On September 8, 2022, the Federal Trade Commission hosted a virtual public forum on its Advanced Notice of Proposed Rulemaking (“ANPR”) concerning “commercial surveillance and lax data security.” The forum featured remarks from FTC Chair Lina Kahn, Commissioner Rebecca Kelly Slaughter and Commissioner Alvaro Bedoya, as well as panels with industry leaders and consumer advocates.

Remarks from Chair Khan and Commissioners Slaughter and Bedoya focused on the need for public participation in the rulemaking process and the FTC’s role in privacy regulation in the absence of comprehensive federal legislation. Commissioner Slaughter noted that, until such federal legislation is passed, the FTC will continue to use its Section 5 authority to regulate unfair and deceptive practices related to privacy and data security.

The industry panel was moderated by FTC Senior Advisor Olivier Sylvain and focused in part on how the FTC should structure a potential rule. Multiple industry panelists emphasized the need for rules that limit out-of-context data use or tracking, while still allowing in-context use to as consumers expect. Industry panelists also highlighted the need for heightened rules for “dominant” industry players and financial penalties for bad behaviors.

The consumer advocate panel focused on issues surrounding meaningful consumer consent and the negative effects of commercial surveillance on consumers, such as one-click background checks and demographic-tailored advertising that disproportionately affects minority groups in negative ways. Similar to the industry panel, consumer advocate panelists also highlighted out-of-context data use and dominant industry actors as some of the major issues the FTC should address in its rulemaking.  The FTC will receive public comments on the ANPR until October 21, 2022.

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Both the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) have authority to enforce Section 7 of the Clayton Act by investigating and challenging mergers where the effect of such transaction “may be substantially to lessen competition or tend to create a monopoly.”

However, the enforcement paths of these two federal agencies differ markedly. DOJ pursues all aspects of its enforcement actions in the federal court system. The FTC, on the other hand, only uses the federal district courts to seek injunctive relief, but otherwise follows its own internal administrative process that combines the investigatory, prosecutorial, adjudicative, and appellate functions within a single agency.

Whether a transaction is subjected to DOJ or FTC review is determined by a “clearance” process with no public visibility. To many, including entities in the health care industry—and, in particular, parties to hospital mergers that are now routinely “cleared” to the FTC (exemplified by two recently filed enforcement actions against hospitals in New Jersey and Utah)—this process appears to be arbitrary. It is also particularly daunting because the FTC has not lost an administrative action in over a quarter-century. Because of the one-sided nature and duration of these administrative proceedings, most enforcement actions brought against merging hospitals rise or fall at the injunctive relief stage. This process also appears to embolden the FTC into taking unprecedented actions, including the pursuit of enforcement remedies against parties to abandoned transactions.

However, this may soon change. The Supreme Court of the United States has agreed to hear a case that raises a forceful constitutional challenge to the FTC’s structure and procedures. The Supreme Court recently agreed to combine the briefing schedule of this case with a similar case that successfully challenged the constitutionality of the administrative process of the Securities and Exchange Commission. The outcome of these cases may fundamentally alter the FTC’s enforcement process.

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