The Federal Trade Commission's Inner Privacy Struggle

Abstract

The Federal Trade Commission (FTC) is not of a single mind on privacy matters. Its privacy efforts are led by attorneys in the agency’s Bureau of Consumer Protection, who are entrusted with case selection. These privacy efforts are evaluated by economists in the agency’s Bureau of Economics, who are skeptical of information privacy crusades. The tensions between these groups is not well understood by outsiders, yet these tensions provide a powerful explanation for the FTC’s privacy enforcement behavior. Understanding these tensions will grow in importance as the President Trump administration shapes the FTC. Going forward, the Bureau of economics is likely to have a more central, public role in case selection. The Bureau of Economics will also push to have more cases pled under the agency’s unfairness theory, because this cause of action gives the economists more space to introduce cost-benefit analysis.

This chapter discusses the cultural and ideological conflicts internal to the FTC on privacy, and explains why the lawyers at the Commission are leading the privacy charge. This is because the Bureau of Economics is constitutionally skeptical of information privacy. Privacy skepticism reflects the economists’ academic methods and ideological commitments. While information privacy is a deeply multidisciplinary field, the Bureau of Economics adheres to a disciplinarity that bounds its inquiry and causes it to follow a laissez faire literature. Commitments to “consumer welfare,” concerns about innovation policy, lingering effects of Reagan-era leadership, the lack of a clearly-defined market for privacy, and the return of rule of reason analysis in antitrust also contribute to the Bureau of Economics’ skepticism toward rights-based privacy regimes.

The chapter concludes with a roadmap for expanding the BE’s disciplinary borders, for enriching its understanding of the market for privacy, and for a reinvigoration of the FTC’s civil penalty factors as a lodestar for privacy remedies.

Keywords: privacy, cost benefit analysis, disciplinarity, consumer protection, case selection and evaluation, intra-institution conflict, market for privacy, dysfunctional equilibrium, game theory

JEL Classification: K2