DC Circuit doubts FTC authority to force additional privacy protections on Facebook

WASHINGTON (CN) — A D.C. Circuit panel appeared skeptical Tuesday of the Federal Trade Commission’s authority to modify a settlement agreement with Meta to require the social media giant to tighten its privacy policies. 

Tuesday’s challenge stems from a complaint the FTC issued in 2012 accusing Meta of falsely representing to its users that they could prevent the platform from sharing their personal information — even while it was actively sharing that information with third-party apps downloaded by their friends on the platform. 

Meta initially consented to the order, promising not to misrepresent its data privacy policies and first obtain users’ consent before sharing information with third parties. 

However, in 2019, the FTC believed Meta had violated that agreement, and brought a complaint in federal court in Washington to impose a penalty and force Meta to abide by the original agreement. The parties reached a settlement, with Meta agreeing to pay a $5 billion penalty in the largest privacy enforcement action in history. 

Just four days after a federal judge issued a stipulated order enforcing the penalty and its terms, the FTC reopened its own administrative proceedings and determined it should modify the settlement and require Meta to make over 800 changes. 

Such changes would require Meta to stop collecting and using the personal data of minors on the app, hire an independent assessor for its privacy program, exercise more oversight of third-party apps and implement more data security protections. 

U.S. Circuit Judges Neomi Rao, Justin Walker and Senior Judge Raymond Randolph — two Donald Trump appointees and a George H.W. Bush appointee, respectively — wondered if the FTC’s modification went well beyond its authority.

Randolph, in an exchange with Justice Department attorney Zachary Cowan, said that since the FTC was requesting injunctive relief against Meta’s continued violations of the previous agreement, it should have gone back to U.S. District Judge Timothy Kelly and requested a modification. 

“Does the FTC have the authority to impose injunctive relief?” Randolph asked. “The answer is no, it doesn’t, it has to go to court.” 

Rao followed up Randolph’s point, noting that the agency has no independent enforcement authority and can only seek such enforcement before a federal judge — the U.S. Supreme Court has recently chipped away at federal agencies’ use of in-house administrative law judges.

“It seems like you’re boot-strapping the fact that you have no enforcement authority into the modifications authority,” Rao said. 

Cowan argued that a key component of the FTC’s authority is to make modifications when there are either changes in fact or law, or when there is a significant public interest. The fact that Meta’s privacy changes did not go far enough. 

Rao and Randolph both seemed unconvinced, highlighting the $5 billion penalty and noting the fact it was paid to settle the federal complaint. Randolph said that if the FTC could change the terms of the settlement for additional injunction, it would stand to reason that Meta could request the $5 billion penalty be refunded. 

Rao added that, if the FTC had the authority to change terms, seemingly in perpetuity, it was unlikely any private company would ever agree to another settlement and take their chances in court. 

Cowan maintained that the FTC acted within its modification authority and that Meta knew the agency could change certain terms when it agreed to the settlement, so there would be no grounds for a refund. 

James Rouhandeh of firm Davis Polk, representing Meta, argued that the FTC clearly did not have the authority to impose an injunction and had essentially tried to circumvent the court with its modification.

“It’s basically saying, ‘Thank you very much court, thank you very much Meta, we’ll take it from here and we will issue new injunctions,’” Rouhandeh said. 

Randolph agreed that the FTC seemingly went against its usual course of action, where it could bring a new complaint if it learned of additional violations, but considering that, a decision favoring Meta may only grant temporary relief. 

“If the FTC can do that, I mean, what are we arguing about?” Randolph said. 

Rouhandeh asserted that if the FTC were to bring a new complaint like that, the proceedings would remain under Kelly’s jurisdiction, and thus any injunction would be his decision to make. 

Ultimately, Rouhandeh said, the FTC “is not a court” and thus should not be able to change the terms of such an expensive settlement on its own. If the modifications were to stand, it would make “no commercial sense” for any company to settle any such case. 

When the panel issues its ruling, the issue would likely make its way to the Supreme Court and place federal agency authority back in the spotlight — and potentially on the chopping block.

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