< FTC Chairman on Privacy, Net Neutrality and the Future of News


Friday, April 23, 2010

BOB GARFIELD: You’re probably aware of the Federal Trade Commission, but chances are you’re not up to speed on what exactly it does. The main answer is to protect consumers from commercial malfeasance and the unfettered forces of the marketplace. This historically has meant investigating antitrust violations - has Microsoft behaved like an abusive monopoly, for instance – and cracking down on deceptive marketing practices, like infomercial get-rich-quick scams. Of late though the FTC has expanded its portfolio from the future of the new industry to online privacy and, perhaps, beyond. And the FTC is hoping that Congress will soon consider the agency’s reauthorization and, with it, the possibility of expanding rulemaking authority. Jon Leibowitz is chairman of the suddenly wide-ranging regulatory body, and he joins me now. Mr. Chairman, welcome to On the Media.

JON LEIBOWITZ: Well, thank you so much for having me, Bob.

BOB GARFIELD: In the past few months, the agency has convened two workshops on the future of journalism, and they were quite well received. But the future of journalism, the FTC, what’s it to you?

JON LEIBOWITZ: Well look, we have a public policy function, going back to the time our agency was created in 1915, and newspapers, news networks are absolutely critical to the democracy we live in. And it’s not certain that we're going to be able to sustain things like foreign bureaus or investigative journalism, particularly at the state level and at the metropolitan level. A few weeks ago I was in Chicago and I visited something called the Chicago News Cooperative. It’s a start-up formed by mostly former Chicago Tribune employees. Their ambition is to have three people covering Cook County, three people covering City Hall and three people covering Springfield, the State House. If they reach that level, they'll have bigger bureaus in each of those places, I'm told, than The Chicago Tribune does, and I think that that’s - that is stunning. But it brings home the changes that the newspaper industry and really the news industry is, is undergoing.

BOB GARFIELD: Rupert Murdoch and various others in the newspaper business are trying to establish pay walls to start generating revenue for content that had been, for the last decade or so, given away for free, but a pay wall really only works if everybody has a pay wall up. Otherwise, consumers will gravitate to where the stuff is free. I wondered if the FTC has considered the idea of some sort of antitrust exemption, which would permit a sort of, you know, newspaper cartel to get together and agree on something that otherwise would be illegal, and that is a uniform pay wall standard where everybody is acting in concert, arguably against the interest of the consumers, but maybe saving the newspaper industry. Has that been discussed?

JON LEIBOWITZ: Of course, we can't grant antitrust exemptions. That’s the province of Congress. But as an antitrust agency, we are generally not keen on antitrust exemptions. And there are also other possibilities and proposals, like a special tax-exempt status for newsgathering. People have also discussed a sort of PBS model. And my guess is next Congress - Congress may start to think about this. We hope to have a report that will provide them and the public with some useful thoughts.

BOB GARFIELD: I want to ask you about privacy.


BOB GARFIELD: Let me begin by framing the issue in the most alarming terms I can think of. The fact is that companies such as Google and Microsoft and Yahoo! and many that, you know, you've never heard of have the ability not only to track your movements surfing on the Web but to record every keystroke that you type online. And then they use these data to target you with advertising, which obviously creeps a lot of people out, and especially privacy hawks, who have asked the FTC, in a couple of cases, to intervene. How big an issue is privacy?

JON LEIBOWITZ: Well, from our point of view, it’s very, very important. Obviously, there is a benefit from things like behavioral marketing. Consumers get more targeted ads, which generally they like and, more importantly than that, it supplies the free content on the Internet that we all use and have grown to expect. On the other hand, imagine that you were walking through a shopping mall and there was someone who was walking behind you and taking notes on everywhere you went and sending it off to anyone who was interested, for a small fee. That would be very disturbing, I think, to most people. And to some extent we see a version of that on the Internet because information is taken from consumers, and for the most part, that information is anonymized, which is good.

BOB GARFIELD: Anonymized, that means that whoever has it cannot track it back to - you, Jon Leibowitz, the individual, but to your - maybe your browser or your IP address, maybe.

JON LEIBOWITZ: Well, they might be able to track it back to your IP address, and there’s a question about whether if you can track something back to someone’s IP address it’s almost the same as personal information. I kind of think it is. But for the most part, they try to anonymize this information, and they try to protect it. But not every company has great data security. And beyond that, consumers ought to be informed in a clear way about the choices that they make.

BOB GARFIELD: Okay, I want to get an idea of the difference between behavioral targeting as a benefit to the consumer and to the media and to the advertiser all at once, versus the points where it sort of crosses the line.

JON LEIBOWITZ: I'll give you an example, based on a case that we brought. Sears Corporation had an Internet site in which they said to consumers, we will give you 10 dollars if you will give us a variety of information, but the licensing agreement which said what they could do with the information was buried clicks and clicks away, so no consumers saw what they planned to do with the information. And what they ended up doing was taking information about their pharmaceutical prescriptions, bank account information, Social Security numbers, things that consumers really probably didn't want taken from them. We brought a case against Sears. We had a settlement. Consumers got money back and, more importantly, Sears agreed not to go on with this program. But what was interesting about it, from our perspective, is that Sears, I don't think they knew what they wanted to do with the information. They were just collecting it, and maybe they were going to sell it to third parties or maybe they were going to do something else with it. They didn't use it in a way that actually harmed consumers, but another company, and possibly Sears, could have done that.

BOB GARFIELD: I'm glad you brought up the Sears Holdings case. My guess is that when you first confronted them, they said [LAUGHS], well, if you look here in paragraph 17 of our terms of service, you'll see that very clearly we warned consumers that we may blah-blah-blah- blah. I have probably clicked on, I don't know, hundreds and hundreds of terms of service agreements, never read a word of them. They're in legal boilerplate. They're in, you know, six-point type. Is it enough that this stuff is disclosed in the fine, fine, fine print, and does the FTC have any role in making the disclosure plainer?

JON LEIBOWITZ: You can't take away consumer rights by burying them in the fine print. That would be an unfair or deceptive act or practice under the FTC’s bread-and-butter statute and a violation of the FTC Act. The role for us is really to try to make those disclosures better in two ways. One way is by working with companies. And a number of companies have gotten together. They're in the process of working on a sort of box that you could click on any advertisements and you'd know what the privacy policy is. And also, we're working with members of Congress who are in the process of writing legislation that I think will ensure that there is clear privacy protection for American consumers and the American public.

BOB GARFIELD: One last subject: net neutrality. Earlier this month a federal court ruled that the Federal Communications Commission lacks the authority to regulate broadband, raising the question, who in the government does oversee the Internet. And some have suggested that the FTC can jump right in. Can you?

JON LEIBOWITZ: I do talk to the chairman of the FCC from time to time. We actually play basketball together on weekends. As for our jurisdiction, we can bring cases for deceptive advertising and for anti-trust violations against companies engaged in unfair methods of competition. But having said that, we're an agency that covers almost all the economy; we're an agency of generalists. The FCC is an agency that’s supposed to have expertise in the telecommunications media and, to some extent, the Internet world. But I do think that preserving the open, non-discriminatory Internet that we've all come to appreciate is very, very important, notwithstanding some exaggerated concerns about what the future would hold if there isn't regulation.

BOB GARFIELD: Who’s better in basketball, you or Julius Genachowski?

JON LEIBOWITZ: Julius has been schooling me on the basketball court for quite some time, and I tore my meniscus, in part because he kept on driving past me to the, to the basket. I ended up having surgery.

[BOB LAUGHS] He’s very crafty, a good passer.

BOB GARFIELD: Let's see how crafty he is in the Congress and the federal courts. Mr. Chairman, thank you very much for joining us.

JON LEIBOWITZ: It was a pleasure to be with you, Bob.

BOB GARFIELD: Jon Leibowitz is chairman of the Federal Trade Commission.