Privacy & Information Security Law Blog

On December 27, 2021, the Federal Trade Commission sought public comment on a petition filed by Accountable Tech calling on the FTC to use its rulemaking authority to prohibit “surveillance advertising” as an “unfair method of competition” (“UMC”). Accountable Tech is a non-profit organization that advocates for social media companies to strengthen the integrity of their platforms.

In its petition, Accountable Tech cites President Biden’s Executive Order encouraging the FTC to use its rulemaking authority to establish rules that regulate “unfair data collection and surveillance practices that may damage competition, consumer autonomy, and consumer privacy.” Although the FTC typically has exercised its UMC authority through enforcement actions, Accountable Tech affirms that the Commission also may promulgate legislative rules under UMC. In addition, Accountable Tech claims that certain procedural limitations on the Commission’s ability to promulgate rules under its unfair or deceptive acts or practices authority do not apply in the UMC context.

Accountable Tech asserts that surveillance advertising is “inherently an unfair method of competition,” as it relies on and reinforces “monopoly power.” Specifically, the petitioner argues that because digital markets are “prone to tipping” (i.e., early competition is for the “entirety of the market”) dominant firms who entered the market early and gained access to massive user bases have continued to excel due to “self-perpetuating data advantages,” allowing them to continuously and unfairly extract and monetize more data while simultaneously raising competitors’ barriers to entry. Such “self-perpetuating data advantages” include the integration of extracted data across business lines, which Accountable Tech asserts effectively limits consumers’ ability to opt out of such ecosystems and allows dominant firms to “capture more data and market power,” as well as gain easy leverage to enter into adjacent markets. Accountable Tech claims that the anti-competitive nature of surveillance advertising and dominant firms’ abuse of their market power cause significant harm to businesses (e.g., publishers and advertisers), consumers, and society. For example, Accountable Tech claims that “resource-starved” publishers “effectively hand over proprietary audience data by embedding [dominant firms’] tracking tools.” Additionally, the petitioner asserts that some dominant firms have “repeatedly and knowingly inflat[ed] metrics, essentially defrauding advertisers.” With respect to consumers, Accountable Tech asserts that “for users of nominally ‘free’ product[s] paid for in the form of personal data,” each “new invasion of privacy and degradation of services” is an “effective price hike.” The petitioner also claims that dominant firms, in furtherance of their surveillance advertising businesses, have inflicted “a litany of significant harms” upon society, including perpetuating discrimination, exploiting kids and teens, fueling extremism, and amplifying misinformation.

Accountable Tech reasons that due to surveillance advertising’s “unfair business model” – where harm to competition and consumers “cannot be separated from the business model that produces them” – and the fact that litigation and other enforcement actions “have proven to be ineffective at constraining [such] harms,” the most “effective and administrable solution” is a full prohibition of the practice. Accountable Tech further provides the FTC with example rules, including those to prohibit “online platforms from using personal data for the purpose of delivering advertisements,” or “businesses from sharing user data, for the purposes of advertising, to any business line, website, advertising technology, or tracker other than the business or service with which a user intentionally interacts.” The public will have until January 26, 2022, to file comments.