I’m just waiting to read a news report that goes something like this:
MegaCorp Inc. announced that it reached a settlement with Big Government Agency over certain widespread practices that the government said were deceptive and harmful. MegaCorp will pay $100 million, but it denies that it did anything wrong, ever. In addition, BGA has agreed to pretend that MegaCorp’s allegedly deceptive practices never happened, and will send Mega’s CEO a muffin basket with a nice card apologizing for any inconvenience or hurt feelings that it caused.
This just seems like the next logical step in the trend of government agencies tripping over themselves to make sure that corporate targets can save face. Last week–in what appears to be a new practice–Google Inc. and Facebook Inc. were each allowed to settle actions by the Federal Trade Commission while explicitly denying allegations that they violated consumer privacy laws. (I’ve got to hand it to the FTC for making the Securities and Exchange Commission, with its “neither admit nor deny” settlements, look like a pit bull.) Apparently, the traditional language used for FTC settlements–that the agreement isn’t an admission of wrongdoing–was viewed by Google and Facebook as way too draconian.
These concessions to Google and Facebook hit a nerve with FTC Commissioner J. Thomas Rosch, who penned dissents in both cases. “I just went ballistic,” the former Latham & Watkins partner told me. “I thought it was terrible that they be allowed to deny liability.” In his Facebook dissent, Rosch maintained that FTC rules don’t even allow for such denials. Instead, under the agency’s rules, a settlement can state that the agreement “does not constitute an admission by any party that the law has been violated as alleged in the complaint.” But a party can’t flat out deny the allegations, Rosch maintains.
In his Google dissent, Rosch seemed even more upset, given that the FTC had previously charged Google with deceptive conduct, and the company is paying a record $22.5 million. “There is no question in my mind that there is ‘reason to believe’ that Google is in contempt of a prior Commission order,” he wrote. “However, I dissent from accepting this consent decree because it arguably cannot be concluded that the consent decree is in the public interest when it contains a denial of liability.”
I agree with Rosch. These “denial settlements” smack of Orwellian doublespeak, where words lack any true meaning. When those who are accused of violating the law are allowed to deny any wrongdoing while at the same time paying to make a case go away, we’ve got system that’s tailored for the comfort of the accused. The public interest seems barely an afterthought.
The FTC charged Google with misrepresenting to users of the Safari browser that it wouldn’t track their activity with “cookies,” violating an earlier settlement. In the Facebook case, the company was accused of telling users that they could keep their information on Facebook private, and then repeatedly allowing it to be shared and made public.
“Denial of liability when the company is paying $22.5 million is a flat contradiction,” Rosch said on Wednesday about the Google case. “Frankly, one of the things that bothered me the most is there’s no limiting principle at all. What I mean by that is [there is no] check on our discretion to accept these denials. We should have articulated a limiting principal.”
Google, represented by Wilson, Sonsini, Goodrich & Rosati, released a statement in which it downplayed the FTC’s action: “We set the highest standards of privacy and security for our users. The FTC is focused on a 2009 help center page published more than two years before our consent decree, and a year before Apple changed its cookie-handling policy. We have now changed that page and taken steps to remove the ad cookies, which collected no personal information, from Apples browsers.” Facebook, represented by Gibson, Dunn & Crutcher, said it was pleased with its settlement.
To my surprise, it seems that Rosch’s objection made an impression on his fellow commissioners, who may be regretting the denial settlements. “We commend Commissioner Rosch for focusing our attention on the issue; going forward, express denials will be strongly disfavored,” they wrote in an FTC statement for the Facebook case. In fact, they also said they’re considering changing their rules to adopt settlement language that more closely tracks the “neither admits nor denies” approach used by the Securities and Exchange Commission. (Curiously, the FTC statement for the Google matter does not contain this sentiment, and in fact strongly defends the agency’s decision to allow a flat-out denial.)
But even if the FTC is having second thoughts, is the cat out of the bag? Having been emboldened by Google’s and Facebook’s denials, I’m sure other companies will push for similar deals, and not just before the FTC. Does the government have the conviction to push back?
