A voice of sanity at the FTC

One commissioner tells truth about toothless settlements with tech companies

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The Federal Trade Commission has a long history of doling out meaningless wrist-slaps to transgressive technology firms and then bragging about the tough measures it took to protect consumers.

The latest example came this week, when the FTC announced a "record-setting penalty" against search giant Google for tracking users of Apple computers and mobile devices (the iPhone and iPad) beginning late last year by going around privacy settings on the Safari browser.

In its statement announcing the record $22.5 million settlement -- the most ever paid by a company to the federal commission -- the FTC said the penalty "sends a clear message to all companies under an FTC privacy order. No matter how big or small, all companies must abide by FTC orders against them and keep their privacy promises to consumers, or they will end up paying many times what it would have cost to comply in the first place."

Yes, and the clear message is that if you run afoul of the fearsome FTC, you will pay the equivalent of loose change scrounged up from the company parking lot. That $22.5 million Google is paying out comprises 0.8% of Google's $2.79 billion profit in the second quarter alone. And it comprises 0.18% of the search company's $12.21 billion revenue for Q2. That's like someone who makes $75,000 a year being forced to pay a fine of $138. A crippling blow by anyone's standards!

I've been railing about these meaningless FTC (and FCC) fines for a long time now (see railing links below), not just because they cause no real pain to the companies being "punished," but because as part of the settlements, these companies don't even have to admit wrong-doing. Even though they're paying "record" fines that "send a message" to other companies.

Now, finally, at least one FTC member has had enough. On the short end of a 4-1 vote, commissioner J. Thomas Rosch decided to write a strongly worded minority opinion questioning the point of settlements in which the powder-puff penalties are assessed without corresponding admissions of guilt:

There is no question in my mind that there is “reason to believe” that Google is in contempt of a prior Commission order. However, I dissent from accepting this consent decree because it arguably cannot be concluded that the consent decree is in the public interest when it contains a denial of liability. ...

[F]ar from explaining why this settlement is in the public interest despite Google’s denial of liability, the Commission merely asserts in its accompanying Reasons for Settlement that the “Commission believes that the settlement by entry of the attached final order is justified and well within the public interest.”

Why is this guy being so nit-picky here? Oh, yes...

[T]his is not the first time the Commission has charged Google with engaging in deceptive conduct. This is Google’s second bite at the apple. The Commission accuses it of violating the Google Buzz consent order by “misrepresent[ing] the extent to which users may exercise control over the collection or use of covered information” and accordingly, seeks civil penalties for those violations. In other words, the Commission charges Google with contempt. ...

[T]he Commission now has allowed liability to be denied not only in this matter but also in the Facebook settlement where Facebook simply promised to “go and sin no more” (unlike Google, Facebook was not previously under order). There is nothing to prevent future respondents with fewer resources than Google and with lower profiles than Google and Facebook from denying liability in the future too.

Exactly right. A system where companies engaged in wrongdoing are assessed meaningless, toothless fines and then allowed to deny any wrongdoing is a system that encourages continual wrongdoing. It's amazing that only one of the five commissioners actually gets this.

So congratulations to Mr. Rosch for pointing out the obvious. Let's hope he can get at least two more commissioners to see the light. That might be a challenge, though, since some really good lobbyist job opportunities with vendors such as Google and Facebook could be at stake!

Chris Nerney writes ITworld's Tech Business Today blog. Follow Chris on Twitter at @ChrisNerney. For the latest IT news, analysis and how-tos, follow ITworld on Twitter, Facebook, and Google+.

Now read this:
FTC's action over Google Buzz means Internet companies no longer will exploit personal data. Until they do.
Twitter put on double-secret FTC probation
FTC gives Google good talking to -- that should teach 'em!

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