Court Questions FTC’s Authority to Change Court-Approved Settlements

By: Epoch Times - Tech Posted On: November 07, 2024 View: 0

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Judges expressed skepticism over FTC’s bid to impose additional privacy measures on Meta, questioning the agency’s authority to modify previous agreements.

A panel of judges from the U.S. Court of Appeals for the District of Columbia Circuit appeared to voice skepticism this week regarding the Federal Trade Commission’s (FTC) authority to unilaterally modify a 2019 settlement agreement with Meta Platforms Inc., formerly known as Facebook.

The settlement, which required Meta to pay a record $5 billion fine and enhance its privacy protections, is now the focal point of a legal dispute over the FTC’s attempt to impose additional obligations on the tech giant.

The dispute traces back to a 2012 complaint in which the FTC accused Facebook of misleading users about its data privacy practices.

In 2019, amid revelations of data misuse—including the high-profile Cambridge Analytica scandal—the FTC filed a lawsuit against Meta to enforce the prior agreement and they reached a settlement. This agreement included the substantial fine and mandated significant changes to how Meta handles user data.

The FTC, after the new order was approved by a court, then sought to reopen the case days later to enforce stricter controls on Meta’s data practices, particularly concerning the handling of minors’ information and increased oversight of third-party apps.

The agency aimed to impose over 800 new privacy obligations on Meta. However, Meta contended that the FTC lacked the statutory authority to modify the settlement without returning to court.

During the proceedings on Nov. 5, Meta’s attorney, James Rouhandeh, argued that the FTC cannot unilaterally alter the injunctive relief imposed by the court in the 2019 settlement.

“The FTC is, in effect, usurping the court’s injunctive powers,” Rouhandeh stated, emphasizing that only the court has the authority to enforce or modify its own orders.

The three-judge panel, consisting of U.S. Circuit Judges Neomi Rao, Justin Walker, and Senior Judge Raymond Randolph, appeared to align with Meta’s position.

Judge Randolph noted, “The FTC has no enforcement authority; it has to go to a court to get its orders enforced.” He questioned whether the FTC was attempting to bypass the court’s jurisdiction by modifying the settlement on its own.

Judge Rao further expressed concerns about the FTC’s approach, suggesting that the agency might be overstepping its bounds.

She questioned whether allowing the FTC to modify the settlement without court involvement would undermine the original agreement and set a concerning precedent for future settlements.

Rouhandeh warned that if the FTC could modify settlements unilaterally, it would “undermine the original agreement and potentially deter companies from settling with the agency in the future.”

He argued that such a move would make “no commercial sense” for companies, as they would face the risk of the agency altering agreements after they have been finalized and approved by a court.

Representing the FTC, attorney Zachary Cowan argued that under Section 5(b) of the FTC Act, the agency retains the authority to modify its administrative orders in the public interest, even after a court-approved settlement.

He maintained that the additional privacy measures are necessary to protect consumers, especially minors, given Meta’s history of data privacy issues.

Despite the FTC’s arguments, the judges noted that the 2019 settlement was a negotiated agreement involving significant financial penalties and specific injunctive terms, all sanctioned by the court. Judge Randolph suggested that if the FTC could unilaterally change the terms, Meta might have grounds to seek a refund of the $5 billion penalty.

The judges emphasized that any modifications to the settlement terms should require court approval. They pointed out that the FTC, lacking independent enforcement authority, must work through the courts to enforce or alter its orders.

After the panel issues their ruling, the case could make its way to the Supreme Court and place the federal agency authority back in the spotlight over government agencies’ regulatory power.

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