Senate Commerce Committee homes in on consumer protection and enforcement in an era of rampant COVID-19-related scams

By August 13, 2020

Consumer protection and data privacy have come into focus on Capitol Hill over the past few weeks. One week after the leaders of Apple, Google, Amazon, and Facebook testified in front of the House Judiciary Committee, the Senate Commerce Committee held a hearing with the Federal Trade Commission (FTC) on this topic. The FTC aims to protect consumers and businesses from “anticompetitive, deceptive, and unfair business practices through law enforcement, advocacy, and education.” The hearing, titled “Oversight of the Federal Trade Commission” focused on the rise in online scams during the COVID-19 pandemic and how to make it easier for the FTC to protect consumers. The senators’ discussion with the FTC chair and commissioners was informed by expert questions provided by the Day One Project, a science and technology policy project that is developing policy proposals for the next Administration. These questions focused on how the FTC plans to keep up with the consumer risks brought by rapidly changing technology, especially from the major tech companies, and risks brought on by scams from current events, such as the pandemic.

There are numerous scams related to COVID-19 and they can be hard to detect. They range from price gouging and selling defective products to people pretending to be contact tracers, those who claim to provide “miracle” cures, and callers pretending to be from the U.S. government. According to the FTC, these pandemic-related scams have cost Americans over $13 million this year and this number is only growing. Out of the 100 million phishing emails blocked by Google each day, it is estimated that about 18 million of them reference the coronavirus. Others attempt to market products that claim to cure COVID-19, like colloidal silver (tiny silver particles suspended in a liquid), which are actually harmful to one’s health.

To combat these scams, the FTC has produced detailed guidance for businesses and consumers. However, enforcement of consumer protection rules can be challenging. Specifically, the FTC’s regulations have not kept up with an evolving internet landscape and scams take advantage of this. Commissioner Rebecca Slaughter acknowledged (1:21:08) that, especially in cases of price gouging, the FTC’s current oversight abilities are an “imperfect tool.”

Typically when a business or individual is caught using predatory tactics on consumers, the FTC sends out a warning letter. The goal of these letters is to notify the business or individual that they are violating consumer protection rules in the Federal Trade Commission Act. They also threaten legal consequences, such as a federal lawsuit, if the predatory behavior continues. The FTC has sent hundreds of letters to companies making misleading claims about COVID-19 treatments and cures, including those pushing treatments with ozone, vitamin C, 5G shields, and ultraviolet light. FTC Chair Joe Simons notes (1:49:25) that these letters tend to be effective. However, Senator Richard Blumenthal (D-CT) expressed (1:50:35) how it would be easier to combat scams if there was a judgement on the books after the first instance of predatory behavior instead of having to wait until the second occurrence to implement harsher punishments.

Through its work in this area, the Day One Project emphasized that FTC’s penalty structure may not provide proper incentives to deter businesses from engaging in predatory tactics or unfair practices in consumer privacy and protection. Experts working with the Day One Project suggested that new regulations could help. During the hearing, Chair Simons and Commissioner Noah Philips agreed and explained (1:32:50 and 2:34:15, respectively) that allowing the FTC to have targeted rulemaking capabilities and the ability to levy civil penalties can help combat scams and protect consumers’ data. This rulemaking authority would allow the FTC, according to Chair Simons, to change its definitions to “account for changes in technology and changes in business methods.”

While this targeted rulemaking authority would need to be passed by Congress, the members of the committee were receptive to the idea. The consumer protection and data privacy landscape is changing rapidly over time and businesses taking advantage of an unprecedented pandemic threaten the security and wellbeing of consumers every day. It is clear from this hearing that FTC is trying its best to combat these threats but needs more help to do so. Input from forward-leaning organizations like the Day One Project are vital to ensure that Congress is informed about the most pressing issues and has the tools it needs to solve them. This will likely not be the last hearing on this topic and the Congressional Science Policy Initiative encourages its readers to get involved in the policymaking process to help Congress protect citizens from predatory business practices.

More information can be found about the Day One Project here: https://www.dayoneproject.org/about.

To get involved with science policy and the U.S. Congress, sign up here: https://fas.org/congressional-science-policy-initiative/.