FTC Process and Transparency Reform Act of 2016

To amend the Federal Trade Commission Act to establish new requirements relating to investigations, consent orders, and reporting requirements, and for other purposes. 1. Short title; table of contents (a) Short title This Act may be cited as the FTC Process and Transparency Reform Act of 2016 (b) Table of contents The table of contents for this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Unlawful act or practice. Sec. 3. Time limitation for consent orders. Sec. 4. Annual reporting on the status of investigations. Sec. 5. Requirement of analysis and rationale for legislative and regulatory recommendations. Sec. 6. Effects of guidelines, general statements of policy, and similar guidance. Sec. 7. Termination of inactive investigations. Sec. 8. Nonpublic collaborative discussions. Sec. 9. Annual plan required. 2. Unlawful act or practice Section 5(n) of the Federal Trade Commission Act ( 15 U.S.C. 45(n) (n) Unlawful act or practice (1) Substantial injury required (A) In general The Commission shall have no authority under this section or section 18 to declare unlawful an act or practice on the grounds that such act or practice is unfair unless the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition. (B) Substantial injury to consumers For purposes of this subsection, an act or practice does not cause and is not likely to cause substantial injury to consumers if the injury or harm resulting from such act or practice is trivial or merely speculative. An injury may be sufficiently substantial if the injury does a small harm to a large number of people. An act or practice may be likely to cause a substantial injury if the act or practice raises a significant risk of concrete harm. (C) Considerations required In determining whether an act or practice causes or is likely to cause substantial injury to consumers under this subsection, the Commission shall consider the following: (i) Whether the act or practice results in monetary harm. (ii) Whether the act or practice results in unwarranted health or safety risk. (iii) Whether the act or practice results only in emotional or other more subjective harm. (2) Net effects of injury required (A) Considerations required An act or practice is not unfair unless the act or practice is injurious in its net effects. In determining whether an act or practice is injurious in its net effects, the Commission shall consider the following: (i) The various costs for a remedy, including the costs to the parties directly before the Commission. (ii) The burdens on society in general in the form of increased paperwork, increased regulatory burdens on the flow of information, reduced incentives to innovation and capital formation, and other similar matters. (B) Consumer decisions The Commission may not second-guess the wisdom of particular consumer decisions, but may consider whether the act or practice unreasonably creates or takes advantage of an obstacle to the free exercise of consumer decisionmaking. (3) Public policy considerations In determining whether an act or practice is unfair, the Commission may consider established public policies as evidence to be considered with all other evidence. Such public policy considerations may not serve as a primary basis for such determination. . 3. Time limitation for consent orders (a) Amendment Section 5 of the Federal Trade Commission Act ( 15 U.S.C. 45 (o) Termination clause required for consent orders Any consent order entered into by the Commission relating to alleged unfair or deceptive acts or practices by the person, partnership, or corporation, subject to the consent order shall include a termination clause that the consent order shall expire not later than 8 years after the date on which the consent order is entered into, unless the consent order relates to alleged fraud by the person, partnership, or corporation subject to the consent order or requires a time limit longer than 8 years based on the factors described in this subsection. In determining the time limit for any termination clause, the Commission shall consider each of the following factors: (1) The impact of technological progress on the continuing relevance of the consent order. (2) Whether there is reason to believe that the person, partnership, or corporation would continue to engage in activities that violate this section without the consent order. (p) Consent order review Any consent order entered into by the Commission that is unrelated to alleged fraud by the person, partnership, or corporation subject to the consent order and has a termination date more than 5 years after such consent order is entered into shall include a clause providing for Commission review of the consent order 5 years after the date on which the order is entered into. Such clause shall require the Commission to evaluate whether the consent order has achieved its initial purposes based on the factors described in subsection (o). The clause shall provide that if, based on such evaluation, the Commission determines that the consent order has achieved its purposes, the Commission shall terminate the consent order. (q) Petition for Review of Existing Consent Orders Any person, partnership, or corporation that as of the effective date of this subsection is subject to a consent order that is unrelated to alleged fraud and has been effective for a period of at least five years may petition the Commission to terminate such consent order. In evaluating a petition to terminate a consent order under this subsection, the Commission shall consider whether the consent order has achieved its initial purposes based on each of the factors described in subsection (o). If, based on such evaluation, the Commission determines that the consent order has achieved its purposes, the Commission shall terminate the consent order. . (b) Effective date; applicability The amendment made by subsection (a) shall take effect on the date of enactment of this Act and with respect to subsections (o) and (p) of section 5 of the Federal Trade Commission Act ( 15 U.S.C. 45 4. Annual reporting on the status of investigations Section 5 of the Federal Trade Commission Act ( 15 U.S.C. 45 (r) Report on investigations (1) In general The Commission shall, on an annual basis, submit a report to Congress on investigations with respect to unfair or deceptive acts or practices, and with respect to unfair methods of competition, in or affecting commerce (within the meaning of subsection (a)(1)), detailing— (A) the number of such investigations the Commission has commenced; (B) the number of such investigations the Commission has closed with no official agency action; (C) the disposition of such investigations, if such investigations have concluded and resulted in official agency action; and (D) for each such investigation that was closed with no official agency action, subject to paragraph (2), a description— (i) sufficient to indicate the legal analysis supporting the Commission’s decision not to continue such investigation; and (ii) of the industry sectors of the persons, partnerships, or corporations who are subjects of such investigation. (2) Consent required The Commission shall not include in a report required under paragraph (1) the description required under subparagraph (D) of such paragraph unless the Commission has— (A) provided to each person, partnership, or corporation who is a subject of the investigation a notification containing the description to be included in the report; and (B) obtained the consent of each such person, partnership, or corporation to the inclusion of the description in the report. (3) Privacy protection The description required under paragraph (1)(D) shall not include the identity of any person, partnership, or corporation who is a subject of the investigation or any other information that identifies the person, partnership, or corporation. . 5. Requirement of analysis and rationale for legislative and regulatory recommendations The Federal Trade Commission Act ( 15 U.S.C. 41 et seq. 6A. Economic analysis required (a) In general Except as provided in subsection (b), the Commission may not publish a recommendation for legislative or regulatory action unless— (1) the Commission publishes any economic analysis or advice prepared by the Bureau of Economics of the Commission relating to such recommendation; or (2) if no such economic analysis or advice was prepared, the Commission indicates, in writing as part of such recommendation, that no such analysis or advice was given. (b) Exception The requirement in subsection (a) shall not apply if— (1) the recommendation for legislative or regulatory action is made as part of an appearance by a Commissioner before Congress; (2) the recommendation is made to a State or local government entity; (3) the recommendation is requested by and submitted to any member or committee of Congress, including the Committee on Energy and Commerce of the House of Representatives; (4) the recommendation is submitted to another Federal agency in response to a notice of proposed rulemaking, including comments to the Federal Communications Commission; or (5) the recommendation is submitted to the United Kingdom, the European Union or members thereof, including recommendations to the European Parliament, the European Commission, or any data protection authorities of any member state with regard to cross-border data flows and other privacy and data security matters. . 6. Effects of guidelines, general statements of policy, and similar guidance Section 18(a) of the Federal Trade Commission Act ( 15 U.S.C. 57a(a) (3) (A) No guidelines, general statements of policy, or similar guidance related either to unfair methods of competition or to unfair or deceptive acts or practices, in or affecting commerce, issued by the Commission shall confer any rights upon any person, State, or locality, nor shall operate to bind the Commission or any person, State, or locality to the approach recommended in such guidelines, general statements of policy, or similar guidance. In any enforcement action, the Commission shall prove a violation of a provision of law enforced by the Commission. The Commission may not base an enforcement action on, or execute a consent order based on, acts or practices that are alleged to be inconsistent with any such guidelines, general statements of policy, or similar guidance, unless the acts or practices violate a provision of law enforced by the Commission. (B) Compliance with any guidelines, general statement of policy, or similar guidance issued by the Commission may be used as evidence of compliance with the provision of law under which the guidelines, general statement of policy, or guidance was issued. (C) Nothing in this paragraph shall be construed to confer any authority upon or negate any authority of the Commission to issue guidelines, general statements of policy, or similar guidance. . 7. Termination of inactive investigations Section 20 of the Federal Trade Commission Act ( 15 U.S.C. 57b–1 (1) by redesignating subsection (j) as subsection (k); and (2) by inserting after subsection (i) the following new subsection: (j) Termination of inactive investigation (1) In general Except as provided in paragraph (2), a covered investigation shall terminate at the expiration of the six-month period beginning on the date on which a covered verifiable written communication is sent by the Commission. (2) Exception Paragraph (1) does not apply if— (A) an additional covered verifiable written communication is sent by the Commission during the period described in paragraph (1); (B) the Commission votes to extend the covered investigation before the expiration of such period; or (C) the Commission determines in a vote, within 30 days after the expiration of such period, that the Commission did not send a covered verifiable written communication during such period because of excusable neglect or a circumstance beyond the control of the Commission that rendered notification during such period impossible. (3) Definitions In this subsection: (A) Covered investigation The term covered investigation (B) Covered verifiable written communication The term covered verifiable written communication . 8. Nonpublic collaborative discussions The Federal Trade Commission Act ( 15 U.S.C. 41 et seq. 27. Nonpublic collaborative discussions (a) In general Notwithstanding section 552b of title 5, United States Code, a bipartisan majority of Commissioners may hold a meeting that is closed to the public to discuss official business if— (1) a vote or any other agency action is not taken at such meeting; (2) each person present at such meeting is a Commissioner or an employee of the Commission; and (3) an attorney from the Office of General Counsel of the Commission is present at such meeting. (b) Disclosure of nonpublic collaborative discussions Not later than 2 business days after the conclusion of a meeting held under subsection (a), the Commission shall publish on its Internet website a disclosure of such meeting, including— (1) a list of the persons who attended such meeting; and (2) a summary of the matters discussed at such meeting, except for such matters as the Commission determines may be withheld under section 552b(c) of title 5, United States Code. (c) Preservation of open meetings requirements for agency action Nothing in this section shall alter or supersede section 552b of title 5, United States Code, with respect to any meeting of Commissioners other than a meeting held under subsection (a). (d) Definitions In this section: (1) Agency action The term agency action (2) Bipartisan majority The term bipartisan majority (A) is a group of two or more Commissioners; and (B) includes, for each political party of which any Commissioner is a member, at least 1 Commissioner who is a member of such political party, and, if any Commissioner has no political party affiliation, at least 1 unaffiliated Commissioner. . 9. Annual plan required (a) Amendments The Federal Trade Commission Act ( 15 U.S.C. 41 et seq. (1) by redesignating section 28 as section 30; and (2) by inserting after section 27 the following new sections: 28. Annual plan required Not later than December 1 of each year, the Commission shall publish and submit to the Committees on the Judiciary and Commerce, Science, and Transportation of the Senate and the Committees on the Judiciary and Energy and Commerce of the House of Representatives a plan for the next calendar year describing the projected activities of the Commission, including each of the following: (1) The policy priorities of the Commission. (2) Any rulemakings projected to be commenced. (3) Any plans to develop guidelines or other non-regulatory guidance documents. (4) Any plans to restructure the Commission or establish or alter working groups. (5) Any planned projects or initiatives of the Commission, including workshops, conferences, and reports. (6) With respect to any activities of the Commission, including workshops, conferences, reports, working groups, guidance documents, or rulemakings, that relate specifically to combating unfair or deceptive acts or practices that target or significantly affect individuals who are 65 years of age or older, a description of how such activities will address such acts or practices. (7) Projected dates and timelines associated with any of the required disclosures in this section. 29. Report on elder fraud required Not later than January 31 of each year, the Commission shall publish and submit to the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Energy and Commerce of the House of Representatives a report on the Commission’s enforcement actions to address unfair or deceptive acts or practices that may have targeted or significantly affected individuals who are 65 years of age or older during the previous calendar year, including each of the following: (1) A brief description of each such enforcement action. (2) The disposition of such enforcement actions, broken down by category. (3) The proportion of such enforcement actions as a percentage of all enforcement actions relating to unfair or deceptive acts or practices in or affecting commerce brought by the Commission. . (b) Rule of construction Nothing in the amendments made by subsection (a) shall be construed to limit or restrict the Federal Trade Commission’s activities or disclosure of information to the public, consistent with applicable law. (c) Effective date; applicability The amendments made by subsection (a) shall take effect on the date of enactment of this Act and shall apply with respect to the first December 1 and January 31, as applicable, occurring after such effective date. December 13, 2016 Reported from the Committee on Energy and Commerce December 13, 2016 The Committee on the Judiciary

Summary: FTC Process and Transparency Reform Act of 2016 (Sec. 2) This bill amends the Federal Trade Commission Act to provide additional factors for the Federal Trade Commission (FTC) to consider before it may declare acts or practices to be unlawful on the ground that they are unfair and likely to cause substantial injury to consumers. Trivial or merely speculative injury or harm must be considered unlikely to cause substantial injury. But the FTC may consider substantial: (1) an injury that does small harm to a large number of people, or (2) a significant risk of concrete harm. In determining the likelihood of substantial injury to consumers, the FTC must consider: (1) monetary harm, (2) unwarranted health or safety risks, or (3) only emotional or other more subjective harm. The FTC must find an act or practice to be injurious in its net effects before it may be considered unfair. In determining the net effects, the FTC must consider: (1) remedy costs; and (2) burdens on society in general, such as increased paperwork or regulatory burdens or reduced incentives for innovation and capital formation. The FTC may not second-guess consumer decisions, but may consider whether an act or practice unreasonably creates or takes advantage of an obstacle to the free exercise of consumer decisionmaking. (Sec. 3) A consent order entered into by the FTC to enforce against alleged unfair or deceptive acts or practices must include a termination clause providing for the order to expire within eight years after it is entered into, unless it relates to alleged fraud or requires a longer time limit. A consent order longer than five years that is unrelated to alleged fraud must provide for the FTC to: (1) review the order five years after it is entered into, and (2) terminate the order if it has achieved its initial purposes. In determining the time limit, the FTC must consider: (1) the impact of technological progress on the order's continuing relevance; and (2) whether the person, partnership, or corporation would continue to engage in violations without the consent order. The bill also allows persons, partnerships, or corporations subject to a consent order that is unrelated to alleged fraud and has been effective for at least five years to petition the FTC to terminate the order. (Sec. 4) The FTC must report annually on investigations the FTC has commenced, concluded with official agency action, or closed with no official agency action. With the consent of persons, partnerships, or corporations that were a subject of a closed investigation, the FTC must describe the legal analysis supporting its decisions not to continue with investigations and the industry sectors of those that were the subject of such closed investigations. The bill prohibits the FTC from including the identity of a person, partnership, or corporation that is a subject of an investigation in its description of an investigation that closed with no official agency action. (Sec. 5) The FTC is prohibited from recommending a legislative or regulatory action unless it publishes any economic analysis or advice prepared by the FTC's Bureau of Economics or indicates that no such analysis or advice was given. These requirements do not apply to recommendations made: (1) in an appearance by a commissioner before Congress, (2) to state or local governments, (3) in response to a request by a Member or committee of Congress, (4) to another federal agency in response to a notice of proposed rulemaking, or (5) to the United Kingdom or the European Union. (Sec. 6) The bill prohibits the FTC's guidelines or general statements of policy from: (1) conferring rights upon any person, state, or locality; or (2) binding the FTC or any person, state, or locality to a recommended approach. In enforcement actions, the FTC must prove a violation of FTC-enforced law. The FTC's enforcement actions or consent orders may not be based solely on allegations that acts or practices are inconsistent with guidelines or general policy statements unless the acts or practices violate FTC-enforced law. Compliance with guidelines or general statements of policy may be used as evidence of compliance with a law under which the guidelines or statements were issued. (Sec. 7) Certain FTC investigations involving civil investigative demands must terminate six months after the FTC sends a verifiable written communication to notify the subject of the investigation. But an investigation may continue beyond that six-month period if the FTC: (1) sends an additional verifiable written communication, or votes to extend the investigation, before the period expires; or (2) votes within 30 days after the expiration of such period that it did not send a written communication because of excusable neglect or a circumstance beyond the FTC's control that rendered notification during such period impossible. A bipartisan majority of FTC commissioners may hold a nonpublic meeting to discuss official business if: (1) no votes or actions are taken, (2) each person at the meeting is an FTC commissioner or employee, and (3) an attorney from the FTC's Office of General Counsel is present. "Bipartisan majority" means a group of at least two commissioners that includes, for each political party of which any commissioner is a member, at least one commissioner who is a member of such political party and, if any commissioner has no political party affiliation, at least one unaffiliated commissioner. Within two business days after such a nonpublic meeting, the FTC must disclose on its website: (1) a list of persons who attended such meeting; and (2) a summary of discussed matters, except for matters that are classified or otherwise exempt from disclosure. (Sec. 9) The FTC must publish and submit to Congress annually: (1) the FTC's plan describing its projected activities and timelines for the next calendar year, and (2) a report on FTC enforcement actions to address unfair or deceptive acts or practices that may have targeted or significantly affected individuals who are 65 or older during the previous year.