Big Tech is facing a data privacy squeeze

What's happening: The FTC voted 3-2 along party lines last Thursday to seek comment on the harms of "commercial surveillance" and whether privacy rules are needed.

• The advance notice of proposed rulemaking, the first step in the rulemaking process, asks several questions about companies' data collection practices and the potential to harm consumers, including children.
• "We've seen now that the growing and continuing digitization of our economy means that [privacy violations and data security breaches] may now be prevalent, and that case by case enforcement may fail to adequately deter law breaking or remedy the resulting harms," FTC chair Lina Khan said in a call with press.

Meanwhile, the FTC's efforts come as bipartisan lawmakers try to pass a comprehensive privacy bill, which has advanced farther than similar proposals.

• The American Data Privacy and Protection Act would allow consumers to opt out of targeted advertising and require companies to minimize the data they collect, among other measures.
• It is sponsored by three of the four lawmakers leading the top committees in the House and Senate that need to advance the bill — House Energy & Commerce Committee Chairman Frank Pallone (D-N.J.), ranking member Rep. Cathy McMorris Rodgers (R-Wash.), and Senate Commerce Committee ranking member Roger Wicker (R-Miss.).

Between the lines: Anxieties about pervasive online data collection are on the rise after the Supreme Court ended federal protections for abortion.

• Privacy advocates have warned that location data, emails, browser history and other online activity could be obtained by law enforcement in connection with abortion investigations in states that have outlawed the procedure.
• In an executive order responding to the Supreme Court decision, President Biden encouraged the FTC take steps to protect consumers' privacy when seeking information about reproductive health services.

The big picture: The FTC could spur Congress to act on long-awaited federal privacy legislation, and start to lay out what American digital privacy rules could look like.

• While Europe passed its General Data Protection Regulation years ago, the data privacy protection vacuum in the U.S. has been filled by a patchwork of laws in a few states.

The intrigue: The FTC's rulemaking process is lengthy and it faces an uncertain legal outcome, but it could ultimately result in giving the agency the authority to fine companies for breaking rules.

• Both Republicans and Democrats at the FTC emphasized the need for congressional action, with the Democrats arguing the FTC effort is not a substitute for legislation.
• Republican Commissioner Christine Wilson, who dissented from the FTC's proposal, said "I am gravely concerned that opponents of the bill will use the (advance notice) as an excuse to derail" the privacy bill.
• But Democratic Commissioner Alvaro Bedoya said, "There are no grounds to point to this process as reason to delay passage of that legislation."

Reality check: The FTC "will face extended administrative and legal battles along the way" to crafting rules, Matt Perault, a policy advisor to New Street Research, wrote in a research note. "Given the challenges, we think the possibility of sweeping new rules is unlikely."

What they're saying: Lawmakers in both parties said their branch of government should move forward with privacy legislation in response to the FTC's action.

• "To get real consumer data privacy protections, Congress must act," Wicker said in a statement. "FTC commissioners have acknowledged that legislation, not regulation, is the preferred way to achieve these protections."

What to watch: Lawmakers behind the bill don't want to lose momentum for their measure — which already faces an uphill battle to become law — because the FTC is acting.