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Data abuses prompt calls for overseer to bare teeth

The US has no basic consumer privacy law and the FTC serves as the country's de facto privacy regulator

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Lawmakers, consumer advocates and even former commission officials are clamouring for tough action against Facebook.

New York

LAST spring, soon after Facebook acknowledged that the data of tens of millions of its users had improperly been obtained by the political consulting firm Cambridge Analytica, a top enforcement official at the Federal Trade Commission drafted a memo about the prospect of disciplining the social network.

Lawmakers, consumer advocates and even former commission officials were clamouring for tough action against Facebook, arguing it had violated an earlier FTC consent decree barring it from misleading users about how their information was shared.

But the enforcement official, James A Kohm, took a different view. In a previously undisclosed memo in March, Mr Kohm - echoing Facebook's own argument - cautioned that Facebook was not responsible for the consulting firm's reported abuses. The social network seemed to have taken reasonable steps to address the problem, he wrote, according to someone who read the memo, and most likely had not broken its promises to the FTC.

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The Cambridge Analytica data leak set off a reckoning for Facebook and a far-reaching debate about the tech industry, which has collected more information about more people than almost any other in history. At the same time, the FTC, which is investigating Facebook, is under growing attack for what critics say is a systemic failure to police Silicon Valley's giants and their enormous appetite for personal data.

Almost alone among industrialised nations, the United States has no basic consumer privacy law. The FTC serves as the country's de facto privacy regulator, relying on more limited rules against deceptive trade practices to investigate Google, Twitter and other tech firms accused of misleading people about how their information is used.

But many in Washington view the agency as a watchdog that too rarely bites. In more than 40 interviews, former and current FTC officials, lawmakers, Capitol Hill staff members, and consumer advocates said that as evidence of abuses has piled up against tech companies, the FTC has been too cautious. Now, as the Trump administration and Congress debate whether to expand the agency and its authority over privacy violations, the Facebook inquiry looms as a referendum on the FTC's future.

"They have been asleep at the switch," said Senator Richard Blumenthal, D-Conn., the ranking member of the subcommittee charged with overseeing the agency. "It's a lack of will even more than paucity of resources." Even if the agency does not penalise Facebook over the Cambridge incident - and some former FTC officials disagree with Mr Kohm's reasoning - the commission could punish the company for other offenses. Former officials say they've been told that its inquiry has expanded to include recent security and privacy breaches as well as Facebook's secretive data-sharing deals with Amazon, Netflix and other companies. Facebook declined to comment on the inquiry.

The agency - overseen by five commissioners, three of them typically from the president's party - is habitually tight-lipped. FTC chairman Joseph Simons declined to comment on the Kohm memo.

As the federal government's main consumer protection and antitrust authority, the FTC has pursued carmakers, drug companies, illegal robocallers and bloggers who fail to disclose corporate sponsors.

But it is hampered by its relatively small size - about 1,100 employees, roughly a quarter the staff of the Securities and Exchange Commission - and broad mandate. Guarding consumer privacy online, just one part of its mission, can raise complex technical issues. The agency's enforcement arm, led by Mr Kohm, doesn't have its own tech experts, instead borrowing them from other agency units. The job of chief technologist, an adviser to the FTC chairman, has been vacant since April. And its lawyers are outnumbered by the armies of attorneys employed by tech giants.

"They have considerably less staff than they had in the 1980s, and more responsibility," said Justin Brookman, a former FTC official under the Obama administration who now works at the Consumers Union.

FTC officials said privacy and data security cases had gotten more attention than any others over the past decade.

Still, all five commissioners agreed at the November Senate hearing that the agency needed more money and greater regulatory authority to keep up with big tech.

Critics said a greater problem was cultural. The FTC is haunted, for example, by a clash with Congress in the 1980s over an attempt by the agency to ban television ads for junk food directed at children, known as "KidVid." Lawmakers pulled funding and severely weakened the FTC's power to issue new regulations.

Even today, "in just about every meeting I have at the FTC, staff mention KidVid," said Josh Golin, executive director of Campaign for a Commercial Free Childhood, which has filed complaints against YouTube and Facebook.

Fears that Congress could again cripple the FTC have made some career lawyers reluctant to take on politically sensitive cases, according to current and former employees, speaking about their experiences during the Trump and Obama administrations.

The FTC has defended its record on privacy, pointing for instance to a US$22.5 million fine imposed on Google in 2012, for bypassing privacy settings in Apple's Safari browser in violation of a consent agreement. The fine was the largest civil penalty in the agency's history.

Former officials say the agency struggles to enforce privacy within its traditional definition of deceptive or abusive business practices.

President Donald Trump's arrival in Washington kicked off a period of uncertainty at the FTC. For 16 months, three of five seats remained vacant on the commission, which was initially led by acting chairwoman Maureen K Ohlhausen, an advocate of "regulatory humility". Ms Ohlhausen's staff told enforcement officials to slow down on cases, so the White House would not view her as anti-business, according to a former senior official. That official and others interviewed for this article spoke on the condition of anonymity to describe conversations that were private or involved nonpublic FTC investigations.

In an interview, Ms Ohlhausen denied ordering a slowdown and cited privacy actions she had brought against PayPal and Lenovo. But she acknowledged having argued against going after what she regarded as small cases, like Nomi.

With limited resources, she said, the FTC should "pursue cases where the evidence of actual or likely consumer harms is strongest." NYTIMES