The Federal Trade Commission has formally launched a rulemaking proceeding that nominally is focused on consumer privacy issues, but actually raises significant questions about the impact of artificial intelligence/machine learning (AI/ML) systems and applications and whether the Commission should adopt rules regulating, limiting, or otherwise overseeing such systems and applications. Companies that develop and deploy AI systems that analyze or utilize consumer data should seriously consider submitting comments to the FTC.
The FTC’s proposal was released as an Advance Notice of Proposed Rulemaking (ANPR) on "Commercial Surveillance and Data Security." The Commission voted along party lines, 3-2, to initiate the proceeding. The comment period for addressing the many questions raised in the ANPR is 60 days after the document is published in the Federal Register. In addition, the agency will host a virtual public forum on September 8, 2022, that will include panel discussions and opportunities for two-minute comments from members of the public.
The Commission invites comment on whether it should consider implementing new trade regulation rules or other regulatory alternatives "concerning the ways in which companies (1) collect, aggregate, protect, use, analyze, and retain consumer data, as well as (2) transfer, share, sell, or otherwise monetize that data in ways that are unfair or deceptive." The Commission said that it is not proposing any new rules, but rather "generat[ing] a public record" about commercial surveillance and data security practices that may be unfair or deceptive in violation of Section 5 of the FTC Act.
The ANPR poses more than ninety questions on "commercial surveillance and data security" to create a record that it may consider for issuing regulations, including specific questions concerning the use of biometric information, commonly used AI/ML systems classified as "automated decision-making" tools, and concerns around so-called "algorithmic error" and "algorithmic discrimination."
The summary below focuses on those issues raised in the ANPR relevant to the potential regulation of AI/ML systems and applications. DWT’s Privacy & Security team published a parallel blog post on the issues the ANPR raises for potential FTC regulation of the collection and use of consumer data and data security.
In the ANPR, the FTC seeks information about the use of automated decision-making (ADM) systems, the costs and benefits those systems confer, their reliability, and the extent to which they are susceptible to algorithmic errors and capable of causing discrimination. The Commission also raises a number of legal and policy questions focused on the scope of potential new rules, the agency’s authority to promulgate new rules, and factors that could mitigate harm in the absence of new rules.
Factual Questions:
The ANPR:
Legal/Policy Questions:
The ANPR:
In addition to the broader ADM-focused questions referenced above, the ANPR also raises questions specific to "algorithmic discrimination" based on protected categories.
The ANPR:
In addition to several other areas of interest (including targeted advertising, health data, and children’s privacy), the ANPR questions the use of biometric information.
The ANPR seeks information on the collection, use, and transfer of biometric data, including the types of biometric data collected by companies. For what purposes is such information being collected? Are consumers aware of such collection? What are the benefits and harms of these practices?
The ANPR also asks whether and how the use of facial recognition, fingerprinting, or other biometric technologies should be limited.
The questions posed by the FTC in its ANPR demonstrate an awareness of the recurring policy and legal questions that arise in conversations about AI and potential methods of regulating ADM systems. Many of the questions raised in the ANPR concern issues—such as transparency and discrimination—that federal, state, and local policymakers focus on in other proposed legislation or regulations.
The FTC indicated in a December 2021 announcement that algorithmic discrimination was going to be a primary focus of its ANPR, and the depth and breadth of the questions the ANPR raises demonstrate the seriousness with which the Commission has focused its efforts.
With that said, the Commission is at the information-gathering stage, and has not indicated that it supports one method of regulation over another, or even whether any new regulations in this space are warranted. Accordingly, companies that may be impacted by regulations on the development and deployment of AI systems should strongly consider submitting comments to the FTC.
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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