Ad Industry Groups to Fight Expanded FTC Powers

Worried about the potential for a crackdown on emarketing practices like online behavioral targeting, major advertisers are moving to oppose the possible expansion of the Federal Trade Commission's powers.

InternetNews.com has learned that this week, a coalition of leading advertising and marketing trade associations and their member companies plans to call on Senate leadership to halt any effort to include an expansion of the FTC's rulemaking authority that could come part of the financial regulation bill rapidly working its way through the chamber.

The concern for advertisers and other industries that have come under FTC scrutiny is that, under the most extreme version of the legislation, the agency could act as "judge, jury and executioner" without authorization from Congress or the Department of Justice, according to Jim Davidson, chair of the public policy group at the law firm Polsinelli Shughart.

As the primary consumer protection agency, the FTC has broad authority across the economy to monitor and investigate unfair or deceptive trade practices in areas as diverse as e-commerce and pharmaceuticals.

But under current law, the FTC is held to more stringent requirements when seeking to set and enforce rules than other executive agencies, a reaction to what American Enterprise Institute scholar Jack Calfee described Friday as a "binge of rulemaking" in the 1970s. As a result, it has only been able to enact and enforce rules either after an extensive period of notice and comment or when it has received a direct mandate from Congress, as it did with the Do-Not-Call list, the Children's Online Privacy Protection Act and the CAN-SPAM Act.

But that could change if a seldom-discussed proposal in the financial reform bill, which passed the House in December, finds its way into the Senate version. That bill could be taken up on the floor as early as this month.

The Senate Banking Committee recently passed the financial regulatory reform bill backed by Chairman Chris Dodd (D-Ct.) on a party-line vote without the FTC language. But many firms that pay their bills with ad dollars are worried about a "back-room deal" between Dodd and Commerce Committee Chairman John Rockefeller to include an amendment in the final bill to expand the FTC's authority, an industry source told InternetNews.com.

The Direct Marketing Association, the Interactive Advertising Bureau and others plan to ask Senate leadership next week to block any efforts to include the FTC expansion in the financial regulatory reform bill.

In their letter, they will argue that any effort to enhance the FTC's authority should be considered as a separate issue from the broader financial overhaul, which would set new rules for Wall Street firms and create a Consumer Financial Protection Agency, though the House and Senate versions differ on the authority that would be granted to that institution.

But speakers at a panel discussion here on Capitol Hill, each philosophically opposed to heavy-handed regulation, argued that the FTC has been operating as a model agency in addressing unfair or deceptive trade practices on a case-by-case basis, save for when its authority has been made clear by Congress in cases like CAN-SPAM.

Online Ads in the Crosshairs

But consumer advocates who have been pressing for tighter privacy protections argue that a broader congressional mandate for the FTC is a needed step to ensure that behavioral targeting and other online ad practices don't undermine users' privacy.

"Online advertisers want the same kind of lax oversight that led to the financial crisis," Jeff Chester, executive director of the Center for Digital Democracy, told InternetNews.com. "They are truly terrified that an FTC with normal rulemaking power will force the industry to treat consumers responsibly."

FTC Chairman Jon Leibowitz has offered the industry assurances that his primary goal in seeking the expanded authority is to pursue instances of fraud, not advertising. But many in the industry worry that the expanded rulemaking authority will inevitably lead to a harsher, more rigid regulatory climate that would stifle a fast-moving, dynamic industry.

"The chairman says, 'That's not what we're after' -- the industry's reaction is 'Okay, let's not put that in the bill,'" said Stu Ingris, a partner at Venable, a law firm representing the IAB and other organizations and firms in the ad industry.

"It seems to me if there's going to be a broadening of authority, it ought to be a separate debate," he said.

But opponents of the measure realize that time is of the essence. President Obama this week convened a bipartisan White House summit to discuss the issue, and amid ongoing Republican opposition, has urged the Senate to press forward with the Dodd bill.

Kenneth Corbin is an associate editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.