FTC’s Record Fine Sends Ominous Warning to Internet Innovators

Washington, D.C., August 9, 2012 − Google will pay $22.5 million to settle an FTC complaint claiming the company misled Safari users about its privacy practices. This fine marks the largest the FTC has ever levied on a single company.

Privacy analysts at the Competitive Enterprise Institute, however, criticized the FTC for setting a dangerously overbroad precedent that will chill Internet innovation and hurt online startups.

“The FTC’s headline-grabbing settlement will enrich federal bureaucrats and compliance attorneys at the expense of the consumers the agency is supposed to protect,” said Ryan Radia, Associate Director of the Center for Technology & Innovation at the Competitive Enterprise Institute. “Although Google found itself in the FTC’s crosshairs this time, the agency could have just as easily targeted any number of other Web companies for similarly minor missteps.”

“While punishing businesses that defraud their customers is among government’s legitimate roles, Google’s only mistake here was failing to realize a software tweak by Apple rendered one of Google’s help pages inaccurate. There is no evidence that any users were ‘taken in’ or harmed by this inaccurate help page, nor does the FTC allege that Google knew or should’ve known that its help page was wrong. A four-commissioner FTC majority even admitted that Google’s alleged wrongdoing didn’t last very long or earn the company much money.”

“This escapade also belies the FTC’s claims that it lacks the resources to police misconduct on the Web,” Radia added. “All the time and money the agency devoted to this six-month investigation could’ve gone toward apprehending the real bad guys: companies that intentionally dupe their users or materially break their privacy promises. Instead, the FTC has sent a message to all Web firms that they shouldn’t give users any tips or advice that isn’t ‘lawyer-approved.’ Worse, under this precedent, Internet companies that lack perfect knowledge of other firms’ privacy decisions risk facing severe FTC fines for accidental, trivial misstatements.”

“It’s high time that Congress reins in the FTC’s authority to pursue outrageous penalties for inconsequential misrepresentations,” said Ben Sperry, Legal Fellow at the Competitive Enterprise Institute. “Before the FTC can fine a company for accidentally violating a consent order, the agency should have to show that the company did not take reasonable steps to comply with the order, and its violation caused concrete harm to the public.”