The upshot, for busy people:
- On January 20, 2022, the US Federal Trade Commission (FTC) continued its recent experiment in holding open meetings of its commissioners. These meetings typically last around an hour and involve two segments: (1) comments from members of the public and then (2) official FTC business, where commissioners vote on matters and make statements on the FTC’s initiatives and goals.
- In this meeting, the FTC did not vote on new initiatives, and the commissioners’ individual statements were anodyne on the topic of preventing identity theft. This is not surprising—the FTC is split 2-2 between Democrats and Republicans, meaning that Chair Lina Khan will need to wait for the third Democratic commissioner before plowing ahead with the non-bipartisan portions of her agenda.
- Public comments focused on two areas: possible anticompetitive conduct in the franchise industry against franchisees, including practices such as requiring franchisees to purchase products from the franchisor; and data privacy concerns related to children using payment apps that might not be subject to the Children’s Online Privacy Protection Rule (COPPA), which the FTC enforces with civil penalties.
- Franchisors and fintechs offering payment systems should take note and examine the practices highlighted by the public’s comments. The comments from the public often trigger interest by commissioners, other FTC officials or staff.
Background: In the past, FTC commissioner meetings have taken place exclusively behind closed doors. Breaking with tradition, Chair Khan began her tenure at the agency by holding monthly meetings of the FTC commissioners that are open to the public. To be sure, the vast majority of the commissioners’ deliberations and meetings are closed to the public. But over the past half year, the FTC has held monthly open meetings where the commissioners vote on certain, pre-selected agency initiatives and read pre-written statements. The FTC also allows individuals from the public two minutes of airtime to raise issues for the FTC’s consideration.
So far, these meetings have seen a number of recurring themes:
- The issues up for consideration are often more partisan—before then-Commissioner Rohit Chopra left to lead the US Consumer Financial Protection Bureau (CFPB) as its director, many of the open meetings generated 3-2 party-line votes. That pattern has changed now that the commission is deadlocked 2-2 between Democrats and Republicans. But expect party-line votes to return when the Senate confirms Chopra’s replacement, Alvaro Bedoya.
- The Republican commissioners, Christine Wilson and Noah Phillips, often use their speaking time to observe the shortcomings of the open-meeting format and to raise broader concerns regarding the FTC’s direction under Chair Khan, in addition to comments regarding the specific matters under consideration.
- FTC staff frequently make presentations about various initiatives or topics that often are related to the items the commissioners will be voting on.
- The FTC has been playing with formatting. For the first handful of meetings, the commissioners voted on matters before hearing from the public, the reverse of what one would expect. Starting in November, Chair Khan switched the order after receiving comments to that end.
- The individuals from the public who participate range wildly in perspective and experience, from industry representatives raising broader policy concerns to individual workers bringing their personal experiences to the FTC’s attention.
The “tentative” agenda. A week prior to these public meetings, the FTC typically releases a tentative agenda. Released on January 13, the tentative agenda for this meeting stated that Chair Khan would begin the meeting with opening remarks and that the “business” for the day would consist of a staff presentation on recent trends in identity theft.
What actually happened? True to the FTC’s word, its only official business consisted of a staff presentation regarding identity theft and comments from the commissioners regarding the FTC’s law enforcement efforts in that space. The lack of acrimony of this latest meeting is consistent with the FTC’s public meetings since Chopra left for the CFPB. For example, the previous two open meetings dealt with bipartisan votes related to a rulemaking on impersonation scams and a study of supply chain disruptions.
The three public comments were a bit more interesting. The first two commenters expressed concerns regarding the franchisors in the retail and hotel industries, flagging what they believed were anticompetitive practices harming franchisees—including, for example, requiring franchisees to buy products directly from the franchisor. The third commenter raised concerns regarding children’s use of mobile payment apps, suggesting that the FTC should focus on any gaps between the protections under COPPA and the generally applicable privacy rules under the Gramm-Leach-Bliley Act.
What does this mean for my business? With respect to the official business, nothing. But companies should be on the lookout for the FTC’s forthcoming advanced notice of proposed rulemaking on privacy, data security and algorithms, which the agency anticipates publishing in February 2022.
But companies in the franchise and mobile payments space should take note. Comments from the public can pique the interest of FTC commissioners and others in leadership positions. So franchisors should review their franchise agreements with an eye to antitrust issues. And mobile payments providers should carefully review how they market their products, what they know about their users, and any third-party sources of data they may acquire to evaluate whether the providers may potentially be subject to COPPA’s requirements.