By: Keturah Taylor
Last week, the National Association of Attorneys General (NAAG) held its annual Capital Forum in Washington, DC, which provided AGs, AG staff, and private sector attendees the opportunity to engage with each other as well as federal officials, to discuss important policy issues and learn about the latest state and federal legal developments.
For three days, attendees debated and learned about wide-ranging topics of current interest to state and federal regulators during panels focused on global considerations in antitrust enforcement; ESG investment requirements; facial recognition technologies; strategies for multistate investigations; drug enforcement and the fentanyl crisis; veterans’ issues; and more. FTC Chairperson Lina Khan and CFPB Director Rohit Chopra also stopped by to discuss their respective agencies’ enforcement and regulatory priorities, and how they plan to work with AGs to protect consumers.
Key takeaways from a number of these panels are highlighted below. In addition to these substantive discussions, Capital Forum attendees also celebrated the service of outgoing NAAG President, Iowa AG Tom Miller, and welcomed incoming NAAG President, Ohio AG Dave Yost.
FTC, CFPB Focused on the Intersection of Privacy and Competition
Oregon AG Ellen Rosenblum and Guam AG Leevin Camacho led a discussion with FTC Chairperson Lina Khan and CFPB Director Rohit Chopra regarding the priorities and objectives of their respective agencies. The panel also discussed the privacy initiatives of each agency.
Chairperson Khan shared that the FTC is focused on the impact that corporate consolidation has on higher prices, lower wages, and declining entrepreneurship. In order to address these issues, the FTC is updating their regulatory and enforcement tools—and revisiting the tools already at its disposal—to better reflect the current market and economic realities. For example, the FTC is updating its Merger Guidelines, which will be released in the next few months, while also revisiting its FTC Act Section 5 enforcement authority, as explained in a recent policy statement. She also opined that the digital marketplace has been under-enforced, and that the agency needs to act much more quickly in this space since incumbent firms are very difficult to dislodge once they are entrenched in the market.
With regard to privacy, Chairperson Khan stated that one of the FTC’s biggest initiatives is rulemaking around commercial surveillance and lax data practices—where business models incentivize the mass collection of user data, it is becoming increasingly difficult to police the potentially unlawful use, collection, and retention of data.
Director Chopra explained that the CFPB is prioritizing the future of consumer finance, including regulating the use of consumer data and cracking down on repeat offenders. The agency wants to ensure that consumers have personal financial data rights, including the ability to switch products or institutions more easily, to create stronger privacy safeguards. He also called for common-sense restrictions around transactional data, given its high value to companies.
Both officials also noted that they intend to hold individual executives more accountable (in addition to corporate entities), in order to deter bad behavior. In that same vein, they agreed that more robust remedies are necessary to prevent companies from considering monetary penalties as merely the “cost of doing business.”
AGs Look to New European Rules as Blueprint for Regulating Big Tech Competition
Colorado AG Phil Weiser and Nebraska AG Doug Peterson held a discussion with Margrethe Vester, Executive Vice President and Commissioner for Competition at the European Commission (EC), about understanding and applying antitrust laws in a global environment. The conversation focused largely on the Digital Markets Act recently implemented by the EC, which seeks to hold responsible the “gatekeepers”—large, systemic online platforms that tend to dominate the digital marketplace.
AGs Weiser and Peterson noted their shared interest in making markets better serve consumers, and that antitrust concerns in the digital marketplace are so important that they may transcend politics and be approached in a non-partisan way. AG Peterson observed that the EC has generally led the US in protecting competition in big tech.
Debate Over ESG Investment Intensifies; Slew of State Legislation Expected in 2023
District of Columbia AG Karl Racine and Tennessee AG Jonathan Skrmetti discussed the legal and fiduciary requirements involved in Environmental, Social, and Governance (ESG) investment decisions with subject matter experts Vivek Ramaswamy and Professor Jeffrey Sonnenfeld, on a panel moderated by Ohio AG Dave Yost.
Disagreement has been swirling in the AG community over whether ESG investing may breach fiduciary duties. AG Racine and Professor Sonnenfeld argued that there is no inherent conflict between the pecuniary interests of investors and permitting asset managers to use an ESG framework to consider additional information when determining whether an investment can bring the beneficiary the highest return with measured risk. As AG Racine stated, in his view, “true ESG application is focused on value, not values.”
By contrast, AG Skrmetti and Mr. Ramaswamy argued that the ESG approach conflicts with the singular purpose of treasurers or other asset managers, which is to make as much money as possible for the beneficiaries. In their opinion, ESG distracts from the fundamental goal of maximizing return, and that allowing a non-pecuniary agenda to influence fiduciary decision-making represents an impermissible “mixed motivation.”
Despite their differences, all panelists agreed that the metrics comprising ESG factors are of utmost importance, and that better defining ESG and identifying the relevant metrics would benefit all parties.
At the conclusion of the panel, it was noted that at least 25 state legislatures will likely consider ESG-related bills in 2023. AGs Racine and Skrmetti agreed that if such laws are enacted, they should be implemented in a manner that avoids abrupt changes, and provides fund managers enough time to act responsibly.
For more insight into AG scrutiny of ESG practices, see Lori Kalani, Mira Baylson, and Meghan Stoppel’s recent article, ESG Best Practices in the Face of Increased AG Scrutiny.
Consumer Protection and Privacy Concerns Surrounding Facial Recognition Technologies
Panel moderator Christopher Curtis, Chief of the Public Protection Division at the Vermont AG’s office, shared that facial recognition technology is a growing area of interest to the AG community. The application and uses of these technologies are growing exponentially, and present a number of issues that lie at the crossroads of consumer protection and privacy.
Panelist Clare Garvey, from the National Association of Criminal Defense Lawyers, noted that there is an inherent contradiction between the technology we want to use as consumers, and our interest in privacy. While consumers are eager to use these technologies to access products and services with ease, the average citizen may not understand the breadth or depth of these applications or how their data is used once collected.
That is why regulators are concerned about establishing appropriate guardrails for such technologies, either through new regulation or by reconsidering how existing regulatory frameworks may apply to such technologies and applications. Panelist Patrick Grother from the National Institute of Standards and Technology (NIST) opined that regulations should be crafted in anticipation of what an image could potentially be used for, and that benchmarks should be used to determine which technologies are better than others. To that point, Professor Gary Marchant from the Sandra Day O’Connor School of Law argued that while federal law may better serve uniformity, states are often more able to act quickly and should do so, while also being careful to avoid inconsistent state laws.