FTC Commissioner Rohit Chopra, who some people think could become the next Commission Chair in the Biden Administration, has co-written a paper calling for the resurrection of the FTC’s Penalty Offense Authority, which it had abandoned in the 1980s. Chopra, writing with his counsel, Samuel A.A. Levine, wrote that
The Penalty Offense Authority is a unique tool in commercial regulation. Typically, first-time offenses involving unfair or deceptive practices do not lead to civil penalties. However, if the Commission formally condemns these practices in a cease-and-desist order, they can become what [the FTC calls] “Penalty Offenses.” Other parties that commit these offenses with knowledge that they have been condemned by the Commission face financial penalties that can add up to a multiple of their illegal profits, rather than a fraction.
Using this authority, the Commission can substantially increase deterrence and reduce litigation risk by noticing whole industries of Penalty Offenses, exposing violators to significant civil penalties, while helping to ensure fairness for honest firms. This would dramatically improve the FTC’s effectiveness relative to our current approach, which relies almost entirely on another authority, Section 13(b). Section 13(b) does not allow the Commission to seek penalties against wrongdoers, and it is now under threat in the Supreme Court.
The POA, found in § 5(m)(1)(B) of the FTC Act, can address, can be deployed immediately, Chopra and Levine write. The POA “can increase deterrence, since firms will pay a significant price for engaging in unfair or deceptive practices previously condemned by the Commission.”
The paper notes how the “Commission can deploy this authority to combat emerging harms, including illegal targeted marketing and deceptive data harvesting.” The paper also notes how the Commission can think broadly of its “approach to combatting corporate misconduct. By inventorying its existing tools and deploying them strategically, the Commission can begin to turn the page on its checkered record and regain the public’s confidence.” That last point is predicated on the public’s lost confidence in the FTC.
Of interest to those in the consumer, reporting ecosystem are several references to the decade-long litigation between the FTC and TransUnion and how the learnings from that case might influence data uses inside and outside the FCRA space. Chopra and Levine note that the FTC “can deploy its Penalty Offense Authority to complement its existing authorities under the FCRA.” For example, while the FTC “can already seek civil penalties through the FCRA, a strategy that incorporates the Penalty Offense Authority offers a major advantage. The maximum civil penalty for penalty offenses is more than ten times greater than what is available through the FCRA alone. When it comes to holding tech behemoths accountable for harm to consumers and fair competition, the Commission must use every tool in its toolbox.” The paper also highlights exploration the CFPB has done to determine “whether aggregators of financial data are covered by the FCRA.”