Washington in Review - April 12, 2019

They say that March comes in like a lion and goes out like a lamb -- but policy issues are always roaring ahead. New pushback from Speaker Nancy Pelosi (D-CA) and the Democrat-controlled House may potentially put a crimp in President Trump’s plans for USMCA. There is continued momentum on the state privacy front, as Texas legislators proposed two CCPA-like bills and Utah unanimously passed a law bolstering federal 4th Amendment protections. Congress, the FCC and FTC are now more aligned than ever in the prolonged regulatory battle to curtail abusive robocalls. Several countries are considering proposals to directly regulate content uploaded to social media platforms, with the possibility of significant fines for any failure to comply. Discussions on sports betting are heating up in state legislatures once again, though no states have legalized sports betting this year. We cover these issues and more in this week’s edition of the WiRe.

Want our Strategic Policy Advisory team to take a look at other topics? Let us know in the comments!

FTC Gives Blocking Authority to ISPs

When repealing net neutrality rules, Federal Communications Commission (FCC) Chairman Ajit Pai assured consumers that although the FCC has limited authority over ISPs, the Federal Trade Commission (FTC) should be able to adequately protect consumers from discriminatory ISP practices. However, in a speech last week, FTC Chairman Joseph Simons implied that this may very well remain a gray area. Simons stated that the FTC is “principally a law enforcement agency” and not a “sector regulator like the FCC,” and that actions like “blocking, throttling, or paid prioritization” would not be per se antitrust violations. Instead, the FTC could take action against ISPs if they block applications without adequately disclosing their practices, or if they mislead consumers about which applications they block or how they block them.

What does it mean?

• With Chairman Simons noting that the agency’s consumer protection jurisdiction can extend to cover ISP network management practices, providers should review their practices and policies to ensure that they are in compliance with Section 5 of the FTC Act -- especially considering that the agency has exercised its enforcement authority against ISPs for deceptive and misleading practices in the past. 

Growing International Demand for More Stringent Social Media Regulation 

Social media companies are under growing pressure to proactively police their platforms for violent content, as Australia, the EU, the UK, and Canada have recently considered direct regulation as a solution. Both the Australian law and the UK’s proposed regulation would hold company executives personally liable for the company’s failure to remove violent content upon notification. Additionally, Australia, the EU, and the UK would all impose substantial fines on the companies themselves for failure to remove such content. Canada announced that it is “actively considering” similar regulatory measures. 

What does it mean?

• These actions come at a time when the global push to increase regulation of content on social media is at the forefront of policy discussion, and legislation may come out of foreign jurisdictions that impact US businesses. 

Senate Commerce Committee Holds Hearing on Federal Privacy Legislation to Consider Impact on Small Businesses 

On March 26, the Senate Commerce Subcommittee on Manufacturing, Trade, and Consumer Protection held a hearing to consider small business perspectives on the possibility of federal data privacy legislation. The panelists, representing businesses and industry groups, agreed that the Federal Trade Commission (FTC) should be given rulemaking authority to better protect consumer privacy, and that the agency should ultimately be the enforcer of any comprehensive federal privacy law. The panelists also voiced support for federal preemption over existing state privacy laws, noting that small businesses lack the resources to navigate unique privacy regulations for each state. 

What does it mean?

• Congress is expected to continue to evaluate legislative proposals amid concerns that industry is not doing enough to self-regulate. 
• As Congress continues its consideration of comprehensive federal privacy legislation, companies should proactively consider how to best advocate for a federal law that is beneficial and workable in their business practices.  
• Large companies should work to understand the needs, resources and limitations of the smaller business partners within their supply chains and vendor groups. 

FTC Hosts a Hearing on Consumer Privacy Approaches

Earlier this week, the FTC held two days of hearings to examine its current approach to addressing consumer privacy, in light of potential gaps in the Commission’s existing authority, as well as new risks, opportunities, and developments. Issues discussed during this 12th session of Hearings on Competition and Consumer Protection in the 21st Century Continue with Discussion of the FTC’s Approach to Consumer Privacy include whether current approaches sufficiently protect consumer privacy; whether certain approaches may have unintentionally hindered innovation, growth, or competition, to the detriment of consumers and the economy; and whether other approaches might better serve consumers and competition, and, if so, what those approaches should be. 

 What does it mean?

• This latest hearing further underscores the widespread support for updating and modernizing regulatory practices surrounding data privacy to address impact on consumers. 
• Companies have the opportunity to comment on the issues raised until May 31, and can take advantage of this opportunity to try and influence policy down the line.

Robocalls Face Growing Opposition in Washington 

On April 3, the Senate Commerce Committee unanimously approved the bipartisan TRACED Act, which is the fourth anti-robocall bill to be considered this Congress. The bill would authorize the Federal Communications Commission (FCC) to levy civil penalties of up to $10,000 per robocall. It would also extend the window in which the FCC can take enforcement action to three years after a robocall is placed. The TRACED Act has received support from all FCC and Federal Trade Commission (FTC) Commissioners, along with support from major industry associations, leading consumer groups, and numerous state attorneys general, showing that change is increasingly likely for robocallers and consumers alike.

What does it mean?

• Taken together, the FCC’s recent call for the telecom industry to step up in implementing safeguards against robocallers and the advancement of federal legislation indicate no slowdown in this wave of regulatory and legislative action.

World Trade Organization Attempts to Wrangle the Unregulated Realm of E-Commerce 

The global business-to-consumer (B2C) cross-border e-commerce market is expected to reach $1 trillion in 2020, presenting a new challenge for governments and industries in terms of customs, security and logistics. The World Trade Organization (WTO) launched talks in March to address the lack of international B2C e-commerce regulations; 75 countries are expected to participate in e-commerce and digital trade negotiations. 

What does it mean?

• Affected companies should consider engaging in the process of creating a harmonized framework. The private sector has the opportunity to boost trade and optimize supply chains, which benefits both producers and consumers. 

Uncertainty Continues as Brexit Deadline Receives an Extension

British Prime Minister Theresa May and EU leaders agreed to delay the UK’s official departure date by six months, to October 31. The agreement allows for the UK to leave sooner should they come to an agreement before the deadline. Theresa May stated that she would prefer to reach an agreement prior to the EU Parliament elections on May 23. She will now need to work with members of her party as well as the Labour Party to come to an agreement that can pass, as her previous proposed exit plan failed to receive approval after three votes. 

What does it mean?

• The delay provides temporary relief for businesses as the prospect of a “No-Deal” scenario, which neither the UK or the EU wants, was becoming more likely with the approach of the April 12 deadline. However, it extends the uncertainty of the future business landscape in the UK.
• Read previous editions of the WiRe for more about Brexit; we will continue to cover and provide updates on Brexit, along with its impacts and implications.

USTR Releases Report Detailing Barriers to Digital Trade 

Last week, the Office of the US Trade Representative (USTR) released its annual National Trade Estimate Report detailing its list of foreign trade barriers across 11 different categories, including IP protection and barriers to digital trade and e-commerce. The report stated that key barriers to digital trade included cross border data flow restrictions and data localization requirements within several nations, including China and India, digital services taxes occurring within EU member countries, and tariffs established on digital products within Indonesia. The USTR also stated that the US-Mexico-Canada Agreement (USMCA) includes “the most comprehensive and advanced digital trade rules ever negotiated” and that it plans on using this as a template for negotiations elsewhere.

What does it mean?

• Expect these items to come up as points of contention while the US continues to negotiate bilateral trade deals with the EU and UK, as digital services taxes have grown in popularity in the region.

Mexican Labor Standards to Delay USMCA Ratification

In a blow to the Trump administration’s goal of seeing the US-Mexico-Canada Agreement (USMCA) passed by this summer, Speaker Nancy Pelosi stated the Democrats’ demands to move forward before she allows a vote. First, Mexico needs to pass and implement major labor reform laws. Second, there is interest in re-opening the agreement to make changes to the text regarding enforceability. The Mexican President has stated that his administration expects to pass stronger worker’s rights legislation before Congress recesses at the end of April; however, Speaker Pelosi and other Democrats have stated that they will need to see how the laws are implemented before Congress will consider a vote. 

What does it mean?

• This latest development, along with additional pushback from both Canada and Mexico for the US to remove its steel and aluminum tariffs, signifies that the USMCA may not be fully ratified by the Trump administration's summer timeline. Read previous issues of the WiRe for more about additional roadblocks to passing the USMCA. 

States are Where the Action Is: Sports Betting Heats Up in Legislatures 

Legalized sports betting was dealt a setback in New York, as online betting was removed from the state’s proposed budget last week, indicating that the industry is unlikely to be legalized in the Empire State this year. Sports betting has been a hot topic in state houses across the country since the turn of the year and the start of the new session. Twenty-nine states, including major markets such as New York and Texas, have introduced legislation that would legalize some form of wagering. 

What does it mean?

• The setback in New York demonstrates that despite the popularity of sports betting with the general public, state legislatures are facing challenges moving the ball forward. No states have legalized sports betting this year, despite wide-ranging interest in the topic. 

Utah, US Senators Test Carpenter’s Missing Planks

Utah became the first state to formally implement a comprehensive warrant requirement for law enforcement to obtain personal information from third parties. HB 57 attempts to address ambiguities left unresolved by the US Supreme Court last year in Carpenter v. U.S., a privacy decision limited to cell phone location data. The issue is not limited to states, as US Senators also probed Carpenter questions in a letter to the Department of Justice (DOJ), demanding information on the DOJ’s interpretation of Carpenter and on how DOJ collects cell phone data. 

What does it mean?

• Companies should be aware that their third parties and vendors may receive warrants for information which could have unexpected impacts to the company’s customer base or organization. 

States, Senators Triangulate Scrutiny on Law Enforcement Data Collection

Recent U.S. Senate and state actions highlight renewed scrutiny of 4th amendment and privacy issues related to the interaction between law enforcement and third party data. A Fairfax County, Virginia judge ruled that “passive use” of automated license plate readings violates state law. As a result, Fairfax police must cease to maintain their database of license plate photo time and location data.  

What does it mean?

• Virginia joins a group of states in restricting the passive collection of license plate data. In the absence of federal privacy legislation, the U.S. Supreme Court will be called upon to comprehensively interpret federal privacy protections. 

Canada Seeks to Tighten Rules on Cross-Border Data Transfer

The Canadian Office of the Privacy Commissioner (OPC) recently announced a change in its stance on cross-border data transfers and its intention to issue formal guidance on the matter in the near future. Under the Personal Information Protection and Electronic Documents Act (PIPEDA), companies must now obtain explicit consent from individuals for cross-border data flows for processing. Companies must not only obtain consent from individuals to use their personal information to deliver the service, but must also do so if they are going to transfer the information to a third party, regardless of whether the transfer is domestic or across international borders. As a first step, OPC is launching a formal consultation with stakeholders on updating its guidance on cross-border transfers of personal information.

What does it mean?

• Written submissions can be filed by interested parties until June 4, and companies impacted by this new interpretation should utilize the opportunity to influence policy. 
• Potentially impacted companies should actively follow OPC’s process. Following the consultation, OPC will clarify the cross-border data transfer rules so that companies understand their obligations around obtaining valid consent and remain accountable for protecting the information in their control.

For past issues of Washington in Review and other commentary on policy and regulatory issues impacting the Technology, Media, and Telecommunications industries, visit us on the web. 

Contributors: Jocelyn Aqua, Regina Barillas, Rosie Brinckerhoff, Jennie Cunningham, Brian Dunch, Arie Esquenazi, Haley Fine, Nick Hall, Josh Joseph, Dan Julian, Priya Kamdar, Julie Riccio, Rachel Roschelle, David Sapin, and Lenora Zimmerman.