Despite a comparably sized economy and a significantly larger population, The European Union (EU) has no burgeoning technology sector like the United States. Most of the world’s biggest tech companies are ones founded and based in the US, followed ominously by China. Instead of attempting to replicate the light-touch regulatory environment that produced American success, EU regulators seem content to levy massive fines against American companies to generate revenue its economies cannot on their own.
The European Data Protection Board recently issued a $1.3 billion fine to Facebook parent company Meta for supposedly violating the EU’s General Data Protection Regulation (GDPR). This is the largest fine the board has handed out under the GDPR. This breaks its previous record of $887 million, set just two years prior when it sued American tech giant, Amazon. With consistent anti-market actions like this, it is no small wonder why Europe has failed to produce large market disruptors. Unfortunately, the US Federal Trade Commission (FTC) seems intent to replicate the EU’s innovation desert on this side of the Atlantic.
It is no secret the FTC has had a tough year. The agency has endured a series of key losses in dubious lawsuits it’s brought against American companies and is currently down to threeDemocratic commissioners, as opposed to five, after Republican resignations. Instead of taking the hint and changing its approach to what has clearly worked in the past, the FTC is seemingly doubling down on its antics by once again targeting an American company with legally questionable action.
The FTC is now proposing to alter the terms of an existing consent decree with Meta, a laDarth Vader in The Empire Strikes Back. The agency is alleging that Meta violated terms of a 2020 agreement. The specific terms cited reference parental controls on Facebook’s Messenger Kids application. Further, they claim that Facebook’s policies and actions have“put consumers at risk.” This is eerily similar to the EU’s recent GDPR allegations against Meta that also came this month.
FTC Chair Lina Khan has been openly meeting with European regulators as of late in an effort to coordinate regulatory strategies. Amidst the FTC’s series of losses, its new moves, and Europe’s similar actions, it is becoming clear that Khan and the FTC are – in many ways – attempting to outsource their regulatory agenda. While American courts have rejected Khan’s ambitious antitrust agenda as unconstitutional and without standing, Europe has fewer qualms about hamstringing American tech companies.
It is also entirely clear that this latest move by the FTC is a political stunt. The agency lost a high profile lawsuit earlier this year against Meta in an effort to stop their acquisition of a virtual reality fitness app. It seems they are trying to now throw everything against the wall to see what will stick to give themselves another shot at harming Meta – whether that comes by their own actions or from overseas.
In the FTC’s published justification for this latest move, they cite a number of incidences that are years old. Meta has taken actions to ameliorate those issues since they were raised the first time. In fact, a number of these claims date back to before the 2020 privacy agreement was implemented. This is yet another indication that the FTC’s action here is not based on any legitimate justification but is politically motivated.
The action also sets a terrible precedent from a good governance perspective. The FTC has been operating on political whims for some time now. However, trying to unilaterally overturn a meticulously negotiated, court-approved settlement will have disastrous consequences going forward. It disincentives any firm from working with the FTC in good faith to strike deals to protect consumers, which will lead to more protracted legal battles for the agency and fewer results for Americans. The FTC behavior also upends the rightful role of Congress in setting lasting frameworks for operating in this space.
Companies in any industry – but especially the fast-moving tech sphere – rely heavily on regulatory certainty. American companies can have none of it if the FTC continues on its current trajectory. With actions like the one it just took with Meta, business leaders can never be sure that agreements they enter into with the government will be honored. They also can’t trust that the bureaucrats meant to enforce those agreements will not try and prompt European regulators to enact the punishments that are not achievable domestically.
Millions of taxpayer dollars are being funneled to the FTC to ultimately harm the American economy. If Chair Khan desires to be a political advocate pursuing an agenda, there are opportunities in the private sector to do so as well as in elected office. However, the FTC is tasked with enforcing existing law, not trying to create it or seeking out foreign regulators who will. This latest development is just the latest demonstration of how far the agency has strayed.