Meta Goes To War With FTC Over Right To Profit From Kids' Personal Data

Meta has filed a lawsuit challenging the Federal Trade Commission's authority to regulate the social advertising giant.

If the Facebook parent succeeds in its claims, the US watchdog could be hobbled and hindered in its ability to pursue its consumer protection mandate.

Zuck & Co's complaint [PDF], filed in federal court in Washington, DC, on Wednesday claims the regulator's structure and operation violates the US Constitution.

In 2011, Meta, in its Facebook incarnation, settled with the FTC over allegations the Silicon Valley titan ran roughshod over people's privacy, and vowed to respect netizens' wishes to keep their info private.

In 2020, the FTC again settled with Meta over claims the biz broke that 2011 promise.

Now this lawsuit is an attempt by the corporation to stop the FTC from modifying that 2020 settlement.

As noted by the non-profit Electronic Privacy Information Center, the 2020 order resulted in a $5 billion fine for Facebook "but required no meaningful changes to the business practices that violate user privacy."

The FTC subsequently decided to seek meaningful shifts in the social network's policy. In May this year, the agency accused Meta of repeatedly violating its privacy commitments, claiming the ad biz has fallen short of its compliance obligations, misled parents about controls in the company's Messenger Kids app, and misrepresented facts about developer access to user data.

And to remedy the situation, the FTC said it wanted to revise the 2020 order to further restrict data gathering by Meta and its subsidiaries – Facebook, Instagram, Oculus, and WhatsApp.

The proposed restrictions include: a blanket prohibition on monetizing the data of children and teens; disallowing the launch of new products until they've been assessed for privacy; an extension of compliance obligations to companies Meta acquires; limits on the use of facial recognition technology; and stronger third-party monitoring of data usage.

Meta – presently being sued by most US states and also by hundreds of school districts over claims the corporation knew its social media services harmed the mental health of kids – contends the proposed FTC changes would cause irreparable harm to its business. Thus it is asking the court to declare the agency's oversight unconstitutional.

"In this complaint, Meta does not seek to litigate the merits of the commission’s accusations and findings against Meta in the FTC proceeding," the paperwork states. "Instead, Meta challenges the constitutionality of five structural characteristics of the commission that render the FTC proceeding unconstitutional."

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Meta argues the FTC, by acting as prosecutor and judge in proceedings violates the Fifth Amendment guarantee of due process. The social biz also claims that the President's inability to remove FTC commissioners violates Article II of the Constitution, which says the US leader can appoint and remove executive officers.

The social ad biz says the FTC, chaired by Big Tech nemesis Lina Khan, aims to usurp its property rights "by seeking to impose broad restrictions on how companies such as Meta may make use of their intellectual property." And it insists meta should be allowed to have any dispute adjudicated in a jury trial, rather than an FTC administrative proceeding.

The FTC declined to comment.

David Vladeck, professor of law at Georgetown University and a former director of the Bureau of Consumer Protection of the Federal Trade Commission, told The Register there are two constitutional issues at play.

One, he said, is the limitation on the President's ability to remove FTC commissioners, which was upheld in Humphrey's Executor v. United States (1935) and revisited recently in Seila Law LLC v. Consumer Financial Protection Bureau (2019). In that latter case, the Supreme Court held that limitations on the removability of the head of Consumer Financial Protection Bureau violated constitutional separation of powers.

"What Meta is doing is arguing that in light of the Seila Law case, the FTC is not constitutionally composed because the President does not have the right to simply remove FTC commissioners," said Vladeck. "And that's an issue that will end up at some point in the Supreme Court."

That's an issue that will end up at some point in the Supreme Court

The other constitutional issue, he said, has to do with Securities and Exchange Commission v. Jarkesy, a case about the financial watchdog's authority. The Supreme Court heard arguments for that case on Wednesday.

"The question there was, 'can the SEC use its administrative powers to adjudicate claims of enforcement against people who've allegedly violated the SEC statutes," said Vladeck.

The FTC's enforcement action against Meta has been administrative rather than judicial, and so if Meta can invalidate that approach, FTC would have to pursue claims using judicial procedure in federal court, which would require more time and resources.

Vladeck said that a decision against the SEC in SEC v. Jarkesy would harm the FTC.

"I think that would be a body blow to enforcement agencies," he said. "It'd be great for people who cheat and steal from consumers, but I think the court would get it wrong. And I hope the court doesn't do that." ®