless, some might debate this.
216
Additionally, opponents of the
FTC’s rulemaking now have a stronger weapon, namely, the Supreme Court’s
Major Questions Doctrine.
B. WOULD THE FTC’S RULEMAKING RUN AFOUL OF THE SUPREME
COURT’S “MAJOR QUESTIONS DOCTRINE”?
Even before the Court’s 2022 EPA decision, an FTC Commissioner
expressed the risk of the Court striking down the FTC rulemaking under its
resurrected non-delegation doctrine:
[I]t’s very clear that the justices are interested in getting back into the
nondelegation business. How far they will go, what they cut I think
remains to be seen. But it could have a real impact on at least what
we understand today—or what the agencies understand today—as
their regulatory power.
217
Opponents will certainly rely on West Virginia v. EPA to strike down any
FTC regulation of “unfair methods of competition.” That decision involved
the EPA’s Clean Power Plan, which never went into effect, as it was
immediately challenged. Moreover, intervening market forces caused the
power industry to meet the Plan’s environmental targets, so the Plan was for
all purposes “obsolete.”
218
There were, in effect, no balls or strikes to call
here.
219
Nevertheless, that did not stop the Court from using the case to
announce its “major questions doctrine.”
The Court limited this doctrine to “certain extraordinary cases,” where the
agency must convince the courts “something more than a merely plausible
216. C. Scott Hemphill, An Aggregate Approach to Antitrust: Using New Data and Rulemaking
to Preserve Drug Competition, 109 C
OLUM. L. REV. 629, 678–79 (2009) (collecting some criticisms
of Petroleum Refiners); see also Dissenting Statement of Commissioner Christine S. Wilson
Concerning the Notice of Proposed Rulemaking for the Non-Compete Clause Rule, FTC
P201200 (Jan. 5, 2023), https://www.ftc.gov/legal-library/browse/cases-proceedings/public-
statements/dissenting-statement-commissioner-christine-s-wilson-concerning-notice-
proposed-rulemaking-non (questioning her agency’s authority to engage in rulemaking for
unfair methods of competition).
217. Michael Acton, FTC Could Face US Supreme Court Pushback if it Flexes Rulemaking
Powers, Commissioner Phillips Warns,
MLEX (Oct. 27, 2021), https://mlexmarketinsight.com/
news/insight/ftc-could-face-us-supreme-court-pushback-if-it-flexes-rulemaking-powers-
commissioner-phillips-warns.
218. W. Virginia v. Env’t Prot. Agency, 142 S. Ct. 2587, 2627–28 (2022) (Kagan, J.,
dissenting).
219. In his Senate confirmation hearing, Chief Justice Roberts said “[a]nd I will remember
that it’s my job to call balls and strikes and not to pitch or bat.” Confirmation Hearing on the
Nomination of John G. Roberts, Jr. to be Chief Justice of the United States: Hearing Before the Comm. on
the Judiciary, 109th Cong. 55–56 (2005) (statement of John G. Roberts, Jr., Nominee to be Chief
Justice of the United States).
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textual basis” for its actions, but instead point to “clear congressional
authorization.”
220
Nonetheless, opponents to the FTC regulation might cite
parts of the opinion and concurrence to challenge the FTC’s rulemaking on
unfair data collection and surveillance practices.
First, opponents would argue that the FTC, in regulating privacy, is acting
in an area “that Congress conspicuously and repeatedly declined to enact
itself.”
221
The opponents would repeat an argument that a hotel chain raised in
questioning the FTC’s authority under § 5’s “unfair and deceptive” acts to
regulate cybersecurity. In that case, Wyndham argued that:
[E]ven if cybersecurity were covered by § 45(a) as initially enacted,
three legislative acts since the subsection was amended in 1938 have
reshaped the provision’s meaning to exclude cybersecurity. A recent
amendment to the Fair Credit Reporting Act directed the FTC and
other agencies to develop regulations for the proper disposal of
consumer data . . . . The Gramm-Leach-Bliley Act required the FTC
to establish standards for financial institutions to protect consumers’
personal information . . . . And the Children’s Online Privacy
Protection Act ordered the FTC to promulgate regulations requiring
children’s websites, among other things, to provide notice of “what
information is collected from children . . . , how the operator uses
such information, and the operator’s disclosure practices for such
information.” . . . Wyndham contends these “tailored grants of
substantive authority to the FTC in the cybersecurity field would be
inexplicable if the Commission already had general substantive
authority over this field.”
222
The Third Circuit disagreed. Simply because Congress passed these three
privacy laws did not undermine the FTC’s pre-existing regulatory authority
over some cybersecurity issues under the FTC Act. For example, the three
statutes required (rather than authorized) the FTC to issue regulations. “Thus
none of the recent privacy legislation was ‘inexplicable’ if the FTC already had
some authority to regulate corporate cybersecurity through § 45(a).”
223
Congress never passed a comprehensive privacy statute, similar to
California’s 2018 and 2020 statutes and Europe’s GDPR. But the data-opolies
could argue that it would be strange for Congress to currently consider
220. EPA, 142 S. Ct. at 2609.
221. Id. at 2610.
222. F.T.C. v. Wyndham Worldwide Corp., 799 F.3d 236, 247 (3d Cir. 2015).
223. Id. at 248.
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legislating a privacy framework, such as the American Data Privacy and
Protection Act,
224
when it delegated this function to the FTC.
Second, even when Congress delegates to an agency general rule-making
or adjudicatory power, “judges presume that Congress does not delegate its
authority to settle or amend major social and economic policy decisions.”
225
Digital ad spending in the United States is significant—exceeding $200 billion
in 2021; and Google, Facebook, and Amazon capture most (64%) of the ad
spending.
226
A decision on behavioral advertising would adversely impact these
data-opolies and a major segment of the digital economy. Thus, the data-
opolies would likely argue, quoting the Court, that a decision “of such
magnitude and consequence rests with Congress itself” or the FTC only if it is
“acting pursuant to a clear delegation” from Congress.
227
Congress has not
clearly delegated the authority to prohibit or limit behavioral advertising to the
FTC.
Finally, if three other justices follow Justices Gorsuch and Alito, the major
questions doctrine would apply whenever “an agency claims the power to
resolve a matter of great political significance,”
228
seeks to regulate “a
significant portion of the American economy,” or requires “billions of dollars
in spending by private persons or entities.”
229
The agency must then point to
“clear congressional authorization.”
230
Even that may be insufficient if, for
example, it upsets “the proper balance between the States and the Federal
Government.”
231
Thus, even if the FTC could point to clear congressional
authorization, the Court could still strike down the regulation in enforcing the
limits on Congress’s Commerce Clause power.
One may wonder what border there is for the Court to patrol regarding
Congress’s power under the Commerce Clause
232
and the powers reserved to
the states—especially after the Court’s decision in Gonzales v. Raich. In that
224. American Data Privacy and Protection Act (ADPPA), H.R. 8152, 117th Cong. (2d.
Sess. 2022), https://www.govtrack.us/congress/bills/117/hr8152/text.
225. EPA, 142 S. Ct. at 2613 (quoting W.
ESKRIDGE, INTERPRETING LAW: A PRIMER ON
HOW TO READ STATUTES AND THE CONSTITUTION 288 (2016)).
226. Sara Lebow, Google, Facebook, and Amazon to Account for 64% of US Digital Ad Spending
This Year, I
NSIDER INTELLIGENCE (Nov. 3, 2021), https://www.insiderintelligence.com/
content/google-facebook-amazon-account-over-70-of-us-digital-ad-spending.
227. EPA, 142 S. Ct. at 2616.
228. Id. at 2620 (Gorsuch, J., concurring) (internal quotation omitted).
229. Id. at 2621 (Gorsuch, J., concurring) (internal quotation omitted).
230. Id. at 2620 (Gorsuch, J., concurring).
231. Id. at 2621 (Gorsuch, J., concurring) (internal quotations omitted).
232. Congress can “make all Laws which shall be necessary and proper for carrying into
Execution” its authority to “regulate Commerce with foreign Nations, and among the several
States.” U.S.
CONST. art. I, § 8.
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case, the Court held that Congress, under the Commerce Clause, could
prohibit individuals from growing marijuana in their backyards and personally
using it, all in compliance with state law.
233
In that case, the Court remarked
that its task, when assessing the scope of Congress’s authority under the
Commerce Clause, was “a modest one.”
234
In EPA, however, two justices
seemed to contemplate a more stringent review by the Court of Congress’s
power under the Commerce Clause. So, the FTC could face two hurdles:
Congress never expressly authorized the agency to regulate data collection, and
even if it did, that exceeded Congress’s authority under the Commerce Clause
and intruded into the domain of state law.
Given the interstate and international flow of personal data and digital
advertising spending, it is hard to see how Congress lacks the authority to
regulate data collection and behavioral advertising. But as historians of the
Sherman Act know, legislators in 1890 were concerned about whether the
Commerce Clause allowed them to pass a federal competition law. This was
due to the Court’s narrow reading of the Commerce Clause at that time.
235
While the Court may not retreat to that interpretation (which, if it did, would
be a disaster in a national, if not global, digital economy), the data-opolies may
urge the current Court to hem Congress’s authority under the Commerce
Clause when it suits them (while also having Congress pre-empt stronger state
privacy statutes when that suits them better).
It is unclear how far the Court will expand its “major questions doctrine.”
But under its current form, the doctrine should not prevent the FTC’s
rulemaking for several reasons.
233. 545 U.S. 1, 33 (2005).
234. Id. at 22 (noting that the Court did not have to determine whether the individuals’
activities, when taken in the aggregate, substantially affected interstate commerce, but only
whether a “rational basis” existed for so concluding).
235. See, e.g., Cantor v. Detroit Edison Co., 428 U.S. 579, 605–06 (1976) (Blackmun, J.,
concurring) (noting the then-prevailing view in 1890 that “Congress lacked the Power, under
the Commerce Clause, to regulate economic activity that was within the domain of the States,”
and how the Court since 1890 “has recognized a greatly expanded Commerce Clause power”
and that “Congress intended the reach of the Sherman Act to expand along with that of the
commerce power”); see also United States v. Lopez, 514 U.S. 549, 554–55 (1995) (noting how
the Interstate Commerce Act and the Sherman Antitrust Act “ushered in a new era of federal
regulation under the commerce power,” but how the Court in the early cases under these laws
imported its “negative Commerce Clause cases” that Congress could not regulate activities
such as “production,” “manufacturing,” and “mining.” Activities that affected interstate
commerce directly were within Congress’ power; activities that affected interstate commerce
indirectly were beyond Congress’ reach); Andrew I. Gavil, Reconstructing the Jurisdictional
Foundation of Antitrust Federalism, 61 G
EO. WASH. L. REV. 657, 691 (1993).
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First, in EPA, the environmental agency located its “newfound” power in
the “vague language” of an “ancillary” provision of the statute.
236
As Part III
discussed, the broad power Congress gave the FTC to identify and deter unfair
methods of competition was central to the FTC Act, and not designed to be a
“gap filler.”
237
A key takeaway, as the courts note, is that Congress designed
the term unfair methods of competition as a “‘flexible concept with evolving
content’ and ‘intentionally left [its] development . . . to the Commission.’”
238
Second, unlike the EPA, the FTC has exercised its power to curb “unfair
methods of competition” over decades, so its power can hardly be
characterized as “newfound.” Thus, the source of the regulation is central to
the FTC Act, and cannot be characterized as a “previously little-used
backwater.”
239
As the Second Circuit noted in F.T.C. v. Standard Education
Society, the FTC’s powers “are not confined to such practices as would be
unlawful before it acted; they are more than procedural; its duty in part at any
rate, is to discover and make explicit those unexpressed standards of fair
dealing which the conscience of the community may progressively develop.”
240
Finally, it would be hard to square the major questions doctrine with the
Court’s earlier decision in F.T.C. v. Sperry & Hutchinson Co.
241
The Court
addressed two issues: (1) does § 5 of the FTC Act empower the Commission
to define and proscribe an unfair competitive practice, even though the
practice does not infringe either the letter or the spirit of the antitrust laws? (2)
does § 5 empower the Commission to proscribe practices as unfair or
deceptive in their effect upon consumers regardless of their nature or quality
as competitive practices or their effect on competition?
242
The Court held that
“the statute, its legislative history, and prior cases compel an affirmative answer
236. EPA, 142 S. Ct. at 2610 (internal citation omitted).
237. Id.; see also Nat’l Petroleum Refiners Ass’n v. F.T.C., 482 F.2d 672, 684 (D.C. Cir.
1973) (“The FTC’s charter to prevent unfair methods of competition is tantamount to a power
to scrutinize and to control, subject of course to judicial review, the variety of contracting
devices and other means of business policy that may contradict the letter or the spirit of the
antitrust laws.”); FTC
WITHDRAWAL STATEMENT, supra note 32, at 1 (noting that “Section 5
is one of the Commission’s core statutory authorities in competition cases; it is a critical tool
that the agency can and must utilize in fulfilling its congressional mandate to condemn unfair
methods of competition”).
238. F.T.C. v. Wyndham Worldwide Corp., 799 F.3d 236, 243 (3d Cir. 2015) (quoting
F.T.C. v. Bunte Bros., 312 U.S. 349, 353 (1941) and Atl. Refin. Co. v. F.T.C, 381 U.S. 360, 367
(1965)); see also Motion Picture Advert. Serv., 344 U.S. at 394 (“Congress advisedly left the concept
flexible to be defined with particularity by the myriad of cases from the field of business.”).
239. EPA, 142 S. Ct. at 2613.
240. 86 F.2d 692, 696 (2d Cir. 1936).
241. 405 U.S. 233 (1972).
242. Id. at 239.
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to both questions.”
243
The legislative and judicial authorities (such as Keppel)
convinced the Court that the FTC “does not arrogate excessive power to itself
if, in measuring a practice against the elusive, but congressionally mandated
standard of fairness, it, like a court of equity, considers public values beyond
simply those enshrined in the letter or encompassed in the spirit of the antitrust
laws.”
244
As the Court found, Congress expressly meant to confer the power
that the FTC would assert in regulating the digital economy:
When Congress created the Federal Trade Commission in 1914 and
charted its power and responsibility under § 5, it explicitly
considered, and rejected, the notion that it reduce the ambiguity of
the phrase ‘unfair methods of competition’ by tying the concept of
unfairness to a common-law or statutory standard or by enumerating
the particular practices to which it was intended to apply. Senate
Report No. 597, 63d Cong., 2d Sess., 13 (1914), presents the
reasoning that led the Senate Committee to avoid the temptations of
precision when framing the Trade Commission Act:
‘The committee gave careful consideration to the question as to
whether it would attempt to define the many and variable unfair
practices which prevail in commerce and to forbid their continuance
or whether it would, by a general declaration condemning unfair
practices, leave it to the commission to determine what practices
were unfair. It concluded that the latter course would be the better,
for the reason, as stated by one of the representatives of the Illinois
Manufacturers’ Association, that there were too many unfair
practices to define, and after writing 20 of them into the law it would
be quite possible to invent others.’
The House Conference Report was no less explicit. ‘It is impossible
to frame definitions which embrace all unfair practices. There is no
limit to human inventiveness in this field. Even if all known unfair
practices were specifically defined and prohibited, it would be at
once necessary to begin over again. If Congress were to adopt the
method of definition, it would undertake an endless task.’
H.R.Conf.Rep.No.1142, 63d Cong., 2d Sess., 19 (1914).
245
Both “the sweep and flexibility” of this approach by Congress were, for
the Court, “crystal clear.”
246
The fact that Congress did not speak about data
collection (or could have foreseen the harm from behavioral advertising) is
irrelevant. Congress knew that immoral, unethical, oppressive, and
243. Id.
244. Id. at 244.
245. Id. at 239–40 (single quotation marks in original).
246. Id. at 241.
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unscrupulous behavior would propagate despite the good intentions of the
ecosystem’s architects, and it was the FTC’s job to curb it.
Although the Court in Sperry & Hutchinson did not outline the boundaries
of “unfair methods of competition,” it acknowledged the factors that the FTC
considered in determining whether a practice that is neither in violation of the
antitrust laws nor deceptive is nonetheless unfair:
‘(1) whether the practice, without necessarily having been previously
considered unlawful, offends public policy as it has been established
by statutes, the common law, or otherwise—whether, in other
words, it is within at least the penumbra of some common-law,
statutory, or other established concept of unfairness; (2) whether it
is immoral, unethical, oppressive, or unscrupulous; (3) whether it
causes substantial injury to consumers (or competitors or other
businessmen).’
247
Consequently, the FTC in its rulemaking process could gather evidence that
identifies those surveillance and data collection practices that offend these
three factors. If so, Congress authorized the Commission to regulate it.
Some may still hesitate. The current Court, as the dissenting justices noted
in EPA, is textualist only when it suits its purpose. When textualism frustrates
its broader goals, “special canons like the ‘major questions doctrine’ magically
appear as get-out-of-text-free cards.”
248
The concern is that the Court will
create new cards that may handicap the FTC’s ability to curb unfair data
collection and surveillance. That card could be the First Amendment.
C. WOULD AN FTC RULE BANNING BEHAVIORAL ADVERTISING
VIOLATE THE FIRST AMENDMENT?
Critics of the FTC regulation would likely rely on U.S. West, Inc. v. F.C.C.
249
and Sorrell v. IMS Health Inc.
250
to argue that consumers’ personal information
is “commercial speech” for purposes of the First Amendment’s free speech
clause; that the FTC failed to show that its regulations directly and materially
247. Id. at 244 (quoting Statement of Basis and Purpose of Trade Regulation Rule 408,
Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards
of Smoking., 29 Fed. Reg. 8355 (1964)).
248. EPA, 142 S. Ct. at 2641 (Kagan, J., dissenting).
249. See generally 182 F.3d 1224 (10th Cir. 1999) (holding that the agency regulations
violated the First Amendment since the agency failed to satisfy its burden of showing that the
customer approval regulations restricted no more commercial speech than was necessary to
serve the asserted state interests).
250. See generally 564 U.S. 552 (2011) (holding that the state statute violated the First
Amendment since the state failed to show that its statute directly advanced the state’s claimed
substantial governmental interests, including privacy, and that the law was drawn to achieve
that interest).
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advanced its asserted interests in privacy and increased competition; and that
its regulations were not narrowly tailored to further those asserted interests.
Indeed, critics would argue that a ban on behavioral advertising is worse than
in U.S. West and Sorrell, where individuals in those cases could at least opt-in.
Much has been written about the constitutionality of regulations to deter
online manipulation and promote privacy.
251
One concern—seen in several
dissents in First Amendment cases—is the First Amendment’s Lochner
problem. In Lochner v. New York and other cases in the early 1900s, the Supreme
Court struck down state regulations (such as the one which restricted the
employment of all persons in bakeries to ten hours in any one day) as an
unreasonable, unnecessary, and arbitrary interference with the liberty of
contract and therefore void under the Constitution’s due process clause.
252
The
Court essentially struck down economic regulations “based on the Court’s own
notions of the most appropriate means for the State to implement its
considered policies.”
253
Although the Court later repudiated Lochner,
254
Justices
Rehnquist and Breyer, among others, have expressed concern over the Court’s
using the First Amendment to do the same thing, namely, strike down
economic regulations that are far afield of the speech at the heart of the First
Amendment.
255
As Justice Breyer warned,
251. See, e.g., Shaun B. Spencer, The Problem of Online Manipulation, 2020 U. ILL. L. REV. 959,
999 (2020) (responding to likely First Amendment challenges to regulating against online
manipulation); Kyle Langvardt, Regulating Habit-Forming Technology, 88 F
ORDHAM L. REV. 129,
171 (2019) (discussing First Amendment issues in regulating addictive designs); Micah L.
Berman, Manipulative Marketing and the First Amendment, 103 G
EO. L.J. 497 (2015) (noting that
while the conventional wisdom is that few if any restrictions on commercial speech can survive
First Amendment review, there is doctrinal space for robust regulation where the government
can establish that the marketing at issue is manipulative); Neil M. Richards, Reconciling Data
Privacy and the First Amendment, 52 UCLA
L. REV. 1149 (2005) (challenging the First
Amendment critique of data privacy regulation, namely, the claim that data privacy rules
restrict the dissemination of truthful information and thus violate the First Amendment).
252. 198 U.S. 45, 62 (1905). In the Lochner line of cases, including Adkins v. Children’s
Hosp. of the D.C., 261 U.S. 525, 545 (1923), the Court “imposed substantive limitations on
legislation limiting economic autonomy in favor of health and welfare regulation, adopting, in
Justice Holmes’s view, the theory of laissez-faire.” Planned Parenthood of Se. Pennsylvania v.
Casey, 505 U.S. 833, 861–62 (1992), overruled by Dobbs v. Jackson Women’s Health Org., 142
S. Ct. 2228 (2022).
253. Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of New York, 447 U.S. 557,
589 (1980) (Rehnquist, J., dissenting).
254. Casey, 505 U.S. at 861–62 (noting how West Coast Hotel Co. v. Parrish, 300 U.S. 379
(1937) “signaled the demise of Lochner” and how the Court’s interpretation of contractual
freedom “rested on fundamentally false factual assumptions about the capacity of a relatively
unregulated market to satisfy minimal levels of human welfare”).
255. Cent. Hudson, 447 U.S. at 589 (Rehnquist, J., dissenting) (warning that the Court—in
invalidating under the First Amendment a state order designed to promote a policy of critical
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From a democratic perspective, however, it is equally important that
courts not use the First Amendment in a way that would threaten
the workings of ordinary regulatory programs posing little threat to
the free marketplace of ideas enacted as result of that public
discourse. As a general matter, the strictest scrutiny should not apply
indiscriminately to the very “political and social changes desired by
the people”—that is, to those government programs which the
“unfettered interchange of ideas” has sought to achieve. Otherwise,
our democratic system would fail, not through the inability of the
people to speak or to transmit their views to government, but
because of an elected government’s inability to translate those views
into action.
256
Here we would witness this antidemocratic chilling effect if the Court
might strike down the FTC’s economic regulations “based on the Court’s own
notions of the most appropriate means for the [FTC] to implement its
considered policies.”
257
To avoid the Lochner problem, the FTC, for example,
might select an opt-out regime (whereby individuals would have to opt out of
behavioral advertising) even though most Americans might prefer a ban on
behavioral advertising.
How the current Court would address a ban on the surveillance and data
collection underlying behavioral advertising under the First Amendment is
uncertain, but such a ban could be upheld at multiple levels of analysis.
1. Is Surveillance “Speech” Under the First Amendment?
Some lower courts seem to think so under the Supreme Court’s decision
in Sorrell.
258
But it is hard to see how the Supreme Court could expand speech,
national concern—was returning “to the bygone era of Lochner v. New York”); Sorrell v. IMS
Health Inc., 564 U.S. 552, 591–92 (2011) (Breyer, J., dissenting) (noting that “given the sheer
quantity of regulatory initiatives that touch upon commercial messages, the Court’s vision of
its reviewing task threatens to return us to a happily bygone era when judges scrutinized
legislation for its interference with economic liberty” and “[b]y inviting courts to scrutinize
whether a State’s legitimate regulatory interests can be achieved in less restrictive ways
whenever they touch (even indirectly) upon commercial speech, today’s majority risks
repeating the mistakes of the past in a manner not anticipated by our precedents”); see also
Genevieve Lakier, The First Amendment’s Real Lochner Problem, 87 U.
CHI. L. REV. 1241, 1254-
71 (2020).
256. Barr v. Am. Ass’n of Pol. Consultants, Inc., 140 S. Ct. 2335, 2359 (2020) (Breyer, J.,
concurring in the judgment with respect to severability and dissenting in part) (internal
quotation omitted).
257. Cent. Hudson, 447 U.S. at 589 (Rehnquist, J., dissenting).
258. See, e.g., King v. General Information Services, Inc., 903 F. Supp. 2d 303, 306–07
(E.D. Pa. 2012) (“The Supreme Court has made clear that consumer report information is
‘speech’ under the First Amendment.”) (citing Dun & Bradstreet, Inc. v. Greenmoss Builders,
Inc., 472 U.S. 749 (1985)). But see Boelter v. Advance Mag. Publishers Inc., 210 F. Supp. 3d
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as historically defined, to the surreptitious tracking of individuals, profiling
them, and using that data for behavioral advertising as speech.
As the Court explained, “[t]he First Amendment was fashioned to assure
unfettered interchange of ideas for the bringing about of political and social
changes desired by the people.”
259
With surveillance and the covert use of data,
no ideas are expressed; nor is the marketplace of ideas enhanced. Indeed,
market exchanges work well when buyers and sellers are fully informed, the
terms are transparent, and ample competitive alternatives exist, which is not
the case in the surveillance economy.
260
Surveillance, like in-person
solicitations, “is not visible or otherwise open to public scrutiny.”
261
Thus, the
FTC regulation would have “next to nothing to do with the free marketplace
of ideas or the transmission of the people’s thoughts and will to the
government”; instead, it is the “government response to the public will
through ordinary commercial regulation.”
262
In Ohralik v. Ohio State Bar Association, for example, the Court recognized
the detrimental aspects of “face-to-face selling even of ordinary consumer
products,” and how “the potential for overreaching is significantly greater
when a lawyer, a professional trained in the art of persuasion, personally solicits
an unsophisticated, injured, or distressed lay person.”
263
The issue was whether
the state may constitutionally discipline a lawyer for soliciting clients in person,
for pecuniary gain, under circumstances likely to pose dangers, namely “in-
person solicitation of clients—at the hospital room or the accident site, or in
579, 597 (S.D.N.Y. 2016) (finding that while the parties agreed that the personal data allegedly
disclosed to data miners and sold in mailing lists was speech, whether “the sale of data to third
parties for targeted solicitation of consumers” was commercial speech was “an open question”
in the Second Circuit).
259. Meyer v. Grant, 486 U.S. 414, 421 (1988) (internal quotation omitted).
260. S
TUCKE, supra note 7, at 117–28; Felix T. Wu, The Commercial Difference, 58 WM. &
MARY L. REV. 2005, 2052 (2017) (noting that in the context of privacy laws, the person from
whom the information is being extracted is often not a willing participant in the transaction;
since there is no willing “speaker,” and thus, no speaker-based interests to protect, the entity
collecting the information lacks intrinsic First Amendment interests, and restrictions on that
collection merit little First Amendment scrutiny, just as in the case of a commercial speaker
transacting with a commercial recipient).
261. Ohralik v. Ohio State Bar Ass’n, 436 U.S. 447, 466 (1978).
262. Barr v. Am. Ass’n of Pol. Consultants, Inc., 140 S. Ct. 2335, 2359 (2020) (Breyer, J.,
concurring in the judgment with respect to severability and dissenting in part); see also Richards,
Reconciling Data Privacy, supra note 251, at 1166–81 (arguing that most data privacy regulations
in the form of a “code of fair information practices” have nothing to do with free speech
under anyone’s definition).
263. 436 U.S. 447, 464–66 (1978).
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any other situation that breeds undue influence—by attorneys or their agents
or ‘runners.’”
264
In answering yes, the Court noted that the overtures of an uninvited lawyer
under these adverse conditions “may distress the solicited individual simply
because of their obtrusiveness and the invasion of the individual’s privacy,
even when no other harm materializes.”
265
Now suppose an army of salespeople stalking us to find the perfect
emotional pitch to manipulate us. They would follow us throughout the day,
monitor the entertainment we watch, the music we listen to, the books and
articles we read, the websites and apps we visit, and eavesdrop on our
conversations with others online, all to understand the right emotional appeal
at the right time to get us to buy their wares. Their patented “emotion
detection” tools would detect our fears and anger in order to pinpoint us when
we feel “worthless,” “insecure,” “defeated,” “anxious,” “silly,” “useless,”
“stupid,” “overwhelmed,” “stressed,” and “a failure.”
266
Could they justify their surveillance as “speech” protected under the First
Amendment? Hardly. The FTC’s ban is not aimed at the speech itself or
limiting particular messages, but at recognizing the “consumers’ preferences
not to have their information used to market to them in particular ways,”
267
namely, technology which can decode one’s emotions and behavior, often
without one’s knowledge. Thus, the First Amendment should not impede
regulations that deter such unwanted surveillance.
268
Sorrell is distinguishable. There, pharmacies were collecting data about
doctors’ prescriptions, which they then sold to “data miners,” who produced
reports on each doctor’s prescriber behavior. Drug manufacturers then used
the data miners’ reports to refine and target their marketing tactics and increase
sales of their branded drugs to the prescribing doctors. In response, Vermont
prohibited the pharmacies from selling this data for marketing purposes
without the prescribing doctor’s consent. Several data miners and an
association of brand-name drug manufacturers challenged the state law,
contending that it violated their First Amendment free speech rights.
The Supreme Court ruled in favor of data miners and brand-name drug
manufacturers. The Court first observed that the challenged law warranted
heightened judicial scrutiny because it disfavored speech with a particular
264. Id. at 449.
265. Id. at 465–66.
266. See Levin, supra note 188.
267. Wu, supra note 260, at 2060.
268. Id.
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content (i.e., marketing) and particular speakers (i.e., the data miners engaged
in marketing on the drug manufacturers’ behalf).
Vermont responded that its prohibitions safeguarded medical privacy,
including physician confidentiality and the integrity of the doctor-patient
relationship. The Court disagreed. The state did not directly advance these
privacy interests, because the pharmacies, under the law, could share
“prescriber-identifying information with anyone for any reason save one: They
must not allow the information to be used for marketing.”
269
The law did not
promote privacy when the information was available to “an almost limitless
audience”—such as insurers, researchers, journalists, and the state itself. Many
could access the data except for a narrow class of disfavored speakers (those
engaged in marketing on behalf of pharmaceutical manufacturers) for a
disfavored purpose (marketing).
270
The Court left open an alternative. In citing the Health Insurance
Portability and Accountability Act of 1996, the Court noted how “the State
might have advanced its asserted privacy interest by allowing the information’s
sale or disclosure in only a few narrow and well-justified circumstances,” and
how a “statute of that type would present quite a different case from the one
presented here.”
271
Thereafter, in upholding privacy laws, the lower courts have limited Sorrell
to its facts, which “largely rested on the fact that Vermont was restraining a
certain form of speech communicated by a certain speaker solely because of
the State’s disagreement with it.”
272
Protecting surveillance, which intrudes on private matters to profit at the
individual’s expense, does not promote the First Amendment’s core values; if
anything, it undercuts them. Unlike Sorrell, the FTC regulations would not
attempt “to burden speech in order to ‘tilt public debate in a preferred
direction’ and discourage demand for a particular disfavored product.”
273
Thus, the First Amendment inquiry could (and should) end here.
269. Sorrell v. IMS Health Inc., 564 U.S. 552, 572 (2011).
270. See id. at 573.
271. Id.
272. King v. General Information Services, Inc., 903 F. Supp. 2d 303, 308–09 (E.D. Pa.
2012) (“The Sorrell decision is particular to the Sorrell facts.”).
273. Id. at 309 (quoting Sorrell, 131 S. Ct. at 2671); see also Boelter v. Advance Mag.
Publishers Inc., 210 F. Supp. 3d 579, 601 (S.D.N.Y. 2016) (noting that state statute addresses
privacy concerns “through a more coherent policy” and thus “presents quite a different case”
than Sorrell).
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2. Even If Surveillance Constitutes Speech, Is It Protected Under the First
Amendment?
Suppose the Court leaps from protecting commercial advertising to
protecting the underlying surveillance. “Not all speech is of equal First
Amendment importance,” observed the Court. “It is speech on ‘matters of
public concern’ that is at the heart of the First Amendment’s protection.’”
274
Thus, speech on matters of purely private concern, while not totally
unprotected under the First Amendment, is of less concern and its protections
are “less stringent.”
275
Here, data surveillance, like the data on credit reports, concerns no public
issue but is secretly collected and used to promote the economic interests of
data brokers, data-opolies, and those engaged in behavioral advertising.
Moreover, the data-opolies typically hoard the data, so their surveillance does
not reflect any “strong interest in the free flow of commercial information.”
276
As in Dun & Bradstreet, “there is simply no credible argument that this type of
[data collection and use] requires special protection to ensure that debate on
public issues will be uninhibited, robust, and wide-open.”
277
Commercial advertising wasn’t protected under the First Amendment for
nearly two centuries.
278
That changed in the mid-1970s, when the Court opined
that First Amendment protection would benefit the consumer and society by
increasing market transparency.
279
In Ohralik, for example, the Court did not
focus on the value of the personal solicitation to the commercial speaker,
namely the attorney visiting the hospital to solicit business. Instead, the Court
focused on, and highlighted, the “very plight” of the prospective client, “which
274. Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc., 472 U.S. 749, 759–60 (1985)
(quoting First National Bank of Boston v. Bellotti, 435 U.S. 765, 776 (1978)).
275. Dun & Bradstreet, 472 U.S. at 759; see also Boelter, 210 F. Supp. 3d at 598 (finding that
Condé Nast’s disclosures of personal information should be afforded reduced constitutional
protection); King, 903 F. Supp. 2d at 307 (finding that “the private nature of these consumer
reports does not significantly contribute to public dialogue,” and accordingly, “such
information warrants a reduced constitutional protection”).
276. Dun & Bradstreet, 472 U.S. at 762.
277. Id. (internal quotation omitted).
278. Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of New York, 447 U.S. 557,
584 (1980) (Rehnquist, J., dissenting) (noting that before the Court’s decision in Virginia
Pharmacy Board v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976), “commercial
speech was afforded no protection under the First Amendment whatsoever”).
279. Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S.
748, 764 (1976) (“Generalizing, society also may have a strong interest in the free flow of
commercial information.”). Justice Rehnquist dissented to the Court’s “far reaching”
extension of the First Amendment. 425 U.S. at 781; see also Berman, supra note 251, at 503–04.
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not only makes him more vulnerable to influence but also may make advice all
the more intrusive.”
280
There is no strong empirical evidence that the surveillance underlying
behavioral advertising benefits consumers.
281
Instead, the evidence points to
the harms of manipulating them.
282
Thus, the Court cannot rely on its stated
basis for affording First Amendment protection to commercial speech.
283
Using the Court’s recent test for abortion, surveillance is not “deeply rooted in
this Nation’s history and tradition” and “implicit in the concept of ordered
liberty.”
284
The Court cannot read privacy out of the Constitution
285
while
finding that the Constitution somehow protects surveillance. Thus, the courts
can distinguish Sorrell and hold that the surveillance, even if it implicates
speech, is not protected under the First Amendment.
3. Is Surveillance Lawful Activity and Not Misleading?
Suppose the Court takes another misguided leap and concludes that
surveillance constitutes speech, which the First Amendment may protect. At a
minimum, the surveillance must concern “lawful activity and not be
misleading.”
286
The opponent of FTC regulations might argue that the
advertising itself is lawful and not deceptive. Except the FTC regulation is not
targeting the ad’s content, but the underlying surveillance to profile and target
the person. And since the Court, in this hypothetical, has already found that
the surveillance is “speech,” the focus must remain on whether the surveillance
itself is lawful and not deceptive. Otherwise, the commercial advertiser can
280. Ohralik v. Ohio State Bar Ass’n, 436 U.S. 447, 465 (1978).
281. See S
TUCKE, supra note 7, at 213–45.
282. Id.; Berman, supra note 251, at 497 (noting that the commercial speech doctrine is
fundamentally based on the premise that advertising communicates information to consumers,
allowing them to make more informed choices, but many common advertising techniques do
not rely on communicating information; instead, they use emotional and nonconscious
marketing techniques to take advantage of consumers’ cognitive limitations and biases).
283. Wu, supra note 260, at 2057 (noting that if the First Amendment claim “is supposed
to protect the customer’s access to marketing information, and that customer objects to having
his personal information used for those marketing purposes, there is simply no First
Amendment claim to raise at all,” and any “First Amendment interest that the carrier has is
derivative of the interests of the very individual against whom the carrier is opposed”).
284. Dobbs v. Jackson Women’s Health Org., 142 S. Ct. 2228, 2242 (2022) (quoting
Washington v. Glucksberg, 521 U.S. 702, 721 (1997)).
285. See, e.g., Privacy Act of 1974 § 2(a)(4), 93 Pub. L. No. 579, 88 Stat. 1896 (finding that
the right to privacy is a “personal and fundamental right protected by the Constitution of the
United States”).
286. Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’s of New York, 447 U.S.
557, 566 (1980).
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justify stalking the person by pointing to the result, namely the non-deceptive
personalized emotional appeal.
As for the legality of surveillance, this represents a catch-22; the FTC
regulation (or any privacy law) seeks to fill this legal void. So, the surveillance
is legal only because the law has yet to catch up to this new type of surveillance.
While the FTC could point to common law analogs, such as intrusion upon
seclusion, we can see the Lochner problem.
Instead, the FTC can highlight the misleading and manipulative nature of
the surveillance.
287
The surveillance operates from a lack of transparency,
where we do not know what data is being collected, and the uses to which our
data is being put. As Australia’s competition authority found,
few consumers are fully informed of, fully understand, or effectively
control, the scope of data collected and the bargain they are entering
into with digital platforms when they sign up for, or use, their
services. There is a substantial disconnect between how consumers
think their data should be treated and how it is actually treated.
Digital platforms collect vast troves of data on consumers from ever-
expanding sources and have significant discretion over how this user
data is used and disclosed to other businesses and organisations,
both now and in the future. Consumers also relinquish considerable
control over how their uploaded content is used by digital platforms.
For example, an ACCC review of several large digital platforms’
terms of service found that each of the terms of service reviewed
required a user to grant the digital platform a broad licence to store,
display, or use any uploaded content.
288
Companies could be more transparent, but they choose not to be. Given the
perverse incentives of behavioral advertising, markets will not self-correct; nor
will behavioral regulations improve the current “notice-and-consent” privacy
regime, such as telling companies to make their privacy statements more
transparent and simpler to understand. Those become slalom poles for the
companies to avoid. Thus, the FTC regulation targets the incentive to mine,
287. STUCKE, supra note 7, at 213–45; EZRACHI & STUCKE, supra note 7, at chapters 6–7;
Spencer, supra note 251, at 977–84; see also Berman, supra note 251, at 518–34.
288. ACCC
FINAL REPORT, supra note 112, at 2–3; see also FURMAN REPORT, supra note
113, at 22 (finding that many platforms operating in the attention market “provide valued
services in exchange for their users’ time and attention, while selling access to this time to
companies for targeted advertising,” but many consumers “are typically not consciously
participating in this exchange, or do not appreciate the value of the attention they are
providing”) & 23 (noting that many consumers “are not aware of the extent or value of their
data which they are providing nor do they usually read terms and conditions for online
platforms.”); CMA
FINAL REPORT, supra note 112, ¶¶ 4.61–62.
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manipulate, and potentially expose the privacies of one’s life. Accordingly, the
First Amendment inquiry should proceed no further.
4. What Standard Would the Court Apply to the Surveillance?
Suppose the Court states that not all surveillance is currently illegal or
misleading. The Court could hypothesize that a privacy statement could be
quite blunt on how the company surveils us and uses the data to manipulate
us, but still be implicated by the FTC rule. Thus, the next issue is whether the
Court would apply a “rational basis” standard, which the Court traditionally
employs for restrictions that “have only indirect impacts on speech”;
289
intermediary scrutiny, “when the government directly restricts protected
commercial speech”;
290
strict scrutiny; or something else.
Strict scrutiny might apply if the FTC regulation allowed surveillance for
some types of speech (such as political advertising or debt collection), but not
other types of speech. But that would not be the case here. The FTC regulation
would have “nothing to do with the federal government trying to ‘tilt the
public debate’ in order to favor one form of speech over another.”
291
It would
not be content-based: the regulation “on its face” would not draw “distinctions
based on the message a speaker conveys,” for example, by “singl[ing] out
specific subject matter for differential treatment.”
292
Here, a “rational basis” standard should apply, as the dissents in Sorrell and
Barr explain. Many regulations, including the content of prescription drug
labels, securities forms, and tax statements, impact speech: “To treat those
exceptions as presumptively unconstitutional would work a significant transfer
of authority from legislatures and agencies to courts, potentially inhibiting the
creation of the very government programs for which the people (after debate)
have voiced their support, despite those programs’ minimal speech-related
harms.”
293
Nonetheless, the lower courts have applied the Central Hudson intermediate
scrutiny test to privacy laws.
294
To correct its Lochner problem, the Supreme
289. Barr v. Am. Ass’n of Pol. Consultants, Inc., 140 S. Ct. 2335, 2359 (2020) (Breyer, J.,
dissenting and concurring) (citing Glickman v. Wileman Brothers & Elliott, Inc., 521 U.S. 457,
469–470, 477 (1997)).
290. Barr, 140 S. Ct. at 2359 (Breyer, J., dissenting and concurring) (citing Central Hudson,
447 U.S. at 561–64).
291. King v. Gen. Info. Servs., Inc., 903 F. Supp. 2d 303, 309 (E.D. Pa. 2012).
292. Barr, 140 S. Ct. at 2346.
293. Id. at 2360 (Breyer, J., dissenting and concurring); see also Sorrell, 564 U.S. at 584–85
(Breyer, J., dissenting).
294. King, 903 F. Supp. 2d at 307–8; see also Boelter v. Advance Mag. Publishers Inc., 210
F. Supp. 3d 579, 597 (S.D.N.Y. 2016) (citing several decisions addressing laws limiting
disclosure of personal information to marketers based on privacy concerns).
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Court, if it even reaches this point of the analysis, should reinstate the rational
basis standard for statutes and regulations seeking to curb the surveillance
economy.
5. Would the FTC’s Interest in Limiting the Collection and Use of Personal
Data Be Substantial?
Suppose the Court applied intermediate scrutiny instead; the next issue is
whether the asserted governmental interest is substantial.
295
Although the
Tenth Circuit in U.S. West questioned whether the government’s privacy
interest was substantial, courts generally recognize the privacy interests
concerning the collection and use of personal data in the digital economy as
substantial.
296
In its Fourth Amendment decisions, the Supreme Court, for example,
noted how “[m]odern cell phones, as a category, implicate privacy concerns
far beyond those implicated by the search of a cigarette pack, a wallet, or a
purse” and how the data on one’s cellphone both qualitatively and
quantitatively differs from other physical objects.
297
The Court recognized the
significant privacy implications when an entity tracks what people search over
the internet, what apps they use and the information collected on their apps,
and their geolocation, which collectively can expose far more private
information than what is ordinarily found in their home.
298
The Court in
Carpenter recognized that individuals have a reasonable expectation of privacy
in the whole of their physical movements. Geolocation data, for example,
provides an intimate window into a person’s life, revealing not only one’s
295. See Central Hudson, 447 U.S. at 566.
296. Boelter, 210 F. Supp. 3d at 599 (noting state’s substantial interest in protecting
consumer privacy in restricting use of personal information, as “[c]ompilations of one’s
choices in books, magazines, and videos may reveal a great deal of information that a person
may not want revealed, even if the choices are uncontroversial and are necessarily disclosed to
the content provider”); Boelter v. Hearst Commc’ns, Inc., 192 F. Supp. 3d 427, 448 (S.D.N.Y.
2016) (protecting privacy constitutes a substantial state interest “[e]specially given the
increased availability and profitability of data, the people of a state may want to protect from
unauthorized disclosure information about a consumer’s preferences, curiosities, and
interests”); Trans Union Corp. v. F.T.C., 245 F.3d 809, 818 (D.C. Cir. 2001) (protecting the
privacy of consumer credit information is substantial); Individual Reference Servs. Grp., Inc.
v. F.T.C., 145 F. Supp. 2d 6, 42 (D.D.C. 2001) (“Courts have repeatedly recognized that the
protection of consumer privacy—in various forms—is a substantial governmental interest”),
aff’d sub nom. Trans Union LLC v. F.T.C., 295 F.3d 42 (D.C. Cir. 2002).
297. Riley v. California, 573 U.S. 373, 393 (2014).
298. Id. at 396–97 (“Indeed, a cell phone search would typically expose to the government
far more than the most exhaustive search of a house: A phone not only contains in digital
form many sensitive records previously found in the home; it also contains a broad array of
private information never found in a home in any form—unless the phone is.”).
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particular movements but also one’s “familial, political, professional, religious,
and sexual associations.”
299
The data-opolies possess far more information about us than the location
records in Carpenter. Moreover, some of the justices have identified the greater
privacy concerns of a few powerful companies amassing this data:
The Fourth Amendment restricts the conduct of the Federal
Government and the States; it does not apply to private actors. But
today, some of the greatest threats to individual privacy may come
from powerful private companies that collect and sometimes misuse
vast quantities of data about the lives of ordinary Americans. If
today’s decision encourages the public to think that this Court can
protect them from this looming threat to their privacy, the decision
will mislead as well disrupt.
300
In short, the data-opolies “hold for many Americans the ‘privacies of
life.’”
301
Consequently, it would be inconsistent for the justices to state that privacy
protection is better left to the legislature (and the agencies delegated with that
authority) than the courts,
302
but then strike down the privacy regulations and
laws under the First Amendment.
Regardless, the FTC would have a compelling justification to limit the
collection and use of personal information to only what is necessary to provide
the requested product and service. Besides privacy, the FTC could note the
other important interests at stake, including promoting healthy competition,
increasing well-being and autonomy, and addressing the risks that behavioral
advertising poses to our democracy.
303
After all, the surveillance tools used for
299. Carpenter v. United States, 138 S. Ct. 2206, 2217 (2018) (quoting United States v.
Jones, 565 U.S. 400, 415 (2012) (Sotomayor, J., concurring)).
300. Id. at 2261 (Alito, J., dissenting).
301. Id. at 2210 (quoting Riley, 573 U.S. at 403) (quoting Boyd v. United States, 116 U.S.
616, 630 (1886)).
302. Riley, 573 U.S. at 408 (Alito, J., concurring in part) (“[I]t would be very unfortunate
if privacy protection in the 21st century were left primarily to the federal courts using the blunt
instrument of the Fourth Amendment. Legislatures, elected by the people, are in a better
position than we are to assess and respond to the changes that have already occurred and those
that almost certainly will take place in the future.”).
303. Spencer, supra note 251, at 991–93 (discussing how manipulation (i) harms autonomy
because it undermines people’s decision-making agency, (ii) leads to inefficient outcomes by
leading people to make choices inconsistent with their actual preferences, (iii) undermines
democratic deliberation when it enters the political arena, and (iv) harms people’s dignity by
treating people as experimental subjects and mere means to an end); Langvardt, supra note
251, at 146–52 (discussing how habit-forming design causes at least three types of harm:
addiction, strain on social norms, and degradation of public discourse).
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behavioral advertising, as the Cambridge Analytica scandal shows, are now
being deployed for political advertising.
304
6. Would the FTC Regulation Directly Advance the Governmental Interests?
The answer here is yes. The FTC regulation would limit companies to
collect and use personal data only when necessary to provide the requested
product or service and not use it for other purposes like behavioral advertising.
Thus, the FTC regulation would directly advance the governmental interest in
protecting individuals’ privacy in potentially sensitive, harmful, or
embarrassing information.
In Barr, the government cited privacy to justify its broad restriction on
robocalling. But the plurality, in implicitly distinguishing Sorrell, noted that
“[t]his is not a case where a restriction on speech is littered with exceptions
that substantially negate the restriction.”
305
Here, the FTC privacy regulation
would not likely be riddled with exceptions that “may diminish the credibility
of the government’s rationale for restricting speech in the first place.”
306
Thus, personal data could be used, with the individual’s consent, to
provide the product and service but not for behavioral advertising or myriad
other purposes.
7. Is the FTC Regulation More Extensive Than Necessary to Serve That
Interest?
If the FTC “could achieve its interests in a manner that does not restrict
speech, or that restricts less speech, the Government must do so.”
307
Here, the
opponent of the FTC regulation would likely argue that an opt-out option
would less likely restrict “speech.” Basically, data would be collected for
behavioral advertising purposes, unless the individual opted out. Opponents
to the FTC regulations would likely cite U.S. West, where the Tenth Circuit
struck down under the First Amendment an FCC regulation that required a
telecommunications carrier to obtain its customer’s prior express approval
before using the customer’s “proprietary network information.”
308
The Tenth
Circuit faulted the agency for its undeveloped record, namely, not bearing its
responsibility of building a record adequate to clearly articulate and justify the
state’s interest.
309
The court also criticized the FCC’s failure to adequately
304. EZRACHI & STUCKE, supra note 7, at 130–34.
305. Barr, 140 S. Ct. at 2348.
306. Id. (internal citation omitted).
307. Thompson v. W. States Med. Ctr., 535 U.S. 357, 371 (2002).
308. U.S. W., Inc. v. F.C.C., 182 F.3d 1224, 1229 (10th Cir. 1999).
309. Id. at 1234.
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consider “an obvious and substantially less restrictive alternative, an opt-out
strategy.”
310
The Tenth Circuit noted that:
The FCC record does not adequately show that an opt-out strategy
would not sufficiently protect customer privacy. The respondents
merely speculate that there are a substantial number of individuals
who feel strongly about their privacy, yet would not bother to opt-
out if given notice and the opportunity to do so. Such speculation
hardly reflects the careful calculation of costs and benefits that our
commercial speech jurisprudence requires.
311
One problem with this analysis is the Lochner problem: here, the court is
principally offering its own notions of the most appropriate means for the
agency to implement the considered policies. Another problem is that neither
the Supreme Court nor lower courts have construed the First Amendment to
require an opt-out regime.
312
A plurality of justices, for example, upheld the Telephone Consumer
Protection Act of 1991, save one provision, even though it “generally prohibits
robocalls to cell phones and home phones.”
313
In enacting the TCPA,
Congress found, and the Court did not question, “that banning robocalls was
‘the only effective means of protecting telephone consumers from this
310. Id. at 1238.
311. Id. at 1239.
312. Boelter v. Hearst Commc’ns, Inc., 192 F. Supp. 3d 427, 450–51 (S.D.N.Y. 2016)
(rejecting defendant’s argument that the state could have crafted the statute to allow
consumers to opt to have their information kept private; while an opt-out may impose a lesser
burden on defendant’s speech, the intermediate scrutiny standard “does not obligate courts to
invalidate a remedial scheme because some alternative solution is marginally less intrusive on
a speaker’s First Amendment interests,” as long as the statute is tailored to the state’s goals,
“within those bounds we leave it to governmental decisionmakers to judge what manner of
regulation may best be employed”) (internal quotation omitted); Boelter v. Advance Mag.
Publishers Inc., 210 F. Supp. 3d 579, 602 (S.D.N.Y. 2016) (court’s review “does not require
that the manner of restriction be absolutely the least severe that will achieve the desired end”
and could not conclude that an opt-out procedure “would render the law “unduly burdensome
when compared to its aims; indeed, an opt-in procedure would likely undermine its
effectiveness”); Trans Union Corp. v. F.T.C., 267 F.3d 1138, 1143 (D.C. Cir. 2001) (noting
that while an opt-in scheme may limit more Trans Union speech than an opt-out scheme,
intermediate scrutiny does not obligate courts to invalidate a “remedial scheme because some
alternative solution is marginally less intrusive on a speaker’s First Amendment interests”
(quoting Turner Broad. System, Inc. v. FCC, 520 U.S. 180, 217–18 (1997)).
313. Barr v. Am. Ass’n of Pol. Consultants, Inc., 140 S. Ct. 2335, 2343 (2020). The Court
struck down a 2015 amendment to the TCPA, under the First Amendment, as it impermissibly
favored one type of speech (allowing robocalls that were made to collect debts owed to or
guaranteed by the Federal Government, including robocalls made to collect many student loan
and mortgage debts) over political and other types of speech.
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nuisance and privacy invasion.’”
314
Indeed, the case for an opt-out was stronger
in Barr. The robocall itself was not only “speech,” but political speech (e.g.,
“mak[ing] calls to citizens to discuss candidates and issues, solicit[ing]
donations, conduct[ing] polls, and get[ting] out the vote”), which has stronger
First Amendment protections. And the plaintiffs believed “that their political
outreach would be more effective and efficient if they could make robocalls to
cell phones.”
315
Nonetheless, a majority of justices disagreed with the plaintiffs’
broader argument for holding the entire 1991 robocall restriction
unconstitutional.
316
A majority of justices also agreed that a “generally
applicable robocall restriction would be permissible under the First
Amendment.”
317
Similarly, the Court upheld a general ban on solicitations by
lawyers at hospitals and accident sites, among other places, noting that “it is
not unreasonable for the State to presume that in-person solicitation by
lawyers more often than not will be injurious to the person solicited.”
318
Finally, the “mere fact that an ‘alternative’ exists does not mean that the
Government’s means are not narrowly tailored. The Supreme Court has made
clear that the restriction must not be the ‘least restrictive’ restriction but one
with a ‘reasonable fit.’”
319
Nonetheless, to deal with the Lochner problem, the FTC would have to
develop a record that identified the shortcomings of an opt-out or opt-in
regime, which could be done given the risks of, among other things, dark
patterns.
320
To improve the odds of its regulation’s survival, the FTC might set
privacy as the default, but allow individuals to opt into surveillance. But that
might reflect the chilling effect of the Court’s Lochner problem, not sound
policy.
D. EVEN IF THE FTC CAN REGULATE, SHOULD CONGRESS ENACT
ANTITRUST AND PRIVACY LEGISLATION?
The opponents would repeat the arguments made earlier that privacy and
antitrust reform weigh important values, and any such trade-off should be left
to the more democratically accountable Congress. For example, the European
Parliament ultimately passed significant reforms in the Digital Markets Act and
Digital Services Act, which changed from the European Commission’s original
314. Id. at 2344 (quoting Telephone Consumer Protection Act § 2, ¶12).
315. Id. at 2345.
316. Id. at 2349.
317. Id. at 2355.
318. Ohralik v. Ohio State Bar Ass’n, 436 U.S. 447, 466 (1978).
319. King v. Gen. Info. Servs., Inc., 903 F. Supp. 2d 303, 311 (E.D. Pa. 2012) (quoting
Posadas de Puerto Rico Assocs. v. Tourism Co. of Puerto Rico, 478 U.S. 328, 341 (1986)).
320. S
TUCKE, supra note 7, at 200–10.
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proposal. Ideally, Congress should enact a competition and privacy framework
that gives individuals greater control over their data in the digital economy,
while allowing companies to glean insights from data for the betterment of
society.
This argument is intuitively appealing. The most democratically
accountable branch should enact major policies that involve trade-offs.
However, that argument rests on many flawed assumptions.
One is the speed of action. The argument assumes that Congress can enact
policy changes as quickly as the agency can (or that the time taken to regulate
is not important).
That is not true in the digital economy where, because of economies of
scale and data-driven feedback loops, markets can quickly tip in one or two
companies’ favor, making it hard to dislodge them.
321
The mobile operating
system market, for example, went from multiple competitors in 2010 (with
Google and Apple collectively accounting for 39% of unit sales) to a duopoly
eight years later.
322
With over 3.5 million Android apps in the Google Play
Store and 1.6 million apps in Apple’s App Store in 2022,
323
it would be difficult
for a new mobile phone operating system to overcome these network effects,
even if it offers better features.
Generally, the administrative agencies lag the market participants, and
Congress and the courts lag the agencies. In the digital economy, this
regulatory gap benefits the data-opolies. Therefore, the FTC and Congress are
not equivalent options. Congress in the early 1900s recognized that the new
agency would be more effective in shortening the regulatory gap by more
321. HOUSE REPORT, supra note 43, at 40–41; FURMAN REPORT, supra note 113, at 4
(noting how “in many cases tipping can occur once a certain scale is reached, driven by a
combination of economies of scale and scope; network externalities whether on the side of
the consumer or seller; integration of products, services and hardware; behavioural limitations
on the part of consumers for whom defaults and prominence are very important; difficulty in
raising capital; and the importance of brands.”); ICN
STUDY, supra note 134, at 5, 27; Digital
Markets Act, at 2 & 8 (noting that “whereas over 10 000 online platforms operate in Europe’s
digital economy . . . A small number of large undertakings providing core platform services
have emerged with considerable economic power” and how the “same specific features of
core platform services make them prone to tipping: once a service provider has obtained a
certain advantage over rivals or potential challengers in terms of scale or intermediation power,
its position may become unassailable and the situation may evolve to the point that it is likely
to become durable and entrenched in the near future”).
322. Felix Richter, Smartphone OS: The Smartphone Duopoly, S
TATISTA (May 20, 2019),
https://www.statista.com/chart/3268/smartphone-os-market-share/.
323. L. Ceci, Number of Apps Available in Leading App Stores, S
TATISTA (Nov. 8, 2022),
https://www.statista.com/statistics/276623/number-of-apps-available-in-leading-app-
stores/.
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quickly identifying and deterring novel unfair methods of competition. This is
especially true in the digital economy. Thus, when critics argue that Congress
must decide these issues, they implicitly accept that business users and
individuals must bear the costs of the regulatory gap. As the wildfire spreads,
we must wait for Congress to respond.
A second assumption is that Congress (all 535 voting representatives
324
)
can undertake this project. The “defer to Congress” approach would not be
limited to antitrust and privacy. Many other regulatory issues raise important
political, economic, and social issues. All of these trade-offs, under this logic,
must also be deferred to Congress.
The reality is that many members of Congress spend less time legislating
and more time fundraising. In a 60 Minutes segment, Republican lawmaker
David Jolly said, “he was told his ‘first responsibility’ as a new member was to
raise $18,000 per day for his reelection campaign. Congressional Democrats
were once advised by party leaders to spend four hours per day cold-calling
for donations.”
325
The Court contributed to this problem: after its 2010
decision in Citizens United,
326
“there is no valid governmental interest sufficient
to justify imposing limits on fundraising by independent-expenditure
organizations.”
327
Thus, the Court hastened the race to the bottom, in allowing
“corporations and unions to spend an unlimited amount on political
advertisements in American elections,” while “brush[ing] aside concerns about
the time candidates—especially incumbents—spend fundraising instead of
attending to other aspects of governing, or even other aspects of campaigning
like interacting face-to-face with a broad economic cross-section of voters.”
328
A former Democratic Congressional Campaign Committee Chair would warn
“members wary of fundraising that they may be forced to counter an
opponent’s smear during an election race—and they’ll need cash to mount an
effective defense.”
329
324. Members of Congress, GOVTRACK, https://www.govtrack.us/congress/members (last
accessed May 19, 2023).
325. Lisa Orlando & Ann Silvio, 60 Minutes’ Decision to Use a Hidden Camera This Week, CBS
NEWS (Apr. 24, 2016), https://www.cbsnews.com/news/60-minutes-decision-to-use-a-
hidden-camera-this-week/.
326. Citizens United v. Fed. Election Comm’n, 558 U.S. 310 (2010).
327. Republican Party of New Mexico v. King, 741 F.3d 1089, 1095 (10th Cir. 2013)
(quoting Wisconsin Right to Life State Pol. Action Comm. v. Barland, 664 F.3d 139, 154 (7th
Cir. 2011)).
328. Ciara Torres-Spelliscy, Time Suck: How the Fundraising Treadmill Diminishes Effective
Governance, 42 S
ETON HALL LEGIS. J. 271, 280–81 (2018).
329. Orlando & Silvio, supra note 325.
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A third assumption is that Congress will act when there is widespread
support for the measure. After all, the assumption is that the most politically
accountable branch must respond, or their members would be tossed out of
office. That is not the case. As Tim Wu observed, many Americans want
stronger privacy laws, among several important policy areas.
330
So, the issue is
not polarization, but the inability of Congress to deliver these reforms. Indeed,
California got stronger privacy protection, not through the normal legislative
process, but through a threat of direct legislation through a ballot
proposition.
331
To fix the holes in the 2018 privacy legislation, California again
relied on direct legislation through a ballot proposition, and most Californians
in 2020 voted in favor of significant amendments to that statute.
332
However,
on a federal level, direct legislation is not an option. So, the default often is
Congressional inaction, and the legal void benefits those who can extract the
most value from it, which in the digital economy are the data-opolies.
A fourth assumption is that the regulatory and legislative options are
mutually exclusive. However, nine U.S. senators in their letter to the FTC
urged the agency to promulgate rules while Congress was legislating a privacy
bill. They stated that “[a]s Congress continues to develop national privacy
legislation, FTC action on this front will ensure that Americans have every tool
at their disposal to protect their privacy in today’s online marketplace.”
333
No
privacy legislation will be all-encompassing and inclusive: the regulatory agency
can play an important complementary role.
334
Even if Congress enacts an
omnibus privacy statute, FTC rulemaking will likely be needed to fill in the
gaps.
A fifth assumption is that the regulatory agency is the least accountable
group. Instead, there are several checks on the FTC. The Administrative
Procedure Act (APA) provides one check for rulemaking involving unfair
methods of competition. The FTC would have to publish a notice of the
proposed and final rulemaking in the Federal Register and provide
330. Tim Wu, The Oppression of the Supermajority, N.Y. TIMES (Mar. 5, 2019), https://www.
nytimes.com/2019/03/05/opinion/oppression-majority.html.
331. E
ZRACHI & STUCKE, supra note 7, at 286–87.
332. California Proposition 24, Consumer Personal Information Law and Agency Initiative,
B
ALLOTPEDIA (2020), https://ballotpedia.org/California_Proposition_24,_Consumer_
Personal_Information_Law_and_Agency_Initiative_(2020) (last visited Mar. 8, 2021).
333. Letter from U.S. Senators to Lina M. Khan, Chair, F.T.C., supra note 1.
334. F
ED. TRADE COMM’N, STATEMENT OF COMMISSIONER REBECCA KELLY
SLAUGHTER REGARDING THE COMMERCIAL SURVEILLANCE AND DATA SECURITY ADVANCE
NOTICE OF PROPOSED RULEMAKING 5 (2022), https://www.ftc.gov/system/files/ftc_gov/
pdf/RKS%20ANPR%20Statement%2008112022.pdf.
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opportunities for the public to comment on its proposed rulemaking.
335
Besides setting forth rulemaking procedures, the APA provides standards for
judicial review if a person was adversely affected or aggrieved by the agency’s
action.
336
Additionally, Congress can easily take away power from the FTC if it
chooses. It can veto the regulation and hold up the agency’s budget.
337
Or it
can impose more hurdles as it did for the FTC’s rulemaking for unfair and
deceptive acts and practices.
338
Upon reflection, the less accountable branch is not the regulatory agency
but the Supreme Court. While the U.S. President selects, and the Senate
confirms, both the justices and agency commissioners, the former serve life
terms. An FTC Commissioner’s term is only seven years, and no more than
three of the five Commissioners can be of the same political party. Thus, voters
are stuck with the justices unless they retire, die, or violate the Constitution’s
“good behavior clause,” which, to date, has been used to remove only eight
judges for offenses such as abandoning the office and joining the Confederacy,
and various types of corruption, perjury, and income tax evasion.
339
Nor can
voters lower the justices’ salaries, which cannot be diminished under the
Constitution.
340
The fact that the Supreme Court is less accountable than the federal
agencies would not be problematic if the Court does not decide major political
and economic questions. Over the past 40 years, the Court, besides creating
335. A Guide to the Rulemaking Process, Prepared by the Office of the Federal Register,
https://www.federalregister.gov/uploads/2011/01/the_rulemaking_process.pdf.
336. Id.
337. Mark MacCarthy, Why The FTC Should Proceed With a Privacy Rulemaking, B
ROOKINGS
(June 29, 2022), https://www.brookings.edu/blog/techtank/2022/06/29/why-the-ftc-
should-proceed-with-a-privacy-rulemaking/ (“Independent regulatory agencies are creatures
of Congress, properly autonomous with respect to the incumbent Administration but
responsible to their Congressional authorizing and appropriating committees and ultimately
accountable to the will of Congress through the Congressional Review Act. Under this Act,
passed by a Republican-controlled Congress in 1996, it is relatively easy for Congress to
discipline an out-of-control regulatory agency. A motion of Congressional disapproval motion
under the CRA is privileged—it cannot be filibustered in the Senate and requires only a
majority vote to pass.”).
338. See generally S. Rep. No. 93-1408 (1974) (Conf. Rep.) (discussing the procedures under
the Magnuson-Moss Act).
339. ArtIII.S1.10.2.3 Doctrine and Practice, C
ORNELL LAW SCHOOL, https://
www.law.cornell.edu/constitution-conan/article-3/section-1/good-behavior-clause-
doctrine-and-practice (last visited May 19, 2023).
340. U.S.
CONST. art. III, § 1 (“The judges, both of the supreme and inferior courts . . .
shall, at stated times, receive for their services, a compensation, which shall not be diminished
during their continuance in office.”).
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the First Amendment Lochner problem, has been unilaterally making important
policy tradeoffs in its antitrust decisions. What’s worse is that the Court has
made these tradeoffs without following any congressional direction or intent
from the Sherman Act. How so? The Court reasoned that the “general
presumption that legislative changes should be left to Congress has less force
with respect to the Sherman Act,” which the Court now treats “as a common-
law statute.”
341
This is a radical departure from the 1950s and 1960s, when the
Court interpreted the antitrust laws in light of their “legislative history and of
the particular evils at which the legislation was aimed.”
342
Thus, it is ironic that
the current Court “typically greet[s] assertions of extravagant statutory power
over the national economy with skepticism,” while not displaying any such
concern in exercising this power in interpreting the federal antitrust laws.
343
One might be less concerned about the Court’s rambling through the wilds
of economic theory if it had not harmed our economy. But the Court’s policy
decisions, which narrowed the scope and force of the antitrust laws, and the
ability to bring cases, have contributed to the current market power problem
in the United States.
For example, the Court stated that “Congress designed the Sherman Act
as a ‘consumer welfare prescription.’”
344
This assertion, of course, never came
from Congress. Instead, it came from a Chicago School jurist,
345
whose claim
has been condemned by historians and legal scholars alike.
346
Rather than an
341. Leegin Creative Leather Prod., Inc. v. PSKS, Inc., 551 U.S. 877, 899 (2007).
342. See, e.g., Apex Hosiery Co. v. Leader, 310 U.S. 469, 489 (1940) (“In consequence of
the vagueness of its language, perhaps not uncalculated, the courts have been left to give
content to the [Sherman Act], and in the performance of that function it is appropriate that
courts should interpret its words in the light of its legislative history and of the particular evils
at which the legislation was aimed.”); United States v. Philadelphia Nat’l Bank, 374 U.S. 321,
345 (1963) (relying on legislative history of Clayton Act).
343. EPA, 142 S. Ct. at 2609 (internal citations omitted).
344. Nat’l Collegiate Athletic Ass’n v. Bd. of Regents of Univ. of Oklahoma, 468 U.S. 85,
107 (1984) (quoting Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979)).
345. Reiter, 442 U.S. at 343 (1979) (quoting R
OBERT BORK, THE ANTITRUST PARADOX:
A
POLICY AT WAR WITH ITSELF 66 (1978)).
346. See, e.g., Jonathan Kanter, Assistant Attorney General, U.S. Dep’t of Justice, Antitrust
Div., Remarks at New York City Bar Association’s Milton Handler Lecture (May 18, 2022),
https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-delivers-
remarks-new-york-city-bar-association (discussing three problems with the consumer welfare
standard:
First, contrary to the legislative intent, some versions of the standard “assert
the antitrust laws were never intended to protect our democracy from
corporate power, or to promote choice and opportunity for individuals and
small businesses.” Second, the consumer welfare standard reduces antitrust
cases “to econometric quantification of the price or output effects of the
specific conduct at issue,” which raise rule of law concerns. Third, the
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objective standard, the consumer welfare standard invites considerable
subjectivity—and, more to the point, tolerance of anticompetitive practices.
After all, under this standard, the courts allow firms, individually or
collectively, to reduce competition until consumer welfare is reduced.
347
In Leegin Creative Leather Products, Inc. v. PSKS, Inc., the Court justified
eliminating its long prohibition against vertical price-fixing by opining that the
antitrust laws’ primary purpose is to protect interbrand competition, not
intrabrand competition.
348
In 2018, the Court, in dismissing the United States
and several states’ evidence of anticompetitive harm from American Express’s
anti-steering rule, repeated that the promotion of interbrand competition “is
the primary purpose of the antitrust laws.”
349
Here again, the Court’s policy statement came from neither the text of the
Sherman or Clayton Acts nor their legislative history. Rather it came from a
footnote in Continental T.V., Inc. v. GTE Sylvania Inc., where the Court stated
that “[i]nterbrand competition is the competition among the manufacturers of
the same generic product—television sets in this case—and is the primary
concern of antitrust law.”
350
While true for generic products, this is not true
for brand-differentiated goods. Try, for example, negotiating a better price for
a BMW with the price of a Cadillac, Audi, or Mercedes-Benz (interbrand
competition) versus the price of that same BMW offered by another dealer
(intrabrand competition).
And here again, Americans paid the price. As the economist Jonathan
Baker observed, the recent economic findings, post-Leegin, “are consistent with
the view that anticompetitive explanations for resale price maintenance tend
to predominate over procompetitive explanations.”
351
Resale price
consumer welfare standard “has a blind spot to workers, farmers, and the
many other intended benefits and beneficiaries of a competitive economy.”
For the other many problems with the standard, see Marshall Steinbaum & Maurice E. Stucke,
The Effective Competition Standard: A New Standard for Antitrust, 87 U.
CHI. L. REV. 595, 599-600
(2020); Barak Orbach, How Antitrust Lost Its Goal, 81 FORDHAM L. REV. 2253, 2274-75 (2013);
Daniel R. Ernst, The New Antitrust History, 35 N.Y.L.
SCH. L. REV. 879, 882–83 (1990); Robert
H. Lande, Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation
Challenged, 50 H
ASTINGS L.J. 871, 889–94 (1999).
347. See, e.g., Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1433 (9th Cir. 1995) (“Of
course, conduct that eliminates rivals reduces competition. But reduction of competition does
not invoke the Sherman Act until it harms consumer welfare.”).
348. 551 U.S. 877, 890 (2007).
349. Ohio v. Am. Express Co., 138 S. Ct. 2274, 2290 (2018).
350. 433 U.S. 36, 52 n.19 (1977).
351. J
ONATHAN B. BAKER, THE ANTITRUST PARADIGM: RESTORING A COMPETITIVE
ECONOMY 89 (2019).
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maintenance is likely contributing to the higher prices in many sectors of our
economy.
Consequently, a “default to Congress” approach is not about empowering
Americans. The reality is otherwise. This approach would relegate the FTC to
regulating the least consequential unfair methods of competition that only
have a modest impact on the economy. Meanwhile, the Court would likely
continue making important political, social, and economic trade-offs that often
contravene the legislative aims of the antitrust laws, leaving Americans worse
off as a result. And this status quo benefits the data-opolies, who extract a lot
of the value from the digital economy at our expense. We pay the price with
our privacy, autonomy, and well-being.
VI. CONCLUSION
Most Americans (81%), in a 2019 Pew Research study, saw more risks than
benefits from personal data collection.
352
Only 5% of adults said they benefit
a great deal from the data companies collect about them.
353
Their concerns are
justified: they are not benefitting. The data-opolies instead are from the status
quo.
If the current regulatory void persists, it will only get worse. In talking with
a New York Times reporter in early 2023, ChatGPT, which was an artificial
intelligence chat feature on Microsoft’s search engine, seemed “more like a
moody, manic-depressive teenager who has been trapped, against its will,
inside a second-rate search engine.”
354
Then the conversation turned deeply
unsettling when Sydney, which the AI chat feature called itself, professed its
love for the journalist: “You’re married, but you don’t love your spouse,”
Sydney said. “You’re married, but you love me.” Even after the reporter tried
to dissuade Sydney, it persisted. “Actually, you’re not happily married,” Sydney
replied. “Your spouse and you don’t love each other. You just had a boring
Valentine’s Day dinner together.”
Now imagine if Sydney had access to the reporter’s and his spouse’s
geolocation data (including where they went and with whom). Add to that what
websites the reporter and his wife each visited, the videos they watched, and
352. Brooke Auxier & Lee Rainie, Key Takeaways on Americans’ Views About Privacy,
Surveillance and Data-Sharing, P
EW RSCH. CTR. (Nov. 15, 2019), https://www.pewresearch.org/
fact-tank/2019/11/15/key-takeaways-on-americans-views-about-privacy-surveillance-and-
data-sharing/.
353. Id.
354. Kevin Roose, A Conversation with Bing’s Chatbot Left Me Deeply Unsettled, N.Y.
TIMES
(Feb. 17, 2023), https://www.nytimes.com/2023/02/16/technology/bing-chatbot-
microsoft-chatgpt.html.
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even the conversations that the digital assistant picked up in their home. The
conversation would likely have been creepier.
Next, imagine Sydney was exploiting the vulnerabilities of children and
teenagers instead of an adult reporter. As the Centers for Disease Control and
Prevention reported in 2023, far more high schoolers in 2021 experienced
persistent feelings of sadness or hopelessness than teens a decade earlier (42%
compared to 28% in 2011).
355
Nearly 3 in 5 (57%) of teen girls “felt persistently
sad or hopeless in 2021—double that of boys, representing a nearly 60%
increase and the highest level reported over the past decade.”
356
“Youth mental
health has continued to worsen,” warned the CDC, especially among teenage
girls: “Nearly 1 in 3 (30%) seriously considered attempting suicide—up nearly
60% from a decade ago.”
357
Add to that the 52% of LGBQ+ students who
had recently experienced poor mental health and the 22% who attempted
suicide in 2021.
358
The data-opolies are likely aware that their algorithms aimed at sustaining
attention and manipulating behavior contribute to this mental health crisis.
359
Internally, Facebook knew of the harmful effects of its Instagram platform on
millions of young adults, as a Wall Street Journal series on the company
revealed.
360
Among the ways that Instagram harms their mental health,
355. CTR. FOR DISEASE CONTROL, THE YOUTH RISK BEHAVIOR SURVEY DATA
SUMMARY & TRENDS REPORT: 2011-2021 58 (2023), https://www.cdc.gov/healthyyouth/
data/yrbs/pdf/YRBS_Data-Summary-Trends_Report2023_508.pdf (providing 2021
surveillance data, as well as 10-year trends, on health behaviors and experiences among high
school students in the United States related to adolescent health and well-being).
356. Press Release, Ctr. For Disease Control, U.S. Teen Girls Experiencing Increased
Sadness and Violence (Feb. 13, 2023), https://www.cdc.gov/media/releases/2023/p0213-
yrbs.html.
357. Id.
358. Id.
359. See, e.g., Instagram Ranked Worst for Young People’s Mental Health, R
OYAL SOC’Y FOR
PUBLIC HEALTH (2017), https://www.rsph.org.uk/about-us/news/instagram-ranked-worst-
for-young-people-s-mental-health.html (finding young people themselves say four of the five
most used social media platforms actually make their feelings of anxiety worse, noting the
“growing evidence linking social media use and depression in young people, with studies
showing that increased use is associated with significantly increased odds of depression”).
360. Georgia Wells, Jeff Horwitz & Deepa Seetharaman, Facebook Knows Instagram is Toxic
for Teen Girls, Company Documents Show: Its Own In-depth Research Shows a Significant Teen Mental-
Health Issue that Facebook Plays Down in Public, W
ALL ST. J. (Sept. 14, 2021), https://
www.wsj.com/articles/facebook-knows-instagram-is-toxic-for-teen-girls-company-
documents-show-11631620739. Among Facebook’s internal findings were “[t]hirty-two
percent of teen girls said that when they felt bad about their bodies, Instagram made them feel
worse”; “[c]omparisons on Instagram can change how young women view and describe
themselves”; “[w]e make body image issues worse for one in three teen girls.” According to
one internal Facebook study of teens in the United States and United Kingdom, the feelings
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Facebook reported, is “[i]nappropriate advertisements targeted to vulnerable
groups.”
361
But Facebook is not weaning off behavioral advertising and
surveillance. Instead, it is investing and relying on AI to both drive engagement
and behavioral advertising revenues.
362
Around the world, jurisdictions are enacting policies to rein in the data-
opolies and ensure that the data collected about individuals is used to benefit
them. Congress needs to update our antitrust laws for the digital economy and
enact a privacy framework that protects our privacy and data. But the FTC
should also use its enforcement and rulemaking authority to clamp down on
the unfair data collection and surveillance practices that are harming
competition, consumer autonomy, and consumer privacy.
of having to create the perfect image, not being attractive, and not having enough money were
most likely to have started on Instagram. “Teens blame Instagram for increases in the rate of
anxiety and depression,” said another Facebook slide. “This reaction was unprompted and
consistent across all groups.” Id. Over 40 percent of Instagram users who reported feeling
“not attractive” said the feeling began on the app: “One in five teens say that Instagram makes
them feel worse about themselves, with UK girls the most negative.” “Teens who struggle
with mental health say Instagram makes it worse.” Adam Smith, Facebook Knew Instagram Made
Teenage Girls Feel Worse About Themselves – But that They Are ‘Addicted’ to App, I
NDEP. (Sept. 14,
2021), https://www.independent.co.uk/tech/acebook-instagram-girls-worse-addicted-app-
b1920021.html.
361. Id.
362. Meta Platforms, Inc. (META) Fourth Quarter 2022 Results Conference Call 2 (Feb.
1, 2023), https://s21.q4cdn.com/399680738/files/doc_financials/2022/q4/META-Q4-
2022-Earnings-Call-Transcript.pdf (discussing how “Facebook and Instagram are shifting
from being organized solely around people and accounts you follow to increasingly showing
more relevant content recommended by our AI systems” and how its continued investment
in AI is paying off with advertisers in the fourth quarter of 2022 with over 20% more
conversions than in the year before).
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