Good morning. The committee will come to order. Thank you for joining us today. Im pleased to welcome federal trade commissioner Joseph Simons and commissioner chopra. Batting. 100 so far . 1000. Its the cupping im thinking of. It has been more than seven years since the ftc has appeared before this Sub Committee. Youre right. Its overdue, and ftc is one of the most important agencies this Sub Committee funds. And its only gotten more important over the last few years. You have enormous jurisdiction. Policing most sectors of our economy for bad behavior. You crack down on abusive robocallers. They investigate data breaches that expose sensitive personal information. They analyze consolidation in the health care market. Helping to limit abusive pricing for essential drugs and health services. Perhaps at the front of mind they are the top cop on the beat for Consumer Privacy violations and other issues in the Technology Sector. This is something everyone worries about these days. Democrat and republican. With a Tech Companies respecting the privacy choices of their customers or choking off competition by favoring their own products or buying up competing products, weve seen some promising actions recently. The ftc certainly did not take a summer break. In the past few months theyve finalized high profile settlements with facebook, youtube and equifax. They launched an antitrust investigation of facebook and possibly other companies. We recognize the challenges the ftc faces in policing such a larj swath of the economy. Thats why this years house appropriation bill proposed an increase in ftc funting. A bump of more than 10 . Part of the reason were here is to understand how the ftc can invest the resources wisely and get the best bang for the buck for consumers. It is also our duty as appropriators to determine if the ftc is excusing the existing resources as efficiently as possible. Consider this summers facebook settlement. Yes, 5 billion is by far the largest privacy settlement. But it doesnt seem to match the magnitude of the privacy violations. That fine does not represent even a full month of revenue for the company. Its not clear that the corporate changes the ftc secured will head off future privacy violations. We could raise similar points about youtube or questions why the equifax settlement over one of the largest data breaches in the history included only 31 million for alternative compensation. The economy has transformed dramatically in the past decade. The companies we poir about today are structured differently than the companies of concern in the past. What we want to know is this. Can the ftc do better . Can it win bigger monetary settlements to provide greater redress to consumers or send clearer signals to the market that the u. S. Will not toll trait anticompetitive or Deceptive Behavior and there will be severe consequences if that does happen. We look forward to hearing from the chairman the commissioner. Before i turn to the witnesses i would like to recognize mr. Graves for his opening remarks. Thank you, mr. Chairman. I appreciate you holding this hearing today. Mr. Chairman, thank you for being here and commissioner as well. Look forward to hearing your testimony, and i think we all know the federal trade commission basically has two primary missions. The first is to protect consumers from unfair and deceptive and fraudulent practices as the chairman discussed. And this includes protecting americans from Identity Theft, false advertising, those dreaded telemarketing calls, the unwanted telemarketing calls and certainly scams against the most vulnerable our elderly that are in our communities, and our Great Service members. The ftc makes sure our markets are open and free. Mr. Chairman, i was thinking about your comments. Its been nearly seven years since theyve been before us. There may be a reason for that. And thats since 2018 nearly 95 of all their decisions and their work on the commission has been unanimous. We dont hear about that a lot knowing this is a bipartisan commission. Congratulation to you on how youve worked together. I know theres still 5 out there where theres tremendous debate and we expect that. As we become more agadependent technologies, these challenges, its important that Technology Companies that serve americans act in an open and transparent manner. That the Technology Sector protects Consumer Privacy, and that they do not conduct anticompetitive Business Practices whatsoever. And however as a regulator the ftc must be careful not to stifle innovation while conducting the important work. Its a difficult balance you grapple with every day. Because weve all seen in the past that overregulation of industries can hurt the Economic Growth and openly hurt consumers as well. Mr. Chairman, thank you for having this hearing today. I think it will be informative. I appreciate the chairman joining us and commissioner as well and look forward to hearing your testimonies. Thank you, sir. I would now like to recognize the chairman for his testimony. Thank you. Chairman kwigly ranking members graves and members of the Sub Committee. Im pleased to be before you to testify about the commissions work and funding requests and particularly alongside my dear colleague, commissioner chopra. This is an independent agency with a broad mission, to protect consumers and maintain competition in most sectors of the committee. On the Consumer Protection side were pursuing Law Enforcement on privacy and Data Security matters including record breaking settlements with facebook, google and youtube and equif equifax. We mainly used a 100yearold statute section 5 of the ftc act to bring our privacy and Data Security actions but our authority under section 5 is limited. These limitations have a critical effect on our ability to protect consumers which is why we urge congress to enact privacy and Data Security legislation enforceable by the ftc which dwrgrants us Civil Penalty Authority and jurisdiction over nonprofits and common carriers. We bring a broad range of Enforcement Actions addressing fraud against older adults, Service Members and other diverse and underserved communities. On the competition said, Enforcement Actions in the pharmaceutical sector continue to be a big priority for us. Cases like our pay for delay matters protect generic competition which helps keep down drug prices. To address concerns about the power of big tech, we have created a Technology Task force within the bureau of competition to concentrate our expertise and better investigate conduct by Technology Companies. I want to thank this committee for the additional 40 million for the ftc that is in the house fiscal year 2020 Financial Services and general government appropriations bill. I assure you we will make good use of that additional funding. Although 40 million is a very large number, more than half of it might be needed to cover mandatory compensation increa s increases, step increases and noncompensation costs related to our Agency Operations such as our consumer sental services contract, our Litigation Support service and our additional Expert Witness fees. The remaining portion of the 40 million would likely be used for adding additional personnel in the neighborhood of 90 fte. We would focus new additions to prior areas such as privacy and enforcement agents, hiring more technologis technologists, doubling the size of the Technology Task force and hiring for economists. Finally, but significantly, while principle differences among commissioners occasionally lead to split decision, some of them high profile ones at that, the ftc works in a bipartisan fashion. And we will continue to do so. We are committed to using every resource to effectively protect consumers, and to promote competition and we look forward to continuing to work with the Sub Committee and the congress. I look forward to your questions. Thank you. Thank you all. I appreciate you holding this hearing today. I am chairman chopra i am honored to represent the federal trade commission. I welcome the oversight. I know it makes agencies stronger. As congress tackles some of the Biggest Challenges facing our economy, our society, and even our national security, the federal trade commission should be a critical piece of that puzzle. The stakes simply could not be higher. For example, how are we going to combat pharmaceutical industry abuses that contribute to out of control drug prices that mean the difference between life and death for patients . What can we do to make sure that americans can get a fair pay raise in a competitive job market rather than being squeezed by employer consolidation and noncompete agreements . How are we going to reverse the worry somedecline in new business formation and make sure that american entrepreneurs are not blocked by incumbents protecting their turf. How will we safeguard Sensitive Data from abuse and misuse from those seeking profit and those abroad seeking to do us hard. How wi congress is currently considering an increase in funding for the ftc and i share the chairmans commitment to use every resource effectively so that we deliver real value for the public. The ftc hearings that convened over the last year were a reminder of the importance of selfcritical analysis. We must always be serching for ways to be more effective. For example, what can we do to leverage the resources and authorities of our federal and state Law Enforcement partners to win full redress for victims and accountability for corporations and their executives that broke the law . How can we codify existing policy guidance and case law into clear rules so we can seek stiff penalties to be returned to taxpayers. What more can we do to protect honest businesses that play by the rules but are harmed by those who chaet . Were thinking about new ways to use the authorities and resources that congress has entrusted to the agency that solve real problems in our markets. We appreciate the opportunity to work with you to tackle these challenges and opportunities and i look forward to your questions. Thank you both. Again, thank you both for being here. Commissioner, you and your fellow democrat commissioner dissented in the youtube and facebook settlements. Could you give us a deeper dive as to the reasoning for your dissent and what you think the ftc can do differently or better to address these issues . Sure. The Facebook Corporation is a major governance and managerial challenge. They have serious dysfunction and they repeatedly violated the 2012 ftc order almost immediately. I was not happy with the outcome of the settlement. I think that it provided a blanket releases of claims that were unspecified. There is not a deep its not just the money . Or is money part of it . Well, it will 5 billion, while it is a record, is it going to change a firm that makes that amount of money very, very quickly in this is one of the largest corporations in the world. And wall street reacted. They didnt actually find it that big of a deal. Most in Silicon Valley who analyzed that business didnt see it as that significant. I outlined the concerns and since the time we finalized that settlement, weve now heard of more and more problems. You know, just recently just a few days ago 64,000 apps suspended we learned from the Massachusetts AttorneyGeneral Court filing you know, question learned about phone numbers in fact it keeps going and going, and i am concerned that the core problems in that firm are not fixed. Mr. Chairman, i want to ask your thoughts on that and more importantly, the ongoing issue this that settlement was discussing. And if you could add into this discussion if these decisions onsetling are because of a risk of losing in court, and if theres something we can do to mitigate against that concern . In this case i dont think it had anything to do with the risk of losing in court. To give context, we do not have the authority ourselves to fine people. We have to go to court and get a court to agree to the fine, and to any other additional relief. So in this case i think theres a widespread view that if we had gone to court, if we had spent years in litigation, and if we had won, the relief that we achieved in the settlement was far greater than any court would have likely granted us. So in terms of whether the settlement or going to litigation was the right choice, i think its clear. The settlement was far greater than we could have gotten in litigation. And theyre now under well, actually, hopefully soon they will be under order when the court signs the papers and finalizes it. And once that happens, then theyre under a much stiffer regime than they were previously. The other thing i want to say is in terms of the 5 billion, that is about 22 or 23 of their profits from last year. I mean, taking that much of someones profit is should be making them think about how they run their business. Is there something besides the fines that can change behavior . No. I want you to elaborate on that. Absolutely. Part of this another big part of this settlement the is injuktive relief. Weve got a new committee of the board thats formed that deals with privacy and is only composed independent directors. We have a requirement on mr. Zuckerberg that he is certified quarterly. Theyre in compliance with the Privacy Program thats mandated in the order. He cant just stick his head in the sand. He gets mandatory information flows which he has to review. Theres a very beefed up Third Party Assessor thats in here. We have the ability to hire and fire. That assessor has access to the mandatory information flows the order requires. And then the ftc itself has the ability to monitor, too, more stringently than weve had in the past. Thank you, mr. Graves. Thank you, mr. Chairman. Well talk a little bit more about antitrust and facebook and others. Something a little more pressing for me as because weve been hearing a lot about it in the news is sim swapping. This is when a bad actor, pretends to be somebody, calls a Telecommunications Company and convinces them to activate a sim card on a different device, and then that allows them to basically have mobile Identity Theft. And have access to a persons phone, oftentimes Bank Accounts, applications, all kinds of things. Whats interesting is the ftc actually responded to this over three years ago. And theres a blog that was posted about this very thing. But it seems to be intensifying, and more active. In fact, jack dorsey suffered this a few weeks ago himself. And his phone was taken over. Can you give us an update . What role do you have in this . And what can consumers do to protect themselves from this and mr. Chairman, ill start with you on that. We share your concerns. This is a big problem. It enables fraud centers to access phone calls and text messages, get personal information, get potentially get into their Bank Accounts and other important aspects of their personal lives. So this is a this is a serious problem. We did provide and do provide on our website guidance to consumers on this issue. And we continue to monitor this issue very carefully. So this is something were focussed on. Is there anything the only i think id add as two factor authentication spreads which is generally a good thing, most people are using that through their personal cell phone. Obviously thats now a big vulnerability the more someone can dig into that phone. So for me, i think of this broader issue of Identity Theft as really problems in our Data Security infrastructure. And that has huge impacts on commerce, national security, everything. So if we dont take this seriously, we cant quantify the harm that can come from this. The twostep verification doesnt really stop a sim swap. No. But it it might help with an application or such. It makes it more damaging. Right . It doesnt stop from reading somebodys text messages, changing pass words on a phone and other things. What can the federal government do to protect consumers from this . I think consumers are doing everything they can. Technology is moving very rapidly. Theyre trying to protect their own identity. Maybe theres something we can do in terms of encouraging the carriers. A lot of what enables this is that the carrier of the scammer the fraud center is able to get enough information that when you go to the security questions theyre able to answer them. Maybe we need to think about how to make that more secure. Thank you. And mr. Chairman, if i could, i have one other question related. Because another issue thats sort of been on my mind a little bit, as it relates to chairman and i both have this similar position about Cyber Security and some of the threats we face as it relates to protection of privacy. Thats why im bringing up sim swaps. We had an fcc meeting recently that discussed geolocation data being sold from the same companies. Without a consumers knowledge. The ftc has some jurisdiction here as well to take action against those that are engaged in the unfair deceptive practices. Can you give us an update as to what involvement you have in that area