FCC Votes To Block Its Own Privacy Rule

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New Federal Communications Commission (“FCC”) Chairman Ajit Pai signaled last week that he is planning to take the first step to return authority over broadband providers’ privacy and data security practices to the Federal Trade Commission (“FTC”).  Consistent with that directive, on March 1, 2017, the FCC Commissioners voted 2-1 to stay the implementation of an Obama-era FCC data security rule that would have required internet service providers (“ISPs”) to take more stringent steps to protect consumers’ personal data.

The FTC arguably already regulates consumer privacy and data security on the Internet, both for ISPs (cable and wireless companies) and “edge providers” (other companies and platforms on the Internet).  Critics of the FCC broadband privacy rules, which were adopted in October 2016, believe the ISP data security rule would have unfairly subjected ISPs to stricter privacy requirements than edge providers, since the rule only applies to ISPs and the FTC already has rules that arguably apply to ISPs and edge providers.  For example, the rule would have required ISPs to obtain consent before using certain consumer data for advertising and internal marketing.  The reason the FTC only “arguably” has the authority to regulate both ISPs and edge providers is that the FCC’s Open Internet Order of 2015 reclassified ISPs as Title II common carriers.  In FTC v. AT&T Mobility LLC, the U.S. Court of Appeals for the Ninth Circuit held in August 2016 that common carriers are exempt from the FTC’s jurisdiction; however, this decision appears to be ripe for U.S. Supreme Court review, as other courts have disagreed with the Ninth Circuit.

After the vote on Wednesday, FTC Chairman Maureen K. Ohlhausen and FCC Chairman Pai issued a joint statement saying that they “disagreed with the FCC’s unilateral decision in 2015 to strip the FTC of its authority over broadband providers’ privacy and data security practices, removing an effective cop from the beat.”  Furthermore, they “still believe that jurisdiction over broadband providers’ privacy and data security practices should be returned to the FTC, the nation’s expert agency with respect to these important subjects” because “all actors in the online space should be subject to the same rules, enforced by the same agency.”  Ohlhausen and Pai explained that the vote to stay the implementation of the data security rule was based on the rule’s inconsistency with the FTC’s privacy framework (i.e. stricter requirements for ISPs).  Until jurisdiction over broadband providers’ privacy and data security practices is returned to the FTC, Ohlhausen and Pai promised to “work together on harmonizing the FCC’s privacy rules for broadband providers with the FTC’s standards for other companies in the digital economy.”

FCC Commissioner Mignon Clyburn, the only Democratic Commissioner, issued a strong dissent that condemned the vote as leaving no option to ensure the protection of personal data online.  Clyburn wrote, “Because of the 9th Circuit decision [FTC v. AT&T Mobility LLC] that seriously called into question the ability of the FTC to regulate any business that has a common carrier component, the Commission’s action today means that a voluntary industry code is the only comprehensive federal protection for broadband data security.”  Senator Ed Markey (D-MA), who has been critical of Chairman Pai since he took the position, described the vote as an attack on privacy rights and net neutrality, stating, “Chairman Pai has fired his opening salvo in the war on the Open Internet Order, and broadband privacy protections are the first victim.”

Others have praised the vote as ensuring a uniform set of privacy protections for consumers.  For example, The Internet & Television Association (“NCTA”) stated, “Today’s FCC action to issue a temporary stay of the data security regulation is a welcome recognition that consumers benefit most when privacy protections are consistently applied throughout the internet ecosystem.”  The NCTA also recently argued in a letter to Congress that the FCC rule “would create confusion and interfere with the ability of consumers to receive customized services and capabilities they enjoy and be informed of new products and discount offers.”

Meanwhile, industry lobby groups, including the NCTA, are asking Congress to consider using the Congressional Review Act to do away with the Open Internet Order of 2015 and prevent the FCC from revisiting such privacy rules for ISPs in the future.  Senator Markey has promised to “oppose any efforts to roll back these important rules [both the Open Internet Order and the FCC broadband privacy rules] either by Congress or by the [FCC], and [to] rally millions of Americans to this cause.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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