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FTC Flexes Its Muscle in Suit against Kochava (But May Not Like the Results)

On August 29, 2022, the Federal Trade Commission (FTC) filed a lawsuit against Kochava, Inc. alleging that Kochava engaged in unfair and deceptive practices by selling the “precise location information” of consumers. This suit comes on the heels of the FTC’s announcement earlier this month that it would “crack down” on “commercial surveillance practices” and July’s warning that the agency would be exercising its enforcement authority against the “illegal” use and sharing of sensitive consumer data.

IN DEPTH

The FTC alleges that Kochava amassed a large amount of sensitive data by tracking the mobile advertising IDs from hundreds of millions of mobile phones, and that such data could be used to track people visiting abortion clinics, domestic abuse shelters, places of worship and other sensitive locations. The FTC then said that Kochava sold that data without first anonymizing it, allowing anyone who purchased the data to use it to track the movements of the mobile device users. The FTC wants to not only block Kochava from selling such data, but also require them to delete and destroy it. In its complaint, the FTC relied on the FTC Act’s general prohibition against “unfair and deceptive acts or practices” and alleged that the company unfairly sold the sensitive data.

Kochava, which beat the FTC to the courthouse and preemptively filed a lawsuit against the FTC prior to the FTC’s complaint, asserted that all of the location data came from third-party data brokers who obtained the information from consenting consumers. Despite the alleged consent, Kochava says it is in the process of implementing steps to remove health services location data from its database. Kochava argued that the litigation was the outcome of the FTC’s failed attempt to implement a vague settlement that had no clear terms and made the problem a moving target.

The Kochava suit brings to the forefront several competing policy considerations, the determination of which could shape the scope of the FTC’s enforcement authority for years to come. The first and foremost issue that the Kochava suit raises is whether the FTC has the authority to effectively impose a consent-based regime for the sale of sensitive consumer information when no federal law enforced by the FTC (other than the Children’s Online Privacy Protect Act (COPPA), which applies to data collected about children under 13) expressly provides for that requirement. While it is not uncommon for the FTC to take expansive views of its enforcement authority, that authority has been successfully challenged in recent years. (See AMG Capital Management, LLC v. FTC, which held that the FTC does not have the statutory authority to seek equitable monetary relief under Section 13(b) of the FTC Act).) Now, Kochava will test the FTC’s authority to regulate in the privacy space—and the FTC may not like the result.

In the unlikely event that Kochava were to litigate against the FTC all the way to the Supreme Court of the [...]

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Supreme Court Clarifies Principles of International Comity in Vitamin C Ruling

Alert: The Supreme Court clarified the principles of international comity this week in a ruling pertaining to the long-running vitamin C antitrust class action litigation. International comity is the recognition a nation shows to the legislative, executive or judicial acts of another nation. Principles of comity state that US courts should defer to the laws of other nations when actions are taken pursuant to those laws. In this week’s ruling, Justice Ginsberg wrote that federal courts should accord respectful consideration to foreign government submissions when analyzing comity issues, but are not bound by them. This ruling vacates the Second Circuit’s decision in the case overturning the jury verdict for the class, and is a win for the class of US purchasers of vitamin C. (more…)




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Supreme Court Nominee Neil Gorsuch Has Significant Antitrust Experience

On January 31, 2017, President Trump nominated Neil Gorsuch to fill the vacant seat at the Supreme Court of the United States left by the late Justice Antonin Scalia. As a federal judge for the US Court of Appeals for the Tenth Circuit, a former private practitioner, and an adjunct professor of antitrust law at the University of Colorado, Gorsuch has an extensive background in antitrust.

In 1996, Gorsuch joined the law firm Kellogg Huber Hansen Todd Evans & Figel, where his practice included both plaintiff and defense litigation in antitrust matters. Gorsuch and his co-counsel helped secure a judgment of $1.05 billion in trebled damages for tobacco company Conwood Co. after a jury found that defendant United States Tobacco Co. engaged in anticompetitive marketing practices. Gorsuch also defended telecommunications company SBC Communications, Inc. during his tenure at Kellogg when a rival company alleged that SBC set forth an illegal tying arrangement. The US District Court for the Eastern District of Texas dismissed the tying count in 2004.

President George W. Bush appointed Gorsuch to the US Court of Appeals for the Tenth Circuit in 2006. In this role, Gorsuch authored several antitrust decisions. In 2009, Gorsuch wrote Four Corners Nephrology Associates, P.C. v. Mercy Medical Center of Durango, 582 F.3d 1216 (10th Cir. 2009), where he held that a hospital’s refusal to allow a physician to use its inpatient nephrology facilities did not violate the Sherman Act or Colorado law. In 2011, Gorsuch reversed a district court’s ruling in Kay Electric Cooperative v. City of Newkirk, Okla., 647 F.3d 1039 (10th Cir. 2011) after finding that a municipality’s electricity provider was not immune from antitrust liability under the state action immunity doctrine.

In 2013, Gorsuch authored his most well-known antitrust opinion, Novell v. Microsoft Corp., 731 F.3d 1064 (10th Cir. 2013). In this case, plaintiff Novell accused Microsoft of maintaining monopoly power over its operating systems by withholding intellectual property from rival software developers. Gorsuch determined that Microsoft’s purely unilateral conduct did not violate the Sherman Act and that “[f]orcing monopolists to hold an umbrella over inefficient competitors might make rivals happy but it usually leaves consumers paying more for less.” Id. at 1072 (internal citations omitted).

With background in representing plaintiffs and defendants and deciding cases in favor of both sides, Gorsuch’s policies about antitrust laws are not entirely clear. However, in his most recent and well-known case, Novell v. Microsoft, Gorsuch stated “[t]he antitrust laws don’t turn private parties into bounty hunters entitled to a windfall anytime they can ferret out anticompetitive conduct lurking somewhere in the marketplace.” Id. at 1080. This language may indicate a preference for a less interventionist approach to competitor conduct relating to its intellectual property.

With an extensive antitrust background, it will be interesting to see whether the Senate ultimately confirms Gorsuch (they did so eleven years ago unanimously) and, if so, whether antitrust issues reach our nation’s highest court.




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