CRE petitions FTC to form competition rules for Facebook, Twitter and Google

In the light of existing or pending Federal Trade Commission (FTC) investigations against Twitter, Facebook and Google, a new petition from regulatory watchdog Center for Regulatory Effectiveness (CRE) seeks to better protect US-based Internet companies from unnecessary investigations by calling for clearly defined acts or practices which are considered unacceptable.

The CRE specifies that as the FTC has the authority to ban acts or practices that cause “substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition,” the watchdog believes that with an absence of rules for web-based services, the FTC would lack “sound intellectual and legal framework for its work” possibly resulting in commission utilising ambiguous rules to settle on a ruling.

In the five-page petition, the CRE sets out its argument:

Before  commencing/continuing with their investigations, the FTC needs to develop a trade regulation that provides for objective assessment as to whether the business strategies and practices of web-based services companies in two-sided markets are unfair. In the absence of the rule, the agency would lack a sound intellectual and legal framework for its work which would open the door to inadvertently harming, not enhancing, the global competitiveness of American businesses and consumer welfare.

Citing calls by three senior White House officials for better regulation of web-based companies, the CRE believes the FTC should liase and form policies with the Department of Justice/Antitrust. The watchdog believes that cooperation between the organisations could result in policies that solicit stakeholder and public opinion.

Concluding its letter, the CRE says that it is premature for the commission to proceed into any investigation of a web-based service – including Facebook, Twitter and Google – until the petitioned-for rules are developed:

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It is premature for the FTC to proceed into any investigation of web based services until the petitioned-for rules are developed through a notice and comment process.

In summary, the Commission needs to develop and publish for public comment a proposed trade regulation, consistent with the statutory requirement that a practice may not be determined unfair unless it “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.”

Unless the Commission has a trade rule in place for web-based services companies that operate in two-sided markets, e.g., Google, Facebook and Twitter, prior to commencing an investigation, the result would be a public perception of the agency interpreting  ambiguous rules to obtain a preconceived solution.

Google is preparing to defend itself in an antitrust investigation into its “core search advertising business”, with Facebook incurring warnings over its privacy settings and Twitter is being investigated for the way it deals with the companies building applications and services for its platform.

We have reached out to Facebook, Twitter and Google for comment and will update the article should we receive a response.