How State Attorneys General are Driving Tech Policy

August 31, 2018 – State attorneys general (AGs), for better or worse, are increasingly important actors in tech policy. As political scientist Paul Nolette explains in “ Federalism on Trial: State Attorneys General and National Policymaking in Contemporary America,” many AGs, no longer content to police garden variety consumer protection issues, now drive national policy through activism and “adversarial legalism.” The internet is a greenfield regulatory opportunity, and in the tech policy realm AGs are flexing their muscle on online privacy, net neutrality, and data security.

Online privacy: AGs creating policy

Believing that federal agencies don’t do enough to regulate, some AGs see their job to deliver “total justice,” the recompense for all injury and loss. The textbook example is the $246 billion tobacco settlement in 1998 won by 46 AGs to recover Medicare costs and to re-regulate the industry independently of Congress and the Executive Branch. With Silicon Valley firms now in the hot seat, some see even bigger dollar signs. Helped by expert litigation firms, the Illinois AG and others are now targeting big data companies such as Uber and Facebook over their privacy practices. California’s new privacy law strengthens the ability of AGs and private litigants to sue.

Net neutrality: AGs blocking policy

Other AGs see their job as reining in the growing federal administrative state. Republican AGs sued the Obama administration 46 times in 8 years, challenging what they saw as federal overreach. Democratic AGs are already far ahead of that pace, having filed 35 suits against the Trump administration in its first year. “There’s no doubt we are taking a page out of the Republican AGs’ playbook,” said Lizzie Ulmer of Democratic Attorneys General Association in a phone interview to the Daily Signal, adding “…the number of legal actions were needed along with the number of times the Trump administration violated the law.” The same article quotes Texas Attorney General Ken Paxton, a Republican who led some of the lawsuits against the Obama administration, who strongly disagreed.“This is a completely different concept. We were trying to enforce the Constitution; they are trying to do an end run around the Constitution.” Twenty-two Democrat AGs have sued the Federal Communications Commission (FCC) over the rollback of the FCC’s 2015 internet regulation, which restored bipartisan policy enshrined by Congress in 1996.

State AGs have also become adept at advocacy, using their platforms as bully pulpits and leveraging the media in service of litigation. This was on display last week with unscrupulous attempts to politicize (in time for the midterm election) the worst fires in California’s history by claiming that a slowed modem in a fire truck was a net neutrality violation.

Data security: AGs racing the Feds on policy

AGs from Alabama, California, Georgia, Maine, Massachusetts, New York, North Carolina, and Texas might claim to be more nimble than federal regulators, noting their speedy Equifax settlement while investigations by the Federal Trade Commission, the Consumer Financial Protection Bureau, and the Securities and Exchange Commission continue. State-level settlements may deliver big headlines and fast payouts, and commit Equifax to oversight, but they won’t necessarily prevent another major data breach. No regulation can protect against every threat, and cybercriminals, who don’t respect rules in the first place, use regulation as a roadmap to find vulnerabilities to exploit. Preventing future cyberattacks requires technological innovation and the redesigning of systems, which the current settlement doesn’t promote.

AGs, like other political actors, are likely incentivized to maximize short term rewards (political support, votes, visibility, etc.) rather than long term consumer welfare, either because they place a higher value on political expediency or because their knowledge of the future is limited. This also explains why California’s SB-822, designed to reimpose misguided (and currently removed) FCC net neutrality rules, will do little to change the status quo. It will, however, reward existing players rather than support innovation that could challenge dominant advertising platforms.

AG activism is here to stay, but rather than creating a dialogue between federal and state actors about optimal regulation, it grows the administrative state on both levels. Some may delight in the success of the disruptive AG agenda, but the fact remains that we make federal policy and preempt states for good reasons: to ensure common rights and standards for all Americans, to increase commerce and enterprise across the states by lessening friction and transaction costs, and to use scarce regulatory resources prudently.

By Roslyn Layton, Forbes
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