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FTC to Boost Efforts to Limit Junk Fees, Corporate Surveillance

Jan. 23, 2023, 9:39 PM

The Federal Trade Commission plans to heighten its focus on junk fees and consumer privacy violations through potential new rules and enforcement actions, a top agency official said.

“We’re very focused on both law enforcement and seeing if there’s a need for market-wide rules to protect consumers throughout the economy,” Samuel Levine, the director of the FTC’s Division of Consumer Protection, said in a Monday interview with Bloomberg Law.

Levine’s unit, which also oversees consumer privacy, continues to push back against commercial surveillance techniques that companies use to track consumers’ behavior online and deliver personalized advertisements.

The commission has a long history of using enforcement actions to oversee business practices and signal policy priorities. But its willingness to weigh new consumer protection-focused rules reflects a more aggressive regulatory approach under FTC Chair Lina Khan.

Levine declined to offer timelines for proposing rules.

Junk Fees

The FTC in June 2022 issued proposals to ban certain auto sales practices, including bait-and-switch tactics and fees for unnecessary items. The proposals also included a requirement for companies to provide better disclosures of costs and conditions.

In October, the FTC began considering a broader rule that would target junk fees in other industries.

“You’re going to continue to see the FTC making sure that companies are not charging consumers without their consent and not charging consumers for junk services,” Levine said.

The FTC’s work on junk fees comes as Biden administration is taking an administration-wide look at what it considers unnecessary fees. The Consumer Financial Protection Bureau, which is led by former FTC Commissioner Rohit Chopra, is working on its own rulemaking that would cut down on junk fees in the consumer finance sector.

But rulemaking takes time to issue proposals, review comments, and determine final regulations. The FTC plans to use enforcement actions to engender more immediate changes in industry behavior, Levine said.

Dark Patterns

The FTC will continue to monitor companies’ use of “dark patterns,” which are design tactics used to push consumers into making unintended purchases and disclosing more information about themeselves.

The FTC in November reached a $100 million settlement with internet phone service provider Vonage Holdings Corp. over alleged junk fees and the use of dark patterns tactics.

The agency’s landmark $520 million settlement with Epic Games Inc. similarly included claims that players of the popular video game Fortnite were tricked into making purchases.

“That’s very concerning for us and we’re going to continue to use all of our tools to root out those practices,” Levine said.

Watching the Watchers

The FTC also is focused on establishing baseline protections for consumers as businesses track their behavior online to gather information about them for personalized advertisements.

In August, the commission posed a series of questions about how to proceed with crafting new rules on how companies should keep consumer data private and secure.

Privacy advocates, trade groups, and others have submitted more than 10,000 comments in response to the rulemaking initiative.

Levine didn’t give a timeline for when the FTC might propose rules. But the agency plans to push ahead this year with its regulatory effort and more enforcement actions against companies that misuse or mishandle consumer data, including information about children.

To contact the reporters on this story: Evan Weinberger in New York at eweinberger@bloomberglaw.com; Andrea Vittorio in Washington at avittorio@bloombergindustry.com

To contact the editor responsible for this story: Roger Yu at ryu@bloomberglaw.com