Unpacking Unfairness: The FTC's Evolving Measures of Privacy Harms

Abstract

Since 1994, when Congress codified the Federal Trade Commission’s (FTC or Commission) three-part test for unfair business practices, the FTC has been cautious in its use of charges of unfairness in consumer protection enforcement—instead relying primarily on charges of deception. This focus has led to “deception-creep,” an expansion of the Commission’s perception of what constitutes deception to include acts and practices that may more classically be described as unfair. Overall, the FTC’s enforcement effectiveness is reduced by adhering to a process that avoids applying the cost-benefit analysis required by the substantial injury prong of unfairness analysis. This neglect of unfairness enforcement reduces certainty in the consistency of FTC enforcement for businesses and consumers alike.

The FTC should embrace unfairness as an equal enforcement mechanism to deception. To properly utilize unfairness in privacy enforcement, the FTC must redefine the perimeters of unfairness and clearly draw the distinction between unfairness and deception. Once there is a defined understanding of when a violation falls under unfairness charges, the FTC can more effectively determine how best to utilize the codified unfairness test, including the cost-benefit analysis portion of determining whether an injury is substantial and constitutes an unfair practice.

To that end, we first briefly review the history of unfairness as an FTC enforcement tool, including trends in the frequency of its use. Next, we examine the unfairness test itself, analyzing the broad types of informational injuries that the FTC has deemed substantial in those privacy cases alleging unfairness. Finally, we divide these previously recognized injuries into operational categories, showing that the FTC has engaged in an implicit balancing test that recognizes informational injury based on the value of personal data. We recommend that the FTC formalize and publish the factors it has used to determine informational injury to provide further certainty for future privacy enforcement.

Keywords: Federal Trade Commission, Unfairness, Enforcement