//  12/12/17  //  Commentary

The Federal Communication Commission's (FCC's) draft order suggests that it will “restore” the Federal Trade Commission's (FTC's) authority to address net neutrality-related harms imposed by broadband carriers. (The scope of the FTC’s authority is—and will remain, even after the FCC’s vote—subject to some uncertainty.) Indeed, the FCC and the FTC released yesterday a Memorandum of Understanding outlining the agencies’ future cooperation over net neutrality matters. It’s thus worth taking a closer look at the FTC’s previous role in net neutrality-related matters, at the MOU, and at the comparative advantages of each agency.

The FTC on Net Neutrality

The FTC’s Acting Chairwoman, Maureen Ohlhausen, has endorsed the FCC’s draft order, explaining that the FTC “stands ready to protect broadband subscribers from anticompetitive, unfair, or deceptive acts ecosystem.”

Other members of the FTC are not so sure: Commissioner McSweeny describes how the FCC is better-equipped to address network neutrality-related harms. Indeed, this has been the view of many FTC Commissioners, on both sides of aisle, for over a decade. Commissioner Leibowitz, for example, noted that there was “little chance” that antitrust could address net neutrality-related harms, except, perhaps, after “drawn out, uncertain and expensive” litigation. Commissioner Rosch went even further, finding it doubtful that antitrust could succeed at all. This is consistent with Commissioner McSweeny’s view that the FCC’s ex ante rules, informed by expertise and historical perspective, are better than the FTC’s ex post enforcement process, which can be “costly, difficult, and time consuming.”

The FTC’s approach to network neutrality has shifted: Away from a consensus position that net neutrality belongs at the FCC, and toward the position that net neutrality belongs in the FTC’s portfolio (McSweeny, Comm’r, dissenting, of course). But what exactly does it mean for the FTC to take on net neutrality? Let’s look at the MOU.

The FCC-FTC MOU

As I noted in an earlier post, net neutrality principles are primarily designed to ensure that ISPs—the gatekeepers for consumer access to the internet—don’t block or discriminate against content that, say, competes against the ISP’s own offerings.

The MOU says practically nothing about these harms. Instead, here’s what the MOU describes:

  1. The FCC will investigate ISP failures to properly disclose—either by a filing with the FCC, or through a public website—ISP practices that amount to blocking, throttling, or content discrimination.
  2. The FTC will investigate unfair and deceptive practices by the ISP. Such practices may “concern[] the accuracy of [these same] disclosures.” They may also include “other” activities.
  3. The FCC and the FTC will share information.

Both the FCC and the FTC agree to address gaps in carrier disclosures. Neither the FCC nor the FTC address the effect of those disclosed practices. In sum, the MOU is primarily, if not solely, concerned with ensuring that carriers disclose their blocking, throttling, and content discriminating practices—without regard to whether those practices are harmful.

This contrasts with the views of past and present members of the FTC, noted above. Commissioner McSweeny, for example, describes discrimination against a rival as “harmful conduct” that net neutrality rules would address (and which would be difficult for the FTC to prosecute). Commissioner Leibowitz notes carriers’ “strong financial incentives to restrict access to content and applications” while expressing doubt over antitrust’s ability to “fully” and “timely” resolve “the concerns that have animated the net neutrality debate.” Likewise, Commission Rosch noted the widespread consensus applauding the FCC’s action in Madison River (its first modern net neutrality case), but explained that such a case would be “difficult to litigate” under antitrust standards.

When members of the FTC explained that the FCC should lead on net neutrality, it was on the view that such rules addressed true threats to competition and to consumer welfare. This was so even where a Commissioner, such as Commissioner Rosch, expressed some skepticism of an alleged harm, but was nonetheless confident that the theory should at least face an adversarial test. But the MOU minimizes these threats, reducing net neutrality’s scope to a disclosure regime.

Addressing Net Neutrality Harms

The MOU’s treatment of these threats to competition and consumer welfare is not surprising in light of the FCC’s draft order. The order, after all, is deeply skeptical of such theories of consumer harm.

The foundation of this skepticism is not clear. On the one hand, the order dismisses claims of content blocking or discrimination as “purely speculative” or “hypothetical.” (An error cost analysis of rules against speculative conducts favors the existing net neutrality protections.)

On the other hand, the order concedes several “examples of net neutrality violations,” but suggests that they “could have been investigated as antitrust violations.” The order does not say whether they could have been redressed as antitrust violations.

The order may omit the second point, about redressability, if the FCC believes that antitrust’s standards are coterminous with net neutrality’s appropriate bounds: If a carrier’s conduct would satisfy antitrust’s tests, then it should fly at the FCC. But if that were so, then the order’s emphasis on “speculative” or “hypothetical” claims seems misplaced: it matters whether the conduct is legal or illegal; it doesn’t matter whether that conduct is real or imagined.

Moreover, if the FCC believed that antitrust, and not the existing net neutrality rules, provide the right standard, we might expect the FCC-FTC MOU to elaborate on the possibility of subjecting potentially harmful conduct to antitrust’s tests. But neither the order nor the MOU seem to take this possibility seriously. And for good reason: As Commissioners Leibowitz, McSweeny, and Rosch all explained, antitrust’s mode of ex post enforcement is a comparatively poor fit for net neutrality harms. It is a slow, expensive, and uncertain response to harms imposed on markets that can be fast-paced, characterized by large network effects, and subject to large first-mover advantages. Hence, to take net neutrality seriously is to take seriously the need for proactive rules against harmful conduct that are crafted by an agency that is competent (jurisdictionally and technically) to design them.


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