Each year, the National Association of Attorneys General (NAAG) hosts a bipartisan group of state attorneys general (AGs) in Washington, D.C. for the group’s Capital Forum meeting, where the AGs set forth NAAG’s agenda and policy focus for the coming year. At this year’s Capital Forum, held last week, Iowa AG Tom Miller took the reigns as NAAG’s president and introduced his presidential initiative: "Consumer Protection 2.0: Tech Threats and Tools."
Top Biden administration officials, including Federal Trade Commission (FTC) Chair Lina Khan and Consumer Financial Protection Bureau (CFPB) Chair Rohit Chopra, presented at the meeting, saying outright that collaboration with the states on corporate consumer enforcement is a top priority. The AGs and federal officials emphasized specific concerns about the role of algorithms, business consolidation, and “corporate recidivism.” Businesses should be aware that the Biden administration intends to share substantial resources with the states in a manner that will lead to a significant increase in enforcement. The thread connecting all of these topics is consumer protection – ranging from enforcement involving conventional consumer scams to complex fraud involving intricate multi-jurisdictional frauds – and likely will touch on nearly every industry sector.
Of note, AG engagement on algorithm-related policy is already occurring. Late last week, on the heels of the NAAG Capital Forum, D.C. Attorney General Karl Racine worked with a city council member to introduce legislation aimed at addressing algorithmically-generated discriminatory practices. This legislation would implement stringent notice and consent requirements and would require companies to undertake annual audits and enter into agreements with algorithm service providers to ensure compliance with the law. Further, in addition to empowering the AG to bring enforcement actions under the law (as well as audit authority), the bill also introduces a private right of action. AG Racine has expressed his fervent hope that his efforts will encourage other states to take similarly aggressive actions to reshape the entire tech ecosystem.
Focus on the role of algorithms
One of the things AGs are looking to better understand and ultimately address as part of the 2022 NAAG initiative is the role of algorithms – and, more broadly, of artificial intelligence – in advertising and in the consumer economy. At the NAAG meeting, AGs discussed ways to address discrimination, deception, and other harmful consumer practices that are, either intentionally or unintentionally, algorithmically-generated in advertising and other online commerce. Specific concerns include so-called “dark patterns,” misuse of personally identifiable information, and consumer data notice and consent agreements. Businesses should expect AGs to be highly engaged on these issues from both policy and enforcement perspectives. AGs will continue to use their existing consumer protection authorities to investigate and bring enforcement actions against businesses whose consumer-facing practices – particularly advertising – incorporates algorithms and machine learning. Further, AGs, especially from larger states, are actively looking to garner resources to increase their internal capabilities by hiring in-house experts on these issues.
Getting friendly with the Feds
AGs at the meeting made clear that they are eager to collaborate with and tap into the resources of the federal government when it comes to tech-focused enforcement. New York Attorney General Letitia James and Nebraska Attorney General Doug Peterson led a panel discussion with FTC Chair Lina Khan and Assistant Attorney General of the DOJ’s Antitrust Division Jonathan Kanter about antitrust and consumer protection enforcement. The state and federal panelists expressed concern regarding the rise in corporate consolidation and activity by Big Tech companies, as well as companies in industries like agriculture, which they consider harmful to competition, small businesses, and workers.
Businesses should be aware that AGs are actively looking to bring antitrust actions, particularly against tech companies, in coordination with similar efforts by the federal government. Some AGs have been vocal on their multifaceted approaches to this issue. D.C. Attorney General Karl Racine testified on Capitol Hill on December 7 about his litigation against one major online marketplace under the District’s Antitrust Act (Reed Smith previously wrote a client alert about AGs' efforts to expand their antitrust enforcement powers via federal legislation).
Similarly, CFPB Chair Rohit Chopra, who recently took charge of the CFPB after serving as an FTC commissioner and, prior to that, the CFPB’s Student Loan Ombudsman where he often worked with the states, committed to combat efforts to preempt state consumer protection laws and also to lend the resources of his office to states in enforcement efforts against businesses subject to CFPB regulation (notably, the banking and financial services industries). Of particular note, Chopra said he is prioritizing working with states to crack down on repeat corporate offenders and plans to identify ways to share monetary relief that his agency obtains from companies directly with the states. Both Chairs Khan and Chopra declared their intentions to explore creative ways to extract financial penalties from industry participants that are found to have harmed consumers.
Back to basics: consumer protection
AG Miller has made it clear that he chose consumer protection as NAAG’s focus because it is a bipartisan and unifying topic among AGs. As a result, there will be a significant focus on addressing foundational consumer protection issues like scams, frauds, and price gouging, in addition to the more hot-button topics around tech. AG Miller also intends to garner input from a variety of sources, including the business community on how they can assist in these efforts, so businesses should consider how to put their best feet forward with AGs concerning consumer protection—a topic that promises to bring plenty of enforcement activity in the year to come.
Client Alert 2021-332