The FTC Sets the Stage for More Bad Tech Regulation

Last month, the Federal Trade Commission (FTC) announced a complaint and proposed order against NGL Labs, LLC, which created “NGL,” an anonymous messaging app. The FTC alleges that NGL employed deceptive means to increase its userbase and improperly solicited underage users, despite the app’s purported risks to minors. The agency seeks to require the defendants to bar underage users from their service.

This enforcement action presents a dichotomy. On the one hand, the FTC performed its proper function combating fraud. But the agency pursued its mission using innovative and potentially far-reaching legal reasoning upon which it could predicate future overreaches.

Apart from its alleged legal infractions, NGL, which allows users to solicit and receive anonymous messages from others, seems to be a shady outfit. According to the FTC, the app’s developers – to boost its popularity – deceived their users. “Defendants began developing messages that would be sent to consumers and would appear to come from real people, but, in reality, would be sent automatically whenever a consumer posted an NGL prompt,” the complaint reads. NGL allegedly overstated its efforts to weed out abusive user-generated content and, moreover, marketed its products to minors, going so far as to message high school students directly on Instagram (per the FTC’s account).

The FTC goes further, however, than humdrum consumer protection. The complaint’s second count states categorically that the “use of anonymous messaging apps by [children and teens] causes substantial injury.” As Commissioner Andrew Ferguson notes in his concurring statement, this “presents a novel theory” under Section 5 of the FTC Act, the operative statutory provision.

“I vote to approve this complaint because I agree that it was unfair to market this anonymous messaging app to teenagers in the way that the defendants marketed it,” Ferguson writes. “If the allegations in the complaint are true, NGL sent fake, anonymous, and distressing messages to minors specifically designed to make them doubt their social worth, as part of a fraudulent scheme to convince those minors to pay for the ability to see who sent the messages.”

Continuing, Ferguson dismantles the FTC’s implication that marketing anonymous messaging apps per se to children could constitute a Section 5 violation. To date, no internet regulatory regime “has ever proceeded on the theory that merely offering messaging services to teenagers violates the law,” he argues. “Such a theory would be in serious tension with the recognized First Amendment rights of minors as well as Congressional policy on their use of internet services.”

The FTC’s reasoning – not to mention its tendency to overextend arguments to their logical nth degree – portend nothing good. The agency seems to have assumed authority to bar children from online platforms it stipulates – yet declines to prove – harm children. NGL provides an easy test case. It lacks the power Big Tech A-listers enjoy. It seems to have done business unethically. But the logic, if sussed out, seems likely to go far further.

If, as the FTC seems to suggest, marketing anonymous messaging services to minors equates to violating Section 5’s prohibition of unfair or deceptive acts or practices, little would block the agency from pursuing such a theory against other phyla of online platforms. It seems unlikely that prudential concerns, constitutional separations of powers, or general scruples would give pause to an agency that unilaterally initiated quasi-legislative online-privacy regulatory process despite the fact that Congress was, at the time, considering that very question.

Whether this camel’s nose under the tent will, in fact, be followed by the rest of the camel remains unknown. Nonetheless, the FTC has earned not a jot of the benefit of the doubt; to the contrary, it has racked up quite a deficit.