Congressional Committee Hears Testimony on Bills that Would Affect Consumers

On May 24, the Energy and Commerce Committee of the U.S. House of Representatives held a legislative hearing on 17 bills related to the operations of the Federal Trade Commission. We believe that three of these bills are of significant interest to consumers. These are the Better Online Ticket Sales Act (HR 5104), the Consumer Review Fairness Act (HR 5111), and the Statement on Unfairness Reinforcement and Emphasis Act (HR 5115).

The Better Online Ticket Sales Act is targeted at “bots” which automatically buy up tickets for popular events such as concerts or sports games, then re-list the tickets on sites such as StubHub for high markups.

The Consumer Review Fairness Act would stop companies from prohibiting customers from leaving unfavorable reviews about products or services. This includes incidents such as the New York hotel which included a clause in its guest contract stating they would charge guests $500 for negative reviews, or the Texas-based pet-sitting service that sued a couple who left a bad review. These prohibitions against bad reviews, when found in terms of service or other contracts, are often called “non-disparagement clauses.”

The Statement on Unfairness Reinforcement and Emphasis Act would require the FTC to essentially offer rationale for why they are declaring an act illegal or deceptive, stating at the commission cannot declare an act unlawful if it is “reasonably avoidable” by consumers, including several other restrictions.

In a statement submitted to the committee, FTC Chairwoman Edith Ramirez detailed the commission’s stance on the bills before the committee, including the three listed above.

Ramirez described the Consumer Review Fairness Act and the Better Online Ticket Sales Act as legislation which identify issues which Congress hopes to include in the FTC’s consumer protection agenda, and on which FTC has already done some work.

Regarding the Consumer Review Fairness Act, Ramirez said that the FTC has used its existing authority to some extent in this area, and welcomes the additional legal tools afforded by this legislation. She expressed support for the Better Online Ticket Sales Act, and approved of measures to prevent scalping and use and sale of scalping software, but also warned that those restrictions should not extend to software which has other, legitimate uses (such as web browsers).

Ramirez expressed concerns about the Statement on Unfairness Reinforcement and Emphasis Act, saying, “we are concerned that attempting to codify selected portions of the Statement might create obstacles to bringing important law enforcement actions.” Ramirez said she believed that this legislation could undermine the commission’s efforts to prevent likely substantial harm.

John Breyault, Vice President of Public Policy, Telecommunications,and Fraud at the National Consumers League, gave his testimony supporting the Better Online Ticket Sales Act. He called fans’ ticket buying experience, “an exercise in frustration.” Gil Genn, testifying on behalf of the Maryland Sports and Entertainment Industry Coaltition, also expressed his support for this bill. He lauded the creation of a “dual enforcement mechanism to stop that theft,” as it would allow the FTC to enforce the law against people who use bots to hack a ticket-selling website as well as allow an artist, venue, or fan to sue a bot user under a federal standard for damages.

Abigail Slater, General Counsel, for the Internet Association, commented on the Statement on Unfairness Reinforcement and Emphasis Act, saying that the bill “seeks to place economics on a firmer footing within the FTC’s consumer protection mission.” Slater stated that it would “modernize [the commission’s] approach to economics in consumer protection cases.” Daniel Castro, Director of the Center for Data Innovation, also supported that act. He said that if the FTC prosecutes a company for a fairly minor infraction, then it could send the message to other companies to direct resources away from innovations and towards corporate lawyers. He called that act mentioned above a step in the right direction for the commission focusing its resources on cases where there is “direct and tangible” consumer harm. David C. Vladeck, a professor at Georgetown University Law Center, opposed the bill, saying that it could undercut, rather than clarify, the FTC’s authority. Vladeck supported the Consumer Review Fairness Act, calling it an important reform.

Slater praised the Consumer Review Fairness Act, as did Castro. Castro noted, however, that it is a fairly narrow law, as it would not apply to non-disparagement clauses in voluntarily negotiated contracts (such as divorce settlements, or some employee agreements).

There was no immediate legislative action taken on these bills in the hearing, however the committee heard arguments and committee members asked a raft of questions of the witnesses, including those mentioned above. A video recording of the full hearing, along with the list of witnesses and their written testimony and a list of and links to all 17 bills, may be found here.

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